Tech Note 2024-1 A Novel Framework to Estimate Social and Private Value Created Through Commercialization of a Pharmaceutical Product

Authors

Paula Chaves de Silva
Fred D. Ledley

Document Type

Article

Publication Date

7-1-2024

Abstract

This framework posits that the value created by a new medicine is embodied in the total health value (health benefit) provided to those using the products. This value is then distributed between social value and private value by the price paid for the product and how these revenues are expensed for different purposes. In this framework, the social value created includes the residual health value (net price paid) along with the scientific value, jobs creation, and social payments to public sector organizations. The private value created includes shareholder value (change in market capitalization plus cash distributions to shareholders) as well as payments made to other private sector organizations. Assessing both the social and private value created by new medicines may inform public policies intended address the needs and expectations of all stakeholders in pharmaceutical innovation.

Recommended Citation

Chaves de Silva, Paula and Ledley, Fred D., 2024. Tech Note 2024-1 A Novel Framework to Estimate Social and Private Value Created Through Commercialization of a Pharmaceutical Product, CISI Publication.