The standard pricing approach for pharmaceuticals involves setting a uniform price across all indications in each market. Based on this approach, the price in each indication does not necessarily align with the value, and payers may restrict therapies to higher value indications. Companies are also disincentivised to develop new indications for therapies if their value threatens the price of existing indications. Indication-based pricing addresses this by allowing discriminatory pricing based on the specific value offered per indication. However, implementing a system whereby vials/packets are differentially priced depending on how they are used is challenging in real-world practice.

To address the high unmet treatment need for COVID-19, a large number of pharmaceutical companies are investigating whether existing therapies can be repurposed to provide efficacious therapeutic options. While some of these are low-cost off-patent therapies (e.g. dexamethasone and hydroxychloroquine), others are branded therapies (e.g. anakinra, ruxolitinib, siltuximab, sarilumab). This raises the conundrum of what would happen if these therapies were found to be efficacious for COVID-19 (or indeed for any future pandemic), as a much lower price may be demanded by healthcare systems in view of the public health need and number of patients. However, once the pandemic is under control, re-establishing the previous high uniform price benchmark may not be possible, such that companies may face significant long-term revenue reductions. This may disincentivise companies from making already approved branded drugs available for trials for any future emerging pandemic trials.

Indication-based pricing would allow existing prices to be maintained for high value indications and incentivise companies to invest in repurposing branded drugs for future pandemics. Further, indication-based pricing may be much easier to implement during a pandemic, due to distinct treating physicians, potential limited supply of the specific vial/packets of a drug, and the fixed time limit of implementation.