Risk Sharing Contracts Between Healthcare Payer and Pharmaceutical Drug Manufacturers

In this project we analyze how a government healthcare provider should negotiate a risk-sharing contract with pharmaceutical drug manufacturers. The objective of the study is to examine how a government healthcare payer should set the terms of pay-for-performance contracts with multiple drug or pharmaceutical manufacturers. The study builds on existing work by Mahjoub, Odegaard, and Zaric (2010), that considers the simplest case when there is only one manufacturer. The main parameters of the contract we seek to model are the evaluation period and percentage of sales that the manufacturer would have to reimburse to the healthcare payer. Due to deriving meaningful tractable results with analytical models, the study will focus on computational game theory and simulation. In other words the study will center on testing different contract policies using computer simulation to evaluate what types of contract, from the health care payer’s perspective, are optimal and robust to adverse outcomes.

The main role for the student involves model building and analysis. Model building involves specifying, for instance, the dynamics between the manufacturers and the healthcare payer, the drugs’ performance and evaluation, disease(s) progression in the population, the metrics to track, etc. Model analysis includes model validation, interpretation of the results, summarizing results, preparing graphs, etc. The student will be responsible for implementing (coding) the model in a computer programming/simulation environment. Additional tasks include literature review and research previous work that has been done. The student is also expected to summarize the model and results and actively participate in drafting a formal research paper and PowerPoint presentation.

Faculty Supervisor:

Dr. Frederik Odegaard


Irene Baby







Western University


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