The Impact of Value-Based Pricing (VBP) Vs International Reference Pricing (IRP) on Innovative Drugs in the US


Labban M1, Patrick A2, Mahendraratnam Lederer N3, Jao R4, Patel P4, Jaksa A5
1Global Pricing Innovation, London, LON, UK, 2Aetion Inc.,, Boston, MA, USA, 3Aetion, Washington, DC, USA, 4Global Pricing Innovations, London, UK, 5Aetion, Inc., Boston, MA, USA

Objective: To compare IRP to VBP, for a list of innovative drugs to understand how commonly-utilised pricing policies in regulated markets may impact drug prices in the US.

Methods: We identified a sample of drugs reviewed by the Institute for Clinical and Economic Review (ICER) from 2019-2021 that had a reported VBP based on ICER’s $150,000/QALY willingness-to-pay threshold. ICER assessments were used because modeling results are publicly available and model building processes are consistent. Reference pricing was calculated for each drug using ex-factory prices from Global Pricing Innovation’s Pulse platform. The IRP formula was defined (based on the Most Favored Nation Model published on the Federal Register on 11/27/2020) as the gross domestic product (GDP) adjusted lowest price across 22 countries with a GDP within 60% of the US. The percent discount from the current US wholesale acquisition cost (WAC) to the IRP and VBP were calculated and compared.

Results: We identified 23 drugs across 28 indications. Based on ICER’s cost-effectiveness modeling, the VBP ranged from a 39.2% increase in price to a 97% discount off the annual WAC. Across the 22 countries included in the IRP analysis, the US had the highest list price for each of the drugs. On average, the VBP approach resulted in the smallest discount needed off the current US drug list price (55.3%) compared to IRP discount needed (70.5%). However VBP resulted in greater discounts compared to IRP for a third of the sample, which included several orphan drugs.

Conclusion: There was no correlation between IRP-based discounts and VBP discounts, suggesting that IRP policies largely fail to capture clinical benefit and value. Although IRP policies provide some predictability on pricing, we find cost-effectiveness strategies better reward drugs with notable improvement over standard of care, and support innovation overall.

Conference/Value in Health Info

2022-05, ISPOR 2022, Washington, DC, USA




Economic Evaluation, Health Policy & Regulatory

Topic Subcategory

Pricing Policy & Schemes


No Additional Disease & Conditions/Specialized Treatment Areas

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