Indication-Based Pricing: Are We All Onboard?

Article by: Amanda Cole

A move towards paying multiple prices for medicines (depending on what they are used for) could address a commonly cited problem in drug development and increase patient access. Our latest consulting report investigates whether key stakeholders are onboard.

Policy change requires constructive conversation and a shared understanding of key issues. Beyond that, policy change requires alignment among key stakeholders and – ultimately – it requires buy-in. In a report published today, we investigate whether there is buy-in for indication-based pricing (IBP).

What is the issue?

The price we pay for medicines should: be aligned with the value medicines provide to patients and the health service; be affordable; and offer a fair reward (and therefore incentive) to developers. However, we are increasingly discovering that individual medicines can be useful in many different and diverse scenarios or patient groups (‘indications’). One medicine normally has one price, so how do we make sure we are paying the ‘right’ price across all these indications? (Where a ‘wrong’ price leads to some patients not accessing potentially beneficial treatments.)

Is IBP the solution?

As more and more medicines come to market with multiple indications (or even more importantly, the unrealised potential to treat multiple indications), the way we pay for those medicines becomes critical in making sure we can benefit from them. ‘Indication-based pricing’ (IBP) permits price to vary according to indication and has been proposed as a solution to meeting this challenge.

In previous publications the OHE has outlined and critically evaluated the academic debate around IBP and how it has been implemented, as well as the economic arguments for/against IBP in terms of impacts on payer budgets, patient access and incentives for innovation. Last year we published a short Discussion Paper on IBP which laid out the key issues with the aim of promoting a shared understanding. This was accompanied by a questionnaire (also translated to Spanish and French) eliciting stakeholders’ thoughts around the positives, the pitfalls and the practicalities of IBP. Through this stakeholder consultation exercise – funded by AstraZeneca and published today – we are able to outline what stakeholders think.

What do stakeholders think?

Sixteen countries were represented among the 73 survey respondents, who among others included representatives of industry, payers, regulators and academics.

Most respondents agreed that some form of IBP would be a good thing (78%) although this belief was held most strongly by industry (96%) and regulators (83%), and less strongly by payers (65%) and academics (57%). Encouragingly, those with experience of IBP were more positive than those without.

70% of survey respondents believed IBP would expand patient access to medicines. However, three-quarters of respondents believed that expanded patient access via IBP would put pressure on payer budgets, although a subset believed that in the long run IBP will generate competition and lead to lower prices.

There was a wide spread of opinion on the best way to implement IBP, the most popular options being a single price based on a weighted average of value and usage across indications, and differential list prices aligned with value for each indication; another popular suggestion (and potentially the most practical) was to have a single price with confidential differential discounts by indication.

Significant barriers to IBP were considered to be inadequate data infrastructure (in particular capturing actual usage by indication), and the perception that IBP is not currently a policy priority in most countries.

Is there buy-in?

Buy-in requires that stakeholders understand the benefits and see the gains. There was a spread of opinion about who is the biggest “winner” from IBP. More than half of respondents (57%) thought that all stakeholders could gain from IBP. However, 31% considered industry to be the single stakeholder that stood to gain the most from IBP. This helps to explain respondents’ view that there was a lack of stakeholder buy-in to pursing IBP, hence a lack of political will to implement it. Our earlier Discussion Paper indicated that the mechanism for the benefit to industry – stimulation of R&D by better aligning price and value at the indication-level – paved the way for expanded patient access. The fact that patients were not singled out as the biggest winner by survey respondents remains a major challenge to achieving greater support for IBP. 

Related Research

Cole, A., Towse, A. & Zamora, B., 2019. Indication-Based Pricing (IBP) Discussion Paper. OHE Briefing, London: Office of Health Economics. Available at: https://www.ohe.org/publications/indication-based-pricing-ibp-discussion-paper-should-drug-pricesdiffer-indication

Cole, A., Towse, A., Lorgelly, P. and Sullivan, R. (2018). Economics of Innovative Payment Models Compared with Single Pricing of Pharmaceuticals. OHE Research Paper 18/04, London: Office of Health Economics. Available at: https://www.ohe.org/publications/economics-innovative-payment-models-comparedsingle-pricing-pharmaceuticals#overlay-context=publications

Towse, A., Cole, A., and Zamora, B. (2018). The Debate on Indication-Based Pricing in the U.S. and Five Major European Countries. OHE Consulting Report, London: Office of Health Economics. Available at: https://www.ohe.org/publications/debate-indicationbased-pricing-us-and-five-major-european-countries

Neri, M., Towse, A. and Garau, M. (2018). Value Assessment of Multi-Indication Pricing (MIP): Practical Solutions and Steps to Move Forward. OHE Briefing, London: Office of Health Economics. Available at: https://www.ohe.org/publications/multi-indication-pricing-mip-practical-solutions-and-steps-move-forward#

Mestre-Ferrandiz,J., Towse, A., Dellamano, R., and Pistollato, M. (2015). Multi-indication Pricing: Pros, Cons and Applicability to the UK. Seminar Briefing 56. Office of Health Economics. Available at: https://www.ohe.org/publications/multi-indication-pricing-pros-cons-and-applicability-uk

 

Posted in Innovation, Pricing and Reimbursement, Value-Based Pricing | Tagged Consulting Reports