Blueprints for Indication-Specific Pricing

Drug Pricing Lab
May 19, 2020

Value-based pricing for pharmaceutical drugs has risen in prominence in recent years as an analytic alternative to current pricing methods that are distorted by financial incentives across the industry and supply chain. Value-based pricing links a drug’s price to the magnitude of the benefit it provides, yet the frequent reality is that a single drug may have different benefit profiles for various FDA approved conditions, also known as indications. “Indication-specific pricing” (ISP) is an approach that accommodates this by linking a drug’s price to the benefit of the drug in each of its approved indications.
Its advantages aside, ISP requires mechanisms to reimburse by indication, yet implementation is hampered by the complexities of drug purchasing and delivery. In the absence of more formal pathways, the Drug Pricing Lab proposes several approaches that rewire existing reimbursement conventions as alternatives to facilitate ISP.

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