Abstract

Objectives

Different pricing models have been proposed for multi-indication drugs. We compared the population health impact of 3 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/quality-adjusted life-year) is higher than both the evidence on and the government measure of opportunity cost (£15 000/quality-adjusted life-year), 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 United Kingdom, where pricing decisions have limited impact on research and development owing to 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 that 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.