Can 'indication-based pricing' become a reality?

Requested by anticancer drug companies

Multinational drug companies propose 'blended pricing' and differential reimbursement rates

Controversy over benefits for specific pharmaceutical companies..."an agenda that requires review in the long run”

With the presence of anti-cancer drugs in the clinical field becoming more prominent in recent years, multinational pharmaceutical companies have been calling for a new reimbursement system.

 

In addition to existing immuno-oncology drugs, the emergence of antibody-drug conjugates (ADCs) has increased the number of treatments that are effective against multiple cancers, and the industry requests different drug prices to be applied for each so-called 'indication.’ In fact, the multinational pharmaceutical industry has been requesting so for the past decade, but it hasn't made much of a difference.

 

However, as obesity drugs have expanded their indications to include diabetes, cardiovascular disease, and metabolic dysfunction-associated steatohepatitis (MASH), the debate is no longer limited to anti-cancer drugs.

 

# According to industry sources on the 21st, immuno-oncology drugs or ADCs with indications for various cancers have recently been introduced into the domestic clinical field, and opinions have been raised that different drug prices should be applied to the same drug for different indications.

 

This method - Indication-based pricing (IBP) - is a further subdivision of value-based pricing (VBP), which states that drug prices should reflect the actual value of drugs.

 

Currently, the single-price policy utilized by Korea’s health insurance system is based on the initial indication.

 

For each additional indication, the existing drug price must be reduced to cover the expanded area of reimbursement.

 

For example, if an A immuno-oncology drug is first approved for lung cancer, and then expands its indications to include gastric and breast cancer, the existing drug price must be reduced through pricing negotiations as its use in practice increases under the current system.

 

In other words, the more you expand reimbursement by adding indications, the more you have to reduce the drug price.

 

The problem is that as the number of therapies with indications for multiple cancers, such as major immuno-oncology drugs and ADCs, grows, so does the demand for their reimbursement, and the current single-price policy cannot accommodate them all.

 

So the more approvals for indications and reimbursement the pharmaceutical companies receive, the more pressure they face to reduce drug prices.

 

As a result, the Korean Research-based Pharmaceutical Industry Association (KRPIA) recently requested the government to launch pilot projects on 'blended pricing' (indication-weighted average price) and 'differentiated reimbursement rates by indication' within the framework of Korea’s risk-sharing agreement (RSA) system.

 

Blended pricing is a system that has been implemented in Italy, France, Japan, and other countries.

 

The idea is to set a single price for a drug, but calculate a weighted average price for each indication based on expected usage and clinical value.

 

The main content is to agree on a single price for the same drug while adding reimbursement in consideration of the increased patient and input of financial resources when the reimbursement standard is extended.

 

The industry request is for the blended pricing system to be introduced first, then the risk-sharing system to be improved by applying differential reimbursement rates by indication.

 

In this regard, Ewha Womans University Professor Jung Hoon Ahn (College of Science& Industry Convergence) recently published a study on 'Reimbursement Policy for Multiple Indication Drugs' sponsored by AstraZeneca.

 

In fact, it reflects the will of the multinational pharmaceutical industry, led by the KRPIA, to introduce the system.

 

“The blended pricing method is highly feasible in the domestic reimbursement and drug pricing environment,” said Professor Ahn.

 

“Blended pricing can be implemented in the legal contract stage, applying it at the risk-sharing agreement scheme stage.” “Blended Pricing can be applied within the risk-sharing framework to reflect the value of drugs per indication while managing the financial risk of drugs with uncertain cost-effectiveness,” he said.

 

”Combined with a structure that allows for reassessment based on actual usage data or adjustments to reimbursement terms based on indication-specific usage, this can increase policy flexibility and feasibility.” As the multinational pharmaceutical industry has been pushing for the introduction of the program, attention has naturally turned to the government’s acceptance.

 

While the need to introduce the system is well understood, as it has been called for more than a decade, there is also consensus that the agenda is not urgent enough to prioritize and pilot quickly in the course of Korea’s current health insurance system.

 

At the same time, there is also an opinion some companies have been particularly exerting their influence among multinational pharmaceutical companies.

 

There are doubts that the benefits of its institutionalization may be concentrated on certain pharmaceutical companies.

 

This would naturally lead to equity issues with other pharmaceutical companies and the domestic pharmaceutical industry.

 

A law firm advisor who serves as a high-ranking government official gave a sobering assessment, saying, “The multinational pharmaceutical industry has been asking for such a system, but it is doubtful that social consensus can be made on this, regardless of whether the government accepts it or not.” “The key to the indication-based drug pricing system is to accurately predict the usage of each drug,” he said.

 

”Even now, when discussing expanding the scope of use of a drug, the price is reduced in anticipation of the increased volume.

 

However, when we look at future outcomes, it often doesn't work well,” he said.

 

In other words, it is difficult to introduce blended pricing at a time when even the estimated usage for risk-sharing is not always accurate.

 

It is theoretically possible, but it is difficult to apply it in practice.

 

“If there is a need to introduce the system, the government should prioritize judging its effectiveness through research services,” said HIRA Director Kook-Hee Kim.

 

“No proper monitoring has been made yet.

 

The weighted average should be discussed every time the number of therapeutic indications increases and the impact should be analyzed in various ways,” indicating that it is a long-term challenge.”