The notion that the price of a medicine should be linked in some way to the value it generates for patients and the health system is generally accepted. Yet, how can this be achieved when, increasingly, medicines are being developed that derive patient across many different indications? We summarise the current state-of-play for indication-based pricing (IBP), both in theory as described in the key literature, and in practice by investigating its use in the US and five major European countries. Author(s) and affiliations(s): Amanda Cole, OHE Bernarda Zamora, OHE Adrian Towse, OHE Conference/meeting: ISPOR Europe Event location: ISPOR Europe Date: 13/11/2018

1. SHOULD DRUG PRICES DIFFER BY INDICATION?
Outlining the debate on indication-based pricing and
how it has been implemented to date
Cole, A., Zamora, B. & Towse, A. OHE Consulting Ltd.
Contact: acole@ohe.org
BACKGROUND
The notion that the price of a medicine should be linked in some
way to the value it generates for patients and the health system is
generally accepted. Yet, how can this be achieved when,
increasingly, medicines are being developed that derive patient
benefit across many different indications?
Indication-based pricing (IBP) has been proposed as a way to
tackle this issue, permitting price to vary according to indication
and – critically – according to value.
The challenge is to ensure payers gain value for money, whilst
providing the right incentive signals for industry to innovate.
Acknowledgements
This research was funded by AstraZeneca
References
[1] Bach P.B., 2014. Indication-specific pricing for cancer drugs. JAMA.;312(16):1629-30
[2] Pearson SD, Dreitlein WB, Henshall C, Towse A., 2017. Indication-specific pricing of pharmaceuticals in the US healthcare
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[3] Flume M, Bardou M, Capri S, Sola-Morales O, et al., 2016. Feasibility and attractiveness of indication value-based pricing
in key EU countries. Journal of Market Access & Health Policy; 4(1):30970
[4] Garrison LP Jr, Veenstra DL., 2009. The economic value of innovative treatments over the product life cycle: the case of
targeted trastuzumab therapy for breast cancer. Value Health; 12(8):1118-23
[5] Yeung K, Li M, Carlson JJ., 2017. Using Performance-Based Risk-Sharing Arrangements to Address Uncertainty in
Indication-Based Pricing. J Manag Care Spec Pharm.; 3(10):1010-1015
AIM
Our aim was to summarise the current state-of-play for IBP, both
in theory as described by the key literature, and in practice by
investigating its use in the US and five major European countries.
METHODS
1. We searched PubMed and the ASCO Journals database for key
papers contributing to the debate on IBP.
2. The grey literature was searched to identify views and
experiences of local stakeholders of IBP in the US, France,
Germany, Italy, Spain and the UK (included local language
searches).
RESULTS (1)
We can better align payments with value in various ways:
We identified 11 main papers contributing to the debate on IBP.
Insight can be summarised under three main themes:
I. Potential benefits of IBP – aligning price with value could
expand patient access
Matching payments with value
• Permits rational prices and avoids suboptimal long-term
societal outcomes [1-4].
• Reduces uncertainty, and can make some indications with poor
cost-effectiveness more affordable [5-7].
• Could encourage research into better targeting [8].
Expands patients access
• Facilitates reimbursement of indications which, based on a
single price, are not cost-effective, thus maximising health gain
RESULTS (2)
• In France and Germany an average, blended or mixed price can
be set ex-ante, but there are challenges in data collection that
can support a reassessment of price and differential discounts.
• In Spain, only one national price can be set, but more flexibility
is possible at the level of the autonomous regions.
• In the UK, NHS England has been cautious of generating data
collection burden on hospitals and clinicians, so simple discounts
which do not differentiate by indication predominate.
• In Italy de facto IBP arrangements are in place through
managed entry agreements using the national registries, but
questions have been raised about cost and ensuring
rebates/discounts are claimed.
• In the US the legislative barriers are of concern, notably “anti-
kickback” provisions and the Medicaid “best price rule”, but
private payers are experimenting with IBP.
DISCUSSION & CONCLUSION
• The case for IBP continues to be debated.
• IBP could in principle lead to more efficient allocation of
resources, expanding patient access and maximising health
gain.
• Some argue that IBP would lead to increasing expenditure on
medicines.
• Generally omitted from the literature is the long-run
consequences of IBP, which would provide the right incentives
for R&D and could increase price competition at the indication-
level, driving down prices and delivering better value.
• If IBP were to be implemented, a number of barriers need to be
overcome to enable its potential benefits to be realised.
and providing the right signals for R&D and the development
of new indications [9,10].
Balancing the needs of all stakeholders
• Could balance affordability for payers, sustainability for
manufacturers and access for patients [2].
II. Potential drawbacks of IBP – unaffordable for payers?
Some argue that IBP would benefit industry at the expense of rising
costs for payers
• IBP would lead to higher overall spend and higher manufacturer
profits, and would not meet affordability challenges [2,7,11].
III. IBP – The details matter
What format should IBP take?
• Efficacy differs from effectiveness, so evidence-based IBP prices
(set ex-ante) might be quite different to outcomes-based
reimbursement (based on realised value) [5].
Data collection barriers
• Poor data availability for tracking use by indication per patient, and
in certain sub-populations [1,2,8].
• IBP could lead to the collection of richer real-world data, and
provide greater transparency in the utilisation of cancer drugs [1].
Legal and contractual barriers
• Market-specific contractual barriers e.g. Medicaid’s best-price rule
[2], but these could be overcome [8]
• Privacy concerns inhibit data sharing [8]
The political challenges may be greater than the technical [1]
[6] Bradley, J., 2017. Cancer, Financial Burden, and Medicare Beneficiaries Journal of Clinical Oncology 35, no. 22, 2461-2462
[7] Bach, P.B., 2016. Walking the Tightrope Between Treatment Efficacy and Price. Journal of Clinical Oncology; 34(9): 889-
891
[8] Sachs R, Bagley N, Lakdawalla DN., 2017. Innovative Contracting for Pharmaceuticals and Medicaid's Best-Price Rule. J
Health Polit Policy Law
[9] Hui L, von Keudell G, Wang R, Zeidan AM, et al., 2017. Cost-effectiveness analysis of consolidation with brentuximab
vedotin for high-risk Hodgkin lymphoma after autologous stem cell transplantation. Cancer. 1;123(19):3763-3771
[10] 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
[11] Chandra A, Garthwaite C., 2017. The Economics of Indication-Based Drug Pricing. N Engl J Med.; 377(2):103-106