‘Should apply blended pricing and reimbursement rates’

“The increased number of anticancer drugs renders differentiated weighted average prices and reimbursement rates by indication necessary”

Policy discussion forum on regulatory improvements to address inequality in innovative new drugs 

Professor Jung-Hoon An: ”Inadequate reflection of drug prices on the value of disease-specific treatments hinders patient access”

With multiple drugs with multiple indications, such as multi-targeted immunotherapy drugs, being approved in Korea, there have been claims that the introduction of an “indication-based drug pricing system” is necessary to improve patient access to treatment and ensure equity.

 

In particular, the argument was made that ‘blended pricing,’ which sets different prices for each indication, could reflect the value of each indication while maintaining a single price, thereby increasing social acceptability, and that it could be introduced without conflicting with the current drug pricing system in Korea, which is based on a single price structure.

 

Ultimately, after taking the first step with “blended pricing,” the industry recommended that the government should introduce a “differentiated reimbursement rate system” based on real-world data accumulated for each indication in order to reflect the value of drugs for each disease and speed up reimbursement for patients.

 

Jung-hoon Ahn, Professor of Health Convergence at Ewha Womans University Graduate School, will present these views at a policy discussion forum titled “Resolving Inequality in Innovative New Drugs and Regulatory Reform” co-hosted by the Democratic Party of Korea lawmakers Mihwa Seo, Byung-Hoon So, Yoon Kim, and Jong-Tae Jang on the 24th.

 

The forum is organized by the Korean Research-based Pharmaceutical Industry Association (KRPIA).

 

Professor Ahn will give a presentation on the reimbursement policy for drugs with multiple indications.

 

Professor Ahn pointed out that there are an increasing number of cases in which drugs with multiple indications are being approved in the field of anticancer drugs.

 

In fact, as of 2018, 75% of tumor treatment drugs in the United States were approved as drugs with multiple indications, and in South Korea, 32 anticancer drugs with multiple indications are eligible for reimbursement.

 

In South Korea, drug prices are determined based on the active pharmaceutical ingredient contained in the drug, making it difficult to set and reflect separate prices for individual indications.

 

This means that even drugs with multiple indications are assigned a single insurance reimbursement ceiling.

 

Professor Ahn expressed concerns that the value of individual indications is not sufficiently reflected in drug prices, leading to issues such as access to treatment for patients that are covered with the expanded indications in South Korea.

 

Taking the multi-indication immunotherapy drug Keytruda as an example, he pointed out that while it is reimbursed in Italy, Switzerland, France, Australia, Japan, and Belgium for both first-line treatment of head and neck squamous cell carcinoma and second-line treatment of endometrial cancer, it is not reimbursed for either in South Korea.

 

In response, Professor Ahn suggested the need to introduce or improve a drug pricing system for multi-indication drugs.

 

Specifically, Professor Ahn proposed that while methods such as “individual approval for each indication” or “differentiated reimbursement rates” could transparently reflect the value of each indication, they require legal amendments or raise concerns about equity in reimbursement amounts between patients that are applied different indications, as well as the need for preparation in the current system, including settlement mechanisms.

 

He emphasized that the blended pricing method is highly feasible under the current reimbursement and drug price system.

 

The logic is that applying blended pricing within the framework of risk-sharing agreements (RSAs), which are legal contracts, would allow the value of drugs to be reflected according to their indications while managing the financial risk of drugs with uncertain cost-effectiveness.

 

Professor Ahn stated, “The country has established a value-based drug pricing system.

 

However, while value is recognized primarily based on the primary indication, appropriate values for individual indications are not reflected.

 

As a result, pharmaceutical companies are delaying or abandoning the launch of subsequent indications, leading to reduced access to new treatments for patients.” “I propose collecting and analyzing real-world data on claims made for each indication to establish actual value evidence for drugs, and building a system that applies differential reimbursement rates that reflect the clinical value differences by indication based on accumulated data,” said Ahn.

 

“This is a strategic approach that complements the limitations of Korea's single drug pricing system while flexibly realizing the effects of indication-based drug price adjustments.” He added, “We can start with a practical approach, such as blended pricing (indication-weighted average price), and gradually evolve toward a differentiated reimbursement rate system that reflects indication-specific value.

 

Blended pricing maintains a single price while reflecting the value of individual indications, making it more acceptable within the social framework.”