# The temporalities of prices: 'Value-based pricing' in pharmaceutical markets

Liliana Doganova, Vololona Rabeharisoa

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Liliana Doganova, Vololona Rabeharisoa. The temporalities of prices: 'Value-based pricing' in pharmaceutical markets. Economy and Society, 2024, 53 (2), pp.183-204. 10.1080/03085147.2024.2346037. hal-04851383

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# The temporalities of prices: 'Value-based pricing' in pharmaceutical markets

Liliana Doganova & Vololona Rabeharisoa

**To cite this article:** Liliana Doganova & Vololona Rabeharisoa (14 May 2024): The temporalities of prices: 'Value-based pricing' in pharmaceutical markets, Economy and Society, DOI: 10.1080/03085147.2024.2346037

**To link to this article:** https://doi.org/10.1080/03085147.2024.2346037

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# The temporalities of prices: ‘Value-based pricing’ in pharmaceutical markets

Liliana Doganova and Vololona Rabeharisoa

## Abstract

In 2019, Zolgensma, a gene therapy for patients suffering from Spinal Muscular Atrophy (SMA), became famous for being ‘the most expensive drug ever’. Its high price was justified by ‘the value’ that the drug will bring to patients and society, illustrating a rationale that has come to be known as value-based pricing. This paper builds on the literature in valuation studies and economic sociology, and on the debates that the case of Zolgensma triggered in France, to provide a conceptual and empirical analysis of a value-based formulation of prices. We argue that formulating prices out of value produces an orientation towards the future which has epistemic and political consequences. We analyse Zolgensma’s value-based price as a composite of narratives and calculations that operates as a regulatory tool, a contractual arrangement, and an object of expertise. In these different settings, its distinctive temporality questions the commensurability of estimated benefits and desirable futures, the treatment of uncertainty, and the relevance of past costs and future value.

Keywords: value-based pricing; drug prices; Zolgensma; valuation; future; uncertainty.

Liliana Doganova (corresponding author), Centre de sociologie de l'innovation (CSI), i3 UMR CNRS, Mines Paris, PSL University, 60 boulevard Saint Michel, 75272 Paris Cedex 06, France. E-mail: liliana.doganova@minesparis.psl.eu
Vololona Rabeharisoa, Centre de sociologie de l'innovation (CSI), i3 UMR CNRS, Mines Paris, PSL University, France. E-mail: vololona.rabeharisoa@minesparis.psl.eu

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Introduction

Approved by the US Food and Drug Administration (FDA) in May 2019, Zolgensma became famous for being ‘the most expensive drug ever’ (Stein, 2019). Zolgensma is a gene therapy for patients suffering from Spinal Muscular Atrophy (SMA), a rare disease that affects about one in 6,000–10,000 newborns and causes paralysis, breathing difficulty and, often, death. The list price¹ that its manufacturer, Novartis, demanded for this one-time treatment is $2.1 million per dose. This price, described as the highest ever reached by a drug, caused amazement in the rare disease community, and more broadly among actors involved in health care and pharmaceutical markets.² Anger was all the stronger in France as the initial research that led to the development of Zolgensma greatly benefited from public support: the research was carried out by a French public research organization (CNRS) and a research laboratory (Généthon) created by a French patient organization (AFM-Téléthon) that is largely funded by donations from an annual fund-raising campaign that appeals to public generosity (Téléthon). Responding to criticism, the president of the US biotechnology start-up AveXis that led the development of Zolgensma and was later acquired by Novartis explained in the media that medicines like Zolgensma should not be priced ‘on research and development and production’ but on ‘the value they bring to society’ (Green, 2019). The idea that the prices of drugs should reflect their ‘value’ has come to be known as value-based pricing. Building on the case of Zolgensma, this paper proposes a sociological analysis of value-based pricing.

In the literature, the high prices of drugs have been explained by the archi-
tecture of drug markets, the financialization of the pharmaceutical industry and
the relative power of states versus pharmaceutical companies. At the same time,
the pharmaceutical industry has long invoked the high costs of research and
development to justify the high prices of drugs. We analyse value-based
pricing as an attempt to disconnect the formation of prices both from the
dynamics of markets and from the accounting of costs. Like Mazzucato and
Roy (2019), we are interested in the conceptual underpinnings of value-based
pricing. However, we do not attempt to show that prices in fact are not, or
should not be, value based. Rather, we turn to the process of the ‘formulation
of prices’ (Callon, 2021) and we analyse the conundrums and debates to which a
value-based formulation of prices gives rise. In doing so, we aim to contribute
to a recent line of research that explores the links between the problem of the
high prices of drugs, valuation processes and the organization of pharma-
ceutical markets (Bourgeron & Geiger, 2022; Nouguez, 2020).

The analysis that we propose here is not an account of how prices are crafted
inside pharmaceutical companies and negotiated with public authorities – these
practices are covered with the veil of confidentiality. We rather take inspiration
from valuation studies which have approached prices as part and parcel of pro-
cesses of valuation that deploy at different sites and moments, involving a
variety of actors and mobilizing discursive strategies and calculative
technologies (Antal et al., 2015; Dussauge et al., 2015; Helgesson & Muniesa, 2013; Kornberger et al., 2015). In this vein, we follow calls to study prices through their ‘formulation’, as it occurs for instance in the public formulas used to calculate prices (Çalışkan & Callon, 2010; Callon, 2021). Moreover, our analysis is informed by research in economic sociology which has focused on pricing as a techno-political construct, particularly in markets where prices are subjected to some form of regulation (Nouguez & Benoît, 2017; Reverdy & Breslau, 2019). Combining these two theoretical perspectives, we use the case of the ‘value-based price’ of Zolgensma to provide a conceptual and empirical account of what a value-based formulation of prices consists of and what effects it produces when it is mobilized in discussions over the high prices of drugs.

From the scarce literature beyond health economics that has examined value-
based pricing in pharmaceuticals so far (Geiger & Bourgeron, 2023; Mazzucato
& Roy, 2019), we retain two distinctive traits of a value-based formulation of
prices. First, it departed from a formulation of prices based on costs (namely
the costs of research and development prior to the introduction of a drug in
the market), which was present both in pharmaceutical companies' justifica-
tions of high prices and in regulatory procedures of medico-economic evalu-
ation. Second, it is associated with the rationale of cost-benefit analysis, in
which the 'value' of a health technology is understood in terms of its 'cost-effec-
tiveness' and its 'prevention value'. In this view, the price of a drug, meaning its
cost for the health system, is balanced against the benefits that it will bring to
patients and society, including the savings (or 'avoided costs') that it will allow
for the health system later in the future.

Extending these observations and drawing inspiration from recent works that have started to explore the links between temporality and valuation (Birch, 2022; Doganova 2024; Muniesa & Doganova, 2020), this paper shows that a value-based formulation of prices is founded in the estimation of future value, which is defined by the quantified and monetized benefits (and costs) that a drug is likely to generate (or avoid). The distinctive temporality of value-based pricing has epistemic and political consequences. By framing past costs of research and development as immaterial to a drug's value and hence price, it ignores the range of activities that have enabled a drug to come into being and the contributions of various actors in this process. Value-based prices are inseparably epistemic and political entities: they involve scientific knowledge and measurement instruments oriented towards the future, and at the same time impose a temporal frame on what counts and how it should be counted.

Our paper proceeds as follows. In Section 1, we outline our theoretical approach and explain how value-based pricing as an object of analysis, and Zolgensma as an extreme case thereof, urge us to develop a conceptualization of prices as the result of valuation practices. In Section 2, we present our methodology and empirical material. The next three sections are devoted to three settings in which the epistemic and political consequences of the
future-oriented temporality of a value-based formulation of prices materialize. Section 3 examines value-based pricing as a regulatory tool that was introduced to reform the making of drug prices by substituting market mechanisms with evidence-based deliberation on value. We discuss how the value-based price of Zolgensma polarized debates on the problem of the commensurability of quantified estimated benefits and desirable futures for both patients' lives and health systems. Section 4 examines value-based pricing as a contractual arrangement between the payer and the provider in which payments are dispersed in time and the making of prices is extended beyond and after the moment when a drug is put on the market. We show that the forward-looking valuation of Zolgensma added to the problem of the adequate measurement of value that of the uncertainty of its realization. Section 5 examines value-based pricing as an object of expertise. We highlight the endeavours of patient organizations and health economists to mobilize different temporalities, oriented towards past costs rather than future value, in order to propose alternative formulations of prices. The conclusion discusses our findings and their contributions to the literature on the pricing of drugs, to valuation studies, and to the sociology of prices.

## Inquiries into drug markets and prices

### Investigating the troubles with drug markets

Research on the prices of drugs has echoed public debates on their high and increasing levels for a couple of years now. The explanations of the high prices of drugs that emerge from this literature tend to focus on the operations of the market from which these prices emerge, and to consider the high prices of drugs as the result of ‘market failures’ (Geiger & Gross, 2018; Mazzucato, 2016). Scholars have particularly pointed at the architecture of drug markets and the monopoly that pharmaceutical companies enjoy (Mazzucato, 2018), the financialization of the biopharmaceutical industry (Birch, 2017; Roy, 2020, 2023), and the relative power of states versus market actors (Bourgeron & Geiger, 2022). They have also observed that attempts at reforming the market ‘from the inside’, by altering market framings, may give rise to unintended consequences and fail to produce lasting effects on the level of drug prices (Geiger & Gross, 2018).

Public concern with the high prices of drugs dates to the historical example of the prices of drugs against HIV/Aids in the 1990s, which low and medium-income countries, notably in Africa and in Asia, could not afford. Access to medicines movements gathering civil society organizations and ‘expert activists’ questioned the reasons for these high prices and denounced the intellectual property regime that conferred a power position to the pharmaceutical industry over negotiations on the prices of drugs (Krikorian, 2017). High-income countries too were soon affected by the high prices of drugs, as the
heavily publicized case of Sovaldi, a drug against Hepatitis C, showed in the
2010s. The reasons put forward to explain the high prices of drugs have accord-
ingly broadened beyond the relative power positions of pharma versus states.
As Bourgeron and Geiger (2022) have shown, the possibility of achieving
high prices concerns only a small number of ‘innovative’ medicines and
hinges on boundary work, conducted jointly by market actors and state
institutions.

The orphan drug market is a telling example. It was created from scratch by specific regulations first in the United States in 1983 (Novas, 2009), and then in Europe in 1999. The 1999 European Directive on Orphan Medicinal Products, which patient organizations actively promoted (Rabeharisoa & O'Donovan, 2014), grants an 'orphan' designation to drugs for diseases affecting less than one in 2,000 (or five in 10,000) patients, and provides economic incentives and scientific assistance to companies willing to develop them. This orphan drug policy undoubtedly contributes to the availability of drugs for rare diseases, despite their small size markets. However, it has also gone hand in hand with 'strategies of stratification' (Wadmann & Hauge, 2021) and with high prices (Côté & Keating, 2012) that have continued to rise in the last decade, with Zolgensma standing as an extreme example.

Studies have also shed light on the architecture of the biotechnology and bio-
pharmaceutical market and expanded the scope of analysis beyond the state/
pharma couple. They have documented the dramatic changes that the organiz-
ation and the funding of drug development have undergone in the last decades,
with pharmaceutical companies 'opening' their innovation activities to biotech-
nology start-ups (Rothaermel, 2001) and embracing the logics of 'financializa-
tion' (Gleadle et al., 2014). The links between these processes and the
increasing prices of drugs have started to be explored. Long celebrated, the
model of open innovation (Chesbrough, 2006), which grants a pivotal role to
research-based biotechnology start-ups and the peculiar forms of finance that
they require (namely, venture capital), is starting to be blamed for promoting
the 'assetization' of pharmaceutical goods and creating a dynamics of specu-
lation that both relies on and contributes to the possibility of high prices
(Birch, 2017; Roy, 2020; Sunder Rajan, 2006). Here again, Zolgensma is a strik-
ing example: the initial research conducted by a patient organization (AFM-
Téléthon) and a public research organization (CNRS) in France was licensed
to a US biotechnology start-up (AveXis) that benefited from fast-track clinical
trials from the FDA and was bought later by Novartis at the unprecedented
price of $8.7 billion.

Exploring drug pricing mechanisms

In the literature that we reviewed above, the high prices of drugs are analysed as
the result of a dysfunctional market: a market that fails to produce the right
price because of the power positions of different actors, the boundaries, or
the categories that they create, and the relationships that they establish. Though prices feature as a central issue, pricing mechanisms are seldom the focus of these market studies. The recent cases of extremely expensive drugs for rare diseases – like Zolgensma, on which we focus here, but also Spinraza, to which it came as an alternative – have raised concerns about how their prices are determined. Accordingly, scholars have started to shift attention towards the ‘valuation practices’ from which these prices result (Wadmann & Hauge, 2021). The debates triggered by the high price of Zolgensma brought to the fore the issue of value-based pricing. Interestingly, as a form of cost–benefit analysis (Mazzucato & Roy, 2019), value-based pricing appears as an attempt to achieve objectivity (Porter, 1995) and to precisely extract the formation of prices from the failing functioning of the biopharmaceutical market. Through its lens, the price of Zolgensma was not an aberration produced by a failing market, but a calculation made in line with the canons of economic theory and regulatory procedures: a price grounded in the evidence-based value of the drug.

This paper examines the ‘value-based’ price of Zolgensma as a case of what we propose to call a value-based formulation of prices. Our analysis is grounded in two related theoretical perspectives. First, we build on research in valuation studies (Dussauge et al., 2015; Helgesson & Muniesa, 2013; Kornberger et al., 2015) to approach prices as the result of valuation practices. Analyses of bio-pharmaceutical markets adopting this perspective have highlighted the role of valuation devices such as the QALY (quality adjusted life year) metric (Sjögren & Helgesson, 2007) and the DCF (discounted cash flow) formula (Doganova, 2018), and the pervasiveness of future-oriented temporalities (Birch, 2022; Doganova, 2024; Roy, 2020). Valuation studies have also emphasized specific moments in which dissonant valuations become salient (Antal et al., 2015). One such moment occurs when they are to be translated into a price. As Pallesen (2016) demonstrated in the case of wind power, ‘valuation struggles over pricing’ frame differently the object to which a price is to be attributed (e.g. is it a public good, a market good, or both?) and the role ascribed to this price (e.g. is it a policy instrument, a market device, or the expression of some kind of economic truth?). In a similar vein, Glabau (2017) has highlighted the conflicting assumptions about ‘the value’ of medicinal products that are revealed by controversies over their prices.

Second, we build on research in economic sociology which focuses on pricing as a techno-political construct. Of particular interest for scholars in this field have been markets in which prices are subjected to some form of regulation and therefore enjoy better visibility and attract greater public attention. Energy markets are one example (Reverdy, 2014; Reverdy & Breslau, 2019). Health markets are another example, both for the prices of hospital services (Juven, 2016) and pharmaceuticals (Nouguez, 2017). Nouguez and Benoît (2017) have shown how price regulation attempts to hold together different and somehow non-compatible ‘social values’, namely access to safe and efficient drugs for all, improvement of the national healthcare system, support to
pharmaceutical innovation, and containment of public expenditures on drugs. This line of research allows us to approach value-based pricing as a valuation device that is both entrenched in and contributing to a techno-political construct.

Combining these theoretical perspectives, we study drug prices through their ‘formulation’ (Çalışkan & Callon, 2010; Callon, 2021). The notion of formulation directs attention to the private and public formulas used for calculating prices, which put in relation various valuation and pricing sites, and produce prices out of other prices. We extend this notion by considering other economic entities – namely, future value and past costs – that intervene in the formulation of prices and may differ in their temporalities and in their epistemic and political implications. We highlight the narrative and calculative dimensions of the formulation of prices: that is, the discourses that articulate different values and the devices that translate these values into prices.

## Methodology and empirical material

In this paper, the analysis of the value-based formulation of prices is based on a single case study focusing on Zolgensma. We chose to focus on Zolgensma because it urged actors in the pharmaceutical market to provide accounts of its price, at the core of which was value-based pricing. Our inquiry was guided by the following questions: What narratives and calculations compose the value-based price of Zolgensma? What forms does value-based pricing take and in which settings does it materialize? With which actors is it associated? What effects does it produce in discussions over the high prices of drugs?

Zolgensma is the brand name of a gene therapy whose early development was conducted by Dr Martine Barkats and her team at the Institute of Myology (a university hospital research unit created by the patient organization AFM and co-operated with French public research institutions), in collaboration with the AFM lab Généthon and the CNRS (the French public research organization). The treatment consists in replacing the gene SMN1 which is dysfunctional in motoneurons of patients with one or two functional copies of the gene SMN2. Dr Martine Barkats found out the vector for transporting the ‘gene drug’, namely an adeno-associated virus called AAV9. Two patents, co-owned by the Généthon and the CNRS were issued in 2007 and 2009. Dr Martine Barkats also conducted the preclinical research on mice that successfully demonstrated that AAV9 can bring the ‘gene drug’ directly to the motoneurons. This discovery was published in 2011 in a top-ranked journal.

The later development of the treatment did not take place in France but in the United States, by a biotech start-up called AveXis founded in 2010 with AVXS-101 (the name of experimental Zolgensma before its market approval) in its portfolio. Its founders applied for clinical trials at the FDA in 2011 and soon raised venture capital. After AveXis conducted a series of clinical trials from 2014 to 2018, it was acquired by Novartis for $8.7 billion in 2018.
Negotiations between AveXis and the AFM resulted in a licensing agreement for securing clinical trials in France, in March 2018.

In May 2019, the FDA approved the drug for the US market. Zolgensma came as an alternative to another drug targeting SMA: Spinraza (an RNA-based therapeutic), for which the manufacturer Biogen got a market approval from the EMA (European Medicines Agency) in 2017. Spinraza too claims to be a 'curing' treatment, but in contrast to Zolgensma, it requires several injections over time. The price of Spinraza raised turmoil at the time: $750,000 per dose the first year, $375,000 per dose the subsequent years. Interestingly, Novartis argued that the $2.1 million it requested for Zolgensma is not that high compared to the price of Spinraza because Zolgensma is a single-treatment therapy and therefore its price is paid only once.

After Zolgensma got a market approval from the FDA, Novartis turned to Europe. In France, this 'return' of Zolgensma, as many commentators had it, understandably raised much concern because of the price demanded by the company and because its early development was conducted and supported by French public and not-for-profit actors. Hence, the vivid debates on the price of Zolgensma within the French field of rare diseases and pharmaceutical markets.

We examine these debates through a qualitative methodology combining interviews and document analysis. The documents that we analysed include: scientific papers on Zolgensma, medico-economic assessment guidelines and official reports on Zolgensma issued by health technology assessment bodies in France (HAS: Haute Autorité de la Santé) and the United States (ICER: Institute for Clinical and Economic Review), commentaries and statements released on the internet by the companies (AveXis, Novartis) and the patient organization (AFM-Téléthon) involved in the development of Zolgensma, as well as papers on value-based pricing that were published over the last two decades by health economists and market actors (public agencies, pharmaceutical companies, consultants). We analysed them to shed light on the different meanings of value-based pricing and the forms that it has taken.

Moreover, we conducted eight interviews with top executives of AFM-Téléthon, one former member of HAS (the French health technology assessment body that carried out medico-economic evaluations of Zolgensma) at the time Zolgensma was discussed within its commissions, and two health economists. The interviews were designed as long (minimum two hours) and semi-structured conversations that started with the puzzle of the price of Zolgensma and continued with questions related to the history and characteristics of this treatment; issues associated with the development and evaluation of treatments for rare diseases more broadly; and the mechanism, rationale and limitations of value-based pricing. We also participated to a multi-stakeholder conference at the French parliament in 2019, where the challenges of gene therapies for rare diseases were debated.
Estimated benefits and desirable futures

After Zolgensma got a conditional marketing authorization from the EMA³ one year after the FDA market approval, it was granted an early-access authorization in France.⁴ To penetrate the French market beyond the scope of early-access, Novartis soon applied for public coverage by the French ‘Sécurité Sociale’⁵ for the sub-population of patients with Type I SMA (the most severe and early-onset form of the disease) who have not yet had swallowing problems and are not on ventilation. This was one critical moment when value-based pricing intersected the history of Zolgensma.

Value-based pricing was introduced by public agencies in the 1990s–2000s as a regulatory tool to reform pharmaceutical pricing ‘in the name of transparency’ (Geiger & Bourgeron, 2023). It was intended to replace extant pricing mechanisms that were accused of being ‘opaque, largely based on what the market can bear’ (Hughes, 2011, p. 731) and leading to ‘price hikes’ and ‘wide dissociations between prices of drugs and their benefits’ (Kaltenboeck & Bach, 2018, p. 2165). Value-based pricing is part of the arsenal of health technology assessment (HTA) procedures that consists in estimating the value-for-money of a treatment after the pharmaceutical company announces the price it demands. It does not determine the ‘real’ price of the treatment (which still is the result of negotiations between the payer and the company) but is meant to help public authorities to regain control over pricing.⁶ It was hoped to help transforming mere price ‘negotiation’ into ‘scientific deliberations between an assessment authority, the manufacturer, and other stakeholders concerning what the available evidence implies for estimates of cost effectiveness, price, and guidance’ (Claxton et al., 2008, p. 253).

The value of a drug is generally expressed through two indicators – the QALY and the LYG (life year gained) – whose calculations are based on data from clinical trials and surveys conducted on patients. These indicators clearly show that what is valued is patients’ future lives on the treatment. However, value-based pricing does not apply the same way across countries. For instance, NICE (National Institute for Health and Care Excellence), the British HTA agency, confronts the value-based price of a treatment to a range of prices that the NHS (the British National Health Services) consider affordable, whereas HAS (High Authority of Health), the French HTA body, does not. The HAS therefore has no say on the level of price deemed reasonable, knowing notably that the French authorities seldom deny public coverage for innovative treatments that fulfil unmet medical needs. However, the issue of affordability loomed behind discussions on Zolgensma within HAS because of the high price of the treatment, despite its curing promises.

First, the Commission for Transparency of the HAS evaluated the medical benefit of the treatment for patients, and the improvement it brings compared to existing alternatives. This Commission concluded that Zolgensma brings in major medical benefit to the targeted sub-population of patients, and significant improvement on Spinraza, the existing alternative, and passed on its
conclusions to the HAS for official validation. Because the company claimed
such a high price, it also had to submit a dossier with medico-economic data
to a second commission of the HAS called the Commission for Economic
Evaluation and Public Health (CEESP: *Commission d'évaluation économique et
de santé publique*).⁷

On the first meeting of the CEESP on 17 November 2020, an exceptionally long and intensive debate developed on the meaning of the ‘benefit’ brought by Zolgensma to the sub-population of patients for which the company demanded coverage. The clinical endpoint that was used to measure this benefit was ‘the ability to sit without assistance at least 30 seconds within two years after treatment’. The Commission pointed to a series of flaws in the data (including absence of data on the side-effects⁸ and on disabilities that will likely remain), but most importantly, it questioned the relevance of the clinical endpoint. One expert forcefully voiced her worry:

> What we are preparing for these children is a life with a very severe handicap where the ability to hold a seated position for 30 seconds without assistance becomes the clinical measure of the state of health, and 98% of the children treated will not see their motor function improve beyond this state. (CEESP, 2020a)⁹

The debate was further complicated by the very high price claimed by Novartis. In contrast to other national HTA agencies, the CEESP does not rely on a cost per QALY threshold in its medico-economic evaluation of drugs, but on the incremental cost-effectiveness ratio that measures the cost induced by the treatment compared to existing alternatives.¹⁰ According to the CEESP, the €1.9 million ($2.1 million) claimed by Novartis translates into a ratio of €500,000 per life year gained. The company was also asked to provide data for estimating the impact of the price it demanded on the French ‘Sécurité Sociale’ budget, which turned out to be €241.6 million over five years, representing a 257 per cent increase of the ‘Sécurité Sociale’ budget (for treating SMA). As one expert of the CEESP reacted in our interview:

> The problem is that it is just unsustainable. It's unsustainable to say 'no' to parents, and it's unsustainable to say 'yes' because it generates additional reallocations of resources ... We can always keep saying that health is priceless (...). but we do know that we are in extremely precarious balances.

A second meeting of the Commission took place on 15 December 2020, which concluded that the incremental cost-effectiveness ratio ‘is extremely high, even for an orphan paediatric drug’ and that its ‘acceptability … by the community’ could not be prejudged by the existence of an ‘uncovered medical need’ (CEESP, 2020b). This conclusion was detailed in the official economic statement on Zolgensma issued by the HAS, which also included position papers
sent by patient organizations as part of the regular evaluation process of
drugs.¹¹ As one of these letters explained:

Every year in France, around one hundred babies are born with [SMA] and of
these around 60 are affected by the most serious form which, until yesterday,
killed 95% of them before the age of 24 months (...) Zolgensma meets a very
strong expectation of the parents of affected children. (HAS, 2020)

The ponderings and hesitations of the CEESP illuminate how value-based
pricing triggers an insurmountable tension between the desirable futures for
patients' lives and the cost-effectiveness and impact of the treatment on the
health system budget. As a life-saving drug, Zolgensma is deemed invaluable.
But what does this entail for its price if this price is supposed to be value-based?
Should the invaluable – and there is certainly nothing that can be more aptly
described in these terms than the life of a child – deserve any price that can
be claimed, up to the $2.1 million that Novartis demands? Although the narra-
tive of value-based pricing often flirts with this extreme, entertaining the idea
that high prices are justified by high values, its association with the quest for
objectivity and the ideal of scientific deliberation produces heated measurement
problems and raises tremendously difficult questions as of the medico-econ-
omic knowledge and data for estimating the value of life, despite its
incommensurability.

Uncertain value, high prices and future payments

Because value-based prices are so high, they tend to come together with so-
called ‘value-based payments’ according to which the price agreed on
between the payer and the manufacturer is paid in several instalments contin-
gent on ‘outcomes’ corresponding to the actual realization of the projected
benefits brought by the drug (Danzon, 2018). Little before Zolgensma was
launched, in the midst of rumours of a price tag as high as $5 million
dollars, Novartis CEO commented that ‘single-treatment therapies with the
potential to provide a lifetime of benefit’, such as Zolgensma, require new
pricing and payment models (Narasimhan, 2019). He emphasized the need
for ‘new economic models to determine exactly how much value that rep-
resents’ – ‘that’ meaning a cure that is ‘better for the child, their family, our
health system and society, as reflected in a healthy, productive life and the
avoided cost and grief of months or years of chronic care’. The challenge, he
added, is not only the magnitude of the price, but how it is paid. The most dif-
ficult challenge, to him, was to find ‘innovative solutions’ for payment ‘such as
the option to pay in instalments over several years and the possibility of refund-
ing payment if the treatment is not successful’.

Indeed, several countries have implemented such ‘innovative payment
mechanisms’ for Zolgensma. For example, outcome-based rebates based on
individual patient data in the real-world setting have been identified in
Germany and the United States (Jørgensen & Kefalas, 2021), a ‘payment at result’ contract with checkpoints at 12, 24, 36 and 48 months was established in Italy (Eversana, 2021), and a pay for performance agreement is being negotiated in Sweden.¹² Such payment mechanisms are akin to performance-based contracts which stipulate that payments will be adjusted according to the ‘performance’, or the ‘result’ of the treatment observed in real life.

The *raison d’être* of performance-based contracts in the case of Zolgensma is twofold. On the one hand, they serve to make its high price payable by splitting it into several smaller payments. On the other hand, they support the possibility to claim a price based on value earlier in the process of drug development, at a moment when this value (assuming that it can be captured in a precise measure) is yet unknown because clinical trials are still ongoing. As early-access procedures and price negotiations are run in parallel, value-based pricing becomes an instrument to embed a projection into the future in the urgency of the present.¹³

Value-based payments attempt to integrate the uncertainty of forward-looking valuation into a dynamic vision of prices, and in doing so they raise several issues in turn. How are success criteria defined? How is it possible to monitor and control the benefits generated by a drug in real life? How can we be sure that there are ‘real uncertainties’ and not ‘quasi-certainties strategically used as a marketing means to achieve higher prices?’, as one health economist we interviewed asked. This interviewee also observed that uncertainty may inflate prices artificially because shareholders will require a compensation for risk: a company prefers a certain stream of €1,000 during five years than an uncertain stream of €1,500.

The association of performance-based contracts with the value-based pricing of drugs is of particular interest for our analysis here because it illuminates another effect of the distinctive temporality of a value-based formulation of prices. Indeed, a forward-looking valuation adds to the problem of the adequate measurement of value (is the ability to sit during 30 seconds a valuable benefit, and is this benefit valuable enough to reward a drug with the highest price?) that of the uncertainty of its realization in the future (is the evidence sufficient to determine that the drug will actually allow patients to sit during 30 seconds years after the injection, and if yes, in what conditions and with which effects?).

In the United States, Zolgensma was assessed by ICER (Institute for Clinical and Economic Review), an independent institute that ‘transparently reviews all available evidence to help align a treatment’s price with how well it improves the lives of patients and their families’.¹⁴ Interestingly, ICER proposed two subsequent ‘value-based price benchmarks’ in a month interval. It used the same method of calculation for both prices: evaluate the benefits that the therapy will provide to patients, translate them into LYG and QALY gained thanks to the treatment, calculate the cost-effectiveness of the treatment (the cost incurred for getting the LYG or the QALY), and compare it to cost-effectiveness ratios, namely the common threshold of $100,000–150,000 per QALY or per LYG. In a first report published on 3 April 2019, ICER concluded that
to comply with the common QALY threshold, the price of Zolgensma (which
was not yet announced at the time) for Type I SMA, the most serious form of
the disease, should be between $310,000 and $900,000 per treatment (and
between $710,000 and $1.5 million per treatment with the alternative LYG
indicator). These first conclusions were followed by a tense dialogue between
ICER and representatives of the industry, as well as patient groups, who con-
sidered that the indicators do not translate the benefit brought by the therapy,
namely the survival of children who will otherwise surely die. On 24 May 2019,
the Institute produced an updated assessment of Zolgensma, ‘in light of
additional data from ongoing trials (...) as well as the treatment’s final FDA
label and just-announced launch price’ (ICER, 2019). Value-based price bench-
marks increased to $1.1–1.9 million with the QALY indicator, and to $1.2–$2.1
million with the LYG indicator. Consequently, the price of $2.1 million Novar-
tis had claimed in the meantime appeared as in line with a value-based price and
was even heralded as a ‘positive outcome’ compared to the rumours of a $5
million price tag. This price explained the President of ICER, ‘more fairly
aligns with the benefits for these children and their families’ whose lives ‘Zol-
gensma is dramatically transforming’ (ICER, 2019).

In France, the CEESP signalled shortcomings in the evidence on the toler-
ance, efficacy, and usefulness of Zolgensma and recommended that the
company conducts a real-life survey¹⁵ to complement missing data. The uncer-
tainty of value is exacerbated by pharmaceutical companies’ strategy to ask for
market approval at earlier stages of the drug development process. As a former
member of the CEESP explained to us in an interview:

The demand that the company submitted for Zolgensma was surely premature
with respect to the result that they could sell. (...) Premature meaning that they
should have continued the clinical trials to have consolidated results. This is a
tactics for companies: sometimes it works, sometimes it does not.

The ‘premature’ access of drugs to the market is even more accentuated in
the case of innovative treatments for rare diseases, such as Zolgensma,
because counterfactuals are hard to establish due to the paucity of data on
the natural history of these diseases and the limited proportion of the affected
population. As an AFM executive explained to us in an interview:

Drugs enter the market more and more prematurely, at a moment when we do
not yet have sufficiently robust data that would allow for a high level of certainty
on the therapeutic value of the product. We do have data on the risks and
dangers of the product, but we do not have sufficiently mature data that
would allow certainty on the level of efficacy in real life and for all the patients.

Zolgensma was tested for the most severe form of the disease (Type I); the
drug was also approved for Type II, a less severe form of the disease, despite the
absence of robust data on the benefit/risk ratio. While welcoming this decision,
because the therapy comes as a miracle for families whose children suffer from
this disease, patient organizations like the AFM are concerned with the high
price of Zolgensma, for it may jeopardize the future of orphan drug markets.
As one of our interviewees explained, ‘we are in a situation in which the
price is set according to a value that is not known’. This lack of knowledge
stems not only from the difficulty to measure the invaluable, as we discussed
in the previous section, but also from the very focus of value-based pricing
on future value and the lack of evidence for appreciating the future.

Future value versus past costs

From the debates triggered by Zolgensma's value-based price emerged alternative formulations of prices. Value-based pricing draws on economic theories and a marketing strategy according to which 'the price of the commodity should reflect the value to the buyer rather than the actual costs of production augmented by the profit margin' (Jommi et al., 2020, p. 15). Opposing this view, several actors have argued that costs, rather than value, should be reflected in drug prices. The AFM, for example, contends that assuming the value of the drug had to be considered, it should be weighted by its R&D and production costs to come up with a 'fair' price. As one of our respondents shared, the problem with value-based pricing is that it generates undue profits for a few (mainly companies) to the detriment of all (patients and society at large) because it puts aside the question of how drugs are developed and brought to the market.

While value-based pricing focuses on the benefits that a drug will likely bring
to a patient and to the collective of which it is part of (in the form of saved lives
and saved costs), a cost-based formulation of prices embraces a different tem-
porality – the past, instead of the future – and mobilizes a different set of actors
– patient organizations, public research organizations, etc., who have contrib-
uted to the development of the drug, in addition to biotechnology start-ups
and pharmaceutical companies. The critique of value-based pricing then
leads to a critique of the prevalent economic model of drug development.
Such critiques are sometimes brushed aside by economic experts, as forcefully
illustrated by the following quote from one of our interviews:

The ‘all value system’, which since the 1990s has gradually replaced a system of
evaluation in which costs were considered [in France], has been pushed by a pro-
fession eager to promote its expertise: economists who defend their *raison d’être*.
When we talk about costs, we are being told: ‘You do not understand economics,
prices are set according to value, to the willingness to pay, etc’.

The links made between value-based pricing and economic theory can be
observed in the literature in health economics.¹⁶ These links permeate public
debate too. For example, during a multi-stakeholder conference co-organized
by the AFM at the French parliament in 2019, one health economist asserted that ‘like in any economic exchange, it is impossible to ignore the value for the patient, which translates the demand’. Such arguments provide value-based pricing with the quality of truthfulness, conferred on it by economic theory. To counter them, some observers rely on empirical examples of prices which manifest themselves as disconnected from the value that drugs bring to patients. During the above-mentioned conference, one geneticist-paediatrician who has been involved in gene therapies from the very beginning, recalled that if antibiotics were priced according to their value, they would just have been unaffordable. This argument repositions value-based pricing not as an expression of economic truth, but as an aberration. What would the prices of such drugs have been if they had been pegged on their value determined by the future benefits to patients and costs avoided to the health system? In this perspective, a value-based formulation of prices becomes a matter of speculation, instead of an instrument of cost-benefit analysis in the pursuit of objectivity. Objectivity, rather, is associated with a cost-based formulation of prices. As a former member of the CEESP shared with us reflecting on the example of Zolgensma, value-based pricing deprives public payers from ‘objective elements’ on which to ground prices:

> There are more and more new products for which the prices claimed by the manufacturers are very high, but these prices are never based on the costs of manufacturing and R&D, which means that these prices are not based on objective elements.

For the AFM, as one of our respondents put it, ‘the idea is not to base prices on costs in an algorithmic manner’, but to integrate costs back in the debate on the prices of drugs to counter the anticipatory and uncertain valuations on which value-based pricing relies:

> We do not say that prices should be set only on a cost + margin basis, but that these elements need to be put back in the discussion to rebalance the ratio of power through more transparency on the terms of the negotiation.

Our objective here is not to suggest that cost-based pricing is more ‘objective’ or ‘transparent’ than value-based pricing. As Geiger and Bourgeron (2023) have shown, cost-based and value-based pricing are associated with different visions of transparency. Moreover, actors who argue in favour of the inclusion of costs in the determination of prices are aware of the difficulties that the measurement of costs entails. Knowledge on costs is not necessarily easier to produce than knowledge on value. It is precisely the difficulty to estimate ‘true’ costs, and particularly costs associated to ‘research efforts’ that contributed to the emergence of value-based pricing in France in the 1990s (Nouguez & Benoît, 2017) and, subsequently, of medico-economic evaluation that was made mandatory in 2013.
Nonetheless, several studies in health economics have painstakingly collected evidence on the cost of pharmaceuticals to provide estimates of cost-based prices of, notably, orphan drugs (van den Berg et al., 2021) and essential medicines (Gotham et al., 2019; Hill et al., 2018). These studies converge on the conclusion that estimated cost-based prices are significantly lower than observed current prices. The AFM undertook a literature review on the development costs of drugs, looking notably to major references, such as the work of DiMasi and colleagues (2003, 2016). As an interviewee shared with us, they soon realized that data on costs are proprietary, that they are difficult to individualize in case companies have product portfolios, and that cross-comparison is therefore seldom relevant. Shifting from a value-based to a cost-based formulation of prices would require not only substituting one calculation method with another, but also profoundly redesigning accounting procedures. As one health economist explained to us:

> Value-based versus cost-based is an endless debate. At the very least, introducing development costs in the pricing of drugs would require analytic corporate accounting, which is nearly impossible for companies.

In the current economic model of drug development, the calculation of costs becomes all the more complex as different actors intervene at different stages of the research, development and production process. The process is punctuated by market exchanges in which scientific knowledge, patents, licenses and promises of future drugs are being bought and sold. One respondent gave us an indication of the prices of these intermediary market exchanges in the case of Zolgensma. AveXis was focused on a single product; €500 million were raised for the development of this product, and AveXis was acquired by Novartis for $8.7 billion. However, these prices do not merely mirror the costs that the development of Zolgensma has required. Some point to the profits made by the two entrepreneurs who founded AveXis, who are said to have pocketed $400–500 million each, and to the fact that at the time it purchased AveXis, Novartis had excess cash on which it would have had to pay taxes if it had not spent it. By way of comparison, the early stages of research on Zolgensma, which allowed for the proof on mice model to be made, cost a few hundred thousand euros, €1 million at most, according to this same respondent.

What we can take from this ‘value-based versus cost-based ... endless debate’ is the actors’ shared feeling that costs, whatever they are, refer to past phenomena that could be accurately documented through inquiries, whereas value results from an unsurpassable speculative gesture and would be known only and at best in the future. This speculative gesture, according to critics, is consubstantial to the increasingly financialized model of open innovation. Thus, the debates on value-based pricing shed light on how prices can work as both epistemic and political entities: inquiries about the relevant expertise to determine drug prices and their relationship to value and costs come along
with inquiries about the process of drug development and the biopharmaceutical economy.

## Conclusion

To conclude, we would like to highlight our main contributions which relate to the literature on the pricing of drugs, to valuation studies and to the sociology of prices.

First, this paper contributes to the literature on the pricing of drugs by shifting attention from the issue of market setting and functioning to the issue of the formulation of prices. Extending the scarce studies that have started to shed light on value-based pricing as an object of sociological analysis (Geiger & Bourgeron, 2023; Mazzucato & Roy, 2019), we have investigated the technicalities of value-based pricing when it operates as a regulatory tool, a contractual arrangement and an object of expertise. The analysis of the controversies that a value-based formulation of prices has triggered in the case of Zolgensma – extending from the technicalities of value-based pricing to debates on desirable futures, uncertainty and models of drug development – has allowed us to deepen our understanding on how, according to the actors, value-based pricing presides over the escalating prices of drugs, and to grasp the range of criticisms that articulate the epistemic and political implications of coupling prices with future value.

Our second contribution is related to valuation studies. The case of value-based pricing urges us to question the very framing of problems in terms of ‘value’. Mazzucato (2018) regrets that the notion of value is brushed away from economic thinking and is appropriated by business studies in the form of ‘value stories’ that help powerful actors (namely big pharma) to extract value wherever they can. The case of value-based pricing shows that the notion of value does not nurture mere ‘value stories’ but is embedded in valuation devices that are core to the functioning of health technology assessment. Our analysis has demonstrated that this focus on value entails a distinctive temporality and confines discussions to a specific set of issues, namely the economic valuation of future lives, whereas actors recognize value-based pricing as a major driver to very high prices. This prompts us to suggest that the issue at stake is not only to re-open the economic and public debate on value for the sake of emancipation from dominant narratives about value creation, but to deconstruct the notion of value as any other category of economic reasoning (Muniesa, 2017).

Our analysis works towards such a deconstruction. We argue that by envisaging prices as based on value, value-based pricing steers debates onto the intractable entanglement between high values and high prices, and positions uncertainty as a key problem that needs to be solved through the production of more data and the invention of new contractual arrangements. We have shown that the conundrums to which value-based pricing can lead have
urged actors to propose alternative formulations of prices from which the idea
of an intrinsic, anticipatory and scientifically determined value of drugs is evac-
uated. Attempts at formulating drug prices out of ‘costs’ rather than ‘value’
have opened a whole set of different issues related to the accounting of costs,
the organization of drug development and the role of public policy.

Our third contribution relates to the sociology of prices more broadly. While sociological approaches to prices have addressed the issues of where prices come from (Beckert, 2011), and how they allow (or not) market transactions to occur (Çalışkan, 2011), our paper calls for further attention to one additional line of inquiry focusing on the temporalities of prices and their epistemic and political consequences. One of the main criticisms addressed to value-based pricing is the decorrelation it produces between on the one hand, the prices of drugs, based on the anticipatory assessment of the value they will bring to patients and society once on the market, and on the other hand, the process through which drugs are developed and the contributions made by different actors – including patients and society – throughout this process. Our analysis highlights that this decorrelation is related to a formulation of prices oriented towards the future. While typical of the early stages of drug research and development and the economy of start-ups and venture capital (Birch, 2022; Doganova, 2024, Chapter 4), with value-based pricing, this future-oriented temporality extends towards the end of the innovation process to characterize the prices of treatments that do exist and are already in use. Thus, the novelty of value-based pricing is not that it espouses the temporality of the future, but that it does so at a particular moment in time when alternative temporalities exist. In doing so, it is likely to jostle the temporal order of pharmaceutical markets characterized by the linearity of a model of innovation that proceeds through subsequent phases of research, development through clinical trials and commercialization.

Acknowledgements

We thank the participants at the SASE 2021 Conference track ‘Age of Pandemics: Regu-
lation, Innovation, and Valuation in Markets for Health and Medicines’, 4S 2021 Con-
ference panel ‘Transforming the Development and Governance of Pharmaceuticals’,
EGOS 2022 Conference track ‘Valuation and Critique in the Good Economy’, and
the 2023 workshop ‘Prix et accès aux médicaments’, as well as Nassima Abdelghafour,
Kristin Asdal, Michel Callon, our colleagues at the Centre de sociologie de l’innovation,
and our partners in the research project SPIN (Social Pharmaceutical Innovation) for
their comments on previous versions of this paper. We are grateful to five anonymous
reviewers for their remarks and suggestions.

**Disclosure statement**

No potential conflict of interest was reported by the author(s).
## Funding

This work was supported by the Agence nationale de la recherche (ANR, the French national research agency), under grant number ANR-19-ISOC-0001-03.

## Ethical approval statement

This work was a non-interventional study and did not require ethical approval.

## Notes

1. The list price is different from the real price that results from confidential negotiations between the payer and the provider.

2. Since the end of November 2022, the price of Zolgensma has been surpassed by Hemgenix (€3.4 million per dose), a treatment for Haemophilia B.

3. Conditional marketing authorization is a fast-track approval for a treatment that fulfils an unmet medical need.

4. Early-access authorization is granted by the French Medicines Agency (ANSM) to innovative treatments upon their presumed efficacy and safety.

5. The French 'Sécurité Sociale' offers public coverage for drugs and treatments under certain conditions.

6. Negotiations usually include rebates, budget capping, size of the targeted population, as well as benchmarking with reference prices in EU countries. In France, negotiations are framed by a multi-annual agreement between the pharmaceutical industry and the CEPS (Committee for the Evaluation of Medicinal Products) which is composed of representatives of the Ministry of Health, the Ministry of Economy, and the French 'Sécurité Sociale'. Value-based pricing therefore comes as an additional element upstream to price negotiations.

7. As per the French law, this was made mandatory in 2013 for treatments whose prices may significantly affect the budget of the French 'Sécurité Sociale'.

8. In 2022, Novartis reported that two children on Zolgensma died of acute liver failure.

9. All the quotes from documents and interviews in French have been translated by the authors.

10. The incremental cost-effectiveness ratio is not a strict cost-benefit ratio like the cost per QALY is, but an estimation of the differential costs induced by the new treatment compared to existing alternatives, pondered by their respective benefits. It aims at situating the new treatment on an efficiency curve in comparison to existing alternatives (e.g. the best current options). The use of this ratio is cohesive with the mission of the HAS, which is not asked to determine a range of reasonable prices for a new treatment but to assess its value-for-money.

11. The HAS official economic statement on Zolgensma was passed on to the French authorities. At the time of writing, price negotiations are seemingly still underway.

12. We thank one anonymous reviewer for informing us about this.

13. We thank one anonymous reviewer for leading us to this observation.
14 https://icer.org/who-we-are/, accessed in May 2022.

15 Real-world data and evidence have turned into a topical issue in the debates on value-based pricing (Augustovski, 2019).

16 It is worth noting that an entire journal in the field of health economics is devoted to the topic of ‘Value in Health’.

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Liliana Doganova is Associate Professor at Centre de sociologie de l'innovation, Mines Paris, PSL University. At the intersection of economic sociology and Science and Technology Studies, her research explores valuation practices in the economy and has appeared in journals such as *Economy and Society*, the *Journal of Cultural Economy*, *Research Policy*, *Science as Culture*, and *Science and Public Policy*. Her new book, *Discounting the future: The ascendancy of a political technology* (2024), explores the links between temporality and valuation through a historical sociology of the technique of discounting. Her current research projects focus on forestry and drug pricing.

Vololona Rabeharisoa is Professor of Sociology at Mines Paris, PSL University, and senior researcher at Centre de sociologie de l'innovation. Her background is in Science and Technology Studies. She is interested in the increasing involvement of civil society organizations in scientific and technical activities. For several years, she has investigated the engagement of patient organizations with biomedical research and its transformative effects on expertise and on the governance of health issues. She has extensively published on these topics. She continues her work by exploring the involvement of patient organizations in therapeutic innovation and in the debates on the organization of drug markets and drug prices.