THE RADICAL IMPLICATIONS OF INDICATION-SPECIFIC PRICING
This paper discusses one of the potentially more impactful new dynamics in the pricing of pharmaceuticals—the advent of indication-specific pricing. Our goal is to provide context to this important change, highlight some of the implications about which biopharma companies should be aware, and leave you with a framework for raising and addressing pertinent questions across the biopharma value chain.
A major change is under way that has the potential to impact the entire process of developing, pricing, and selling pharmaceuticals. Express Scripts, a leading pharmacy benefit manager (PBM) and pioneer in drug cost management, has introduced an indication-specific pricing model, whereby drugs are reimbursed differently based on their effectiveness in treating a particular indication rather than at the same rate across all indications. Express Scripts is piloting the model in oncology, and, if it proves effective, the company next plans to expand indication-specific pricing to immunology.
Given that most of the highest-selling products are currently approved for multiple indications, the impact could be profound. If broadly adopted, this new pricing model has the potential to radically change the approaches by which biopharma companies price their products, moving the industry closer to performance-based pricing.