Zhang Y, Herring W. The impact of alternative weighting methodologies on cross-indication value-based pricing estimates. Poster presented at the 2020 ISPOR Virtual Conference; May 2020. [abstract] Value Health. 2020 May 1; 23(Suppl 1):S289. doi: 10.1016/j.jval.2020.04.094.


OBJECTIVES: For drugs approved in multiple conditions, current product-specific pricing frameworks struggle to reflect differences in efficacy and value across indications accurately. Value-based pricing (VBP) approaches based on a drug’s value in a single indication (e.g., first approval, minimum value) may negatively affect patients’ access to effective therapies in other indications (e.g., payers restricting coverage, manufacturers forgoing new indications). Health technology appraisal bodies have responded by recommended a weighted-average VBP approach. This study aims to demonstrate the impact of alternative weighting methodologies on cross-indication VBP estimates.

METHODS: We considered three weighting methods: (1) based on the incidence of each indication, (2) based on the number of patients using the drug for each indication (reflecting incidence and market share), and (3) based on the total drug utilization for each indication (reflecting incidence, market share, and drug utilization per patient). To demonstrate the use of these methods, we considered a hypothetical drug approved in four indications. For each indication, incidence rates (5, 3, 1, and 0.5 per 1,000 individuals), market shares for the drug (10%, 60%, 90%, and 40%), average lifetime utilization per patient (40, 20, 60, and 80 units), and VBP estimates for the drug ($2,500, $500, $1,000, and $4,000 per unit) were assumed.

RESULTS:
In this example, the cross-indication VBP estimates for the hypothetical drug using the three weighting methods were $1,789, $1,132, and $1,476 per unit, respectively. Compared with strictly incidence-based weights, incorporating market share resulted in a 37% reduction in the weighted VBP estimate while incorporating market share and drug utilization resulted in a smaller 18% reduction in the weighted VBP estimate.

CONCLUSIONS: This study underscores the challenges in capturing the true value to health care systems of drugs with multiple indications and highlights the importance of including epidemiology, market share, and drug utilization in cross-indication VBP estimates.

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