Indication-Based Pricing of the Pharmaceuticals in Croatia: Case-Study Modelling Excercise

OBJECTIVES: The aim of the paper is to model a pricing system based on relative value of three case-study oncology therapies in different indications to show how prices should vary to achieve the same value-for-money across indications as well as to identify the obstacles in the practical application of IBP.

METHODS: Efficacy data (LYGs and QALYs) were extracted from pivotal clinical trials. IBP was operationalized in two ways: first, by anchoring all drug prices to the indication that provides the greatest or lowest benefit, what we term “payer” and “industry” perspective; second, by anchoring drug prices to a target cost-effectiveness threshold relevant for Croatia. To identify potential barriers for using IBP in Croatia, we interviewed policy makers and clinicians.

RESULTS: Efficacy of drugs varied considerably across indications. When drug prices were anchored to the indication with the greatest benefit (payer’s perspective), drug prices in the other indications should be lowered by 39% to 85%. If drug prices were anchored to the indication with the lowest benefit (industry’s perspective), drug prices in certain indications would have to be increased dramatically (181% - 572%). Anchoring indication prices to a cost-effectiveness threshold (estimated at €17,000 per QALY) would require relatively less price variation to achieve the same value-for-money: from the payer’s perspective, the prices should be lowered by 6% - 59%, or from the industry’s perspective, the prices should be increased by 40% - 246%. The obstacles for implementing IBP vary depending on the stakeholder perspective.

CONCLUSIONS: Drug prices could be linked with value, and thus more accurately reflect the value across multiple indications. Depending on the IBP approach, the price variation per indication differs dramatically. For countries with low healthcare expenditure, IBP has the potential to reduce overall spending and/or increase the value for money of healthcare spending, although its implementation is littered with practical problems.