Different use different price for same substance drugs?

Scope on the trending keyword ‘indication-specific pricing’ pt. 1

Synergy between RSA-applied follow-on drug and reimbursement expansion condition

Industry “Beneficial cost-effectiveness should be reflected through differentiated refund rate”

One says “Why should drugs cost the same when their effects, target patient sizes and values are different?” Another argues, “Why should I pay more for a drug that shares a common substance with other drugs?” In some way, both of those arguments make sense.

 

And it is considered a conventional conflict of interest between a seller and a consumer.

 

An ‘indication-specific drug pricing’ means granting a pricing on a drug based on each indication with different value of innovation the drug owns to reflect the recent changes in drugs having various indications.

 

So far, an organization representing multinational pharmaceutical companies, the Korean Research-based Pharmaceutical Industry Association (KRPIA), has been focusing on expanding risk sharing agreement (RSA) and pharmacoeconomic evaluation (PE) exemption eligibility.

 

But now it is advocating differentiated pricing based on specific indication of the drug.

 

The industry trend of one drug having numerous indications has been apparent for at least five years, considering the South Korean market only.

 

Lately, various indications not only applicable for different lines of treatment, but also for different disease treatments have been added constantly.

 

But why now?

 

◆Reactions on expanded RSA: The revised RSA system is the reason why KRPIA and multinational pharmaceutical companies have been closely following the indication-specific drug pricing.

 

On Oct.

 

8, the industry was relieved to see a follow-on drug now eligible for RSA.

 

The revised regulation provides an option of RSA to cost-effective drug (latecomer) with treatment level equivalent to first-in-class drug.

 

However, the South Korean government also added another clause as well.

 

Although the regulation was alleviated on follow-on drugs, the government now demands for cost-effectiveness confirming evidence (administration cost comparison or PE) from a RSA drug when expanding its reimbursement regardless of having RSA-eligible indication or not.

 

After the said revision was disclosed, KRPIA officially addressed of ‘indication-specific drug pricing’ in an official statement submitted.

 

At the time, KRPIA claimed “The cost-effectiveness evaluation standard’s consistency and predictability of the final price could be improved, if the drug pricing was decided based on indication.

 

The labeled price could be kept the same, but the patients’ treatment access could improve if the contract is signed to apply differentiated indication-specific refund rate based on the actual cost-effective price for each indication.” At a glance, the indication-specific drug pricing and regulation to confirm cost-effectiveness in a drug seeking to expand RSA reimbursement, but it is far from it.

 

Previously, RSA-applied drug coverage expansion was processed by the Health Insurance Review and Assessment Service (HIRA) setting the reimbursement standard without reviewing cost-effectiveness evidence and the National Health Insurance Service (NHIS) negotiating based on increasing patient size and use volume and adjusting the refund rate.

 

Of course, nowadays the Cancer Deliberation Committee is the biggest hurdle for the pharmaceutical companies, but the said course of action was considered typical.

 

But basically, it means the latecomer drugs’ pricing are lowered with the same standard as the first-in-class drug, because the authority grants minimum pricing after comparing against alternative options’ administration cost and PE results.

 

And it creates a synergy effect when overlapped with latecomer’s drug approval, because the lowest pricing goes down as the number of follow-on drug listed with RSA goes up and listed indication expands.

 

In other words, the industry is complaining “Why should the drug pricing always fall and never get raised?

 

If the cost-effectiveness of an added indication is higher than the previously listed induction, then the pricing should be adjusted accordingly.”

Various types of novel payment models in other countries

◆The basic frame of indication-specific drug pricing as explained by the industry: Their argument is actually not a farfetched idea.

 

The background of KRPIA and the industry’s claim is that the introduction of the indication-specific drug pricing in South Korea would highly likely to be limited to RSA-applied drugs (preferentially considered) that also adjust the refund rate.

 

Currently, Australia, Switzerland and the U.S.

 

are using the indication-specific pricing that mostly maintains the initial labeled price but adjusts the refund rate.

 

And other types of novel payment models (NPM), such as combination-based pricing and over-time payments are used in Australia, Switzerland, the U.S.

 

and Italy to improve access to new drug.

 

The industry experts seem to agree the indication-specific pricing is the most suitable model in the South Korean market.

 

And from the government’s perspective, the notion is not to be dismissed blindly.

 

The self-explanatory term, ‘indication-specific pricing,’ literally means pricing a drug based on the value of each indication.

 

If the system, as described by KRPIA, adjusts the refund rate based on the value of the indication assessed through PE while maintaining the labeled price, the government could find more grounds to lower the drug pricing.

 

It is also important to note that most of new drug’s additional indications tend to be less innovative than their first indication.

 

The industry’s market access associate commented, “At this point, the reimbursement listing of a latecomer drug’s first indication may be easy, but growing number of companies has started to give up on listing additional indications with complications they face.

 

And now the patients are left behind only to watch their access to treatment get further out of reach.”