Despite extensive research literature on the topic, there is disagreement on how production effects should be quantified and weighted (9). We assume that health authorities can formulate rules for estimating production effects, while we propose two methods for applying them in priority setting. Method A is aimed at addressing the objection that healthcare providers increase the price of care, for example pharmaceuticals, to reflect the value of production gains, as described above. Method B is aimed at the other two main objections. It may be preferred to combine the methods or apply them separately, depending on the circumstances and the desired effect:
Method A: Surplus sharing. Here, production gains are given a weight X < 100 % of the estimated effect in the economic analysis. This will ensure that the provider of the healthcare intervention cannot capture all the benefits from increased production. X will also determine the weighting of production effects in priority setting.
Method B: The budget method. Transferral of proportion Y < 100 % of the expected production gain to the healthcare budget. Increased production means, inter alia, higher tax revenues and reduced welfare payments (sick pay and disability benefits). By transferring a proportion of this to healthcare budgets, 'extra resources' are ensured for treating more patients.
In the proposal for surplus sharing, the authorities and patients will likely retain a significant portion of the welfare gain. For pharmaceuticals, this is supported by the fact that pharmaceutical prices are rarely adjusted for inflation over time in Norway, unlike the value of production. The proportion of the welfare gain that accrues to the healthcare provider will therefore decrease over time regardless of the value of X. Also, pharmaceutical prices tend to decline over time following market entry due to competition and, eventually, patent expiry.
Whether the additional funds from the budget method will be sufficient to compensate any patient groups that lose out when production effects are accounted for depends on the amount that is being transferred. However, it is not inconceivable that those who get deprioritised on the margin due to changes in rules for priority setting, may be the first to be prioritised when new funds are allocated to health care. The fact that more patients than before will receive treatment will, in any case, mitigate the ethical dilemma originating from redistribution. This is also in line with the "resource criterion", a current rule for priority setting in Norway, which implies that interventions consuming fewer healthcare resources, all else being equal, should be given a higher priority. The rationale behind this is that it frees up resources that can generate additional health benefits. The budget method is also intended to incentivise decision-makers to give weight to values outside their own budget.