Alternative pricing policies for multi-indication products: a quantitative analysis

Objectives: Different pricing models have been proposed for multi-indication drugs. We compare the population health impact of three pricing policies: uniform pricing, indication-based pricing (IBP), and a hybrid policy of uniform pricing with IBP applied selectively. Methods: We develop a policy model to compare how these pricing policies affect drug access, health benefits, innovation (numbers of new drugs and indications developed), and pharmaceutical costs over the product lifecycle. The framework is illustrated with numeric examples and case studies, using UK evidence. Results: In the UK context where the cost-effectiveness threshold (approval norm, £30,000/QALY) is higher than both the evidence on and the government measure of opportunity cost (£15,000/QALY), IBP is associated with lower overall population health than uniform pricing. The hybrid pricing policy results in lower population health than uniform pricing when innovation effects are not considered, but higher population health when these effects are considered. To improve health outcomes in the UK, where pricing decisions have limited impact on R&D due its small market size, IBP or hybrid policies would need to be implemented in conjunction with lower cost-effectiveness thresholds. Application of the framework to nivolumab and pembrolizumab found IBP would approximately double expenditure for those products without improving access or health benefits. Conclusions: IBP and hybrid policies can improve access to new drugs but must be carefully designed to avoid cost increases that could harm overall population health. Lower approval norms are required for these policies to contribute positively to population health.