Paper addresses challenges and provides recommendations to guide design of one model of value-based pricing being considered by Medicare in its Part B demonstration project

March 15, 2016 – The Institute for Clinical and Economic Review (ICER) has released a new white paper:  Indication-specific Pricing of Pharmaceuticals in The U.S. Health Care System: A Report from the 2015 ICER Membership Policy Summit.  The release of the ICER white paper follows the announcement last week by CMS that it intends to test new payment models for Medicare Part B drug reimbursement.  Indication-specific pricing is one of the six value-based pricing approaches that CMS is considering, and the ICER white paper provides information that will be helpful to stakeholders considering the advantages and disadvantages of different models for indication-specific pricing.

The main focus of the paper is to analyze the challenges facing efforts to implement indication specific pricing (ISP) initiatives in the US.  A conceptual framework of different ISP models is presented, in which the methods of assigning differential prices by indication are explored, along with illustrative case examples of ISP in international markets.  The analysis is accompanied by a set of recommendations for insurers, manufacturers, and policymakers to help guide a careful consideration of when ISP may be an appropriate option, and if so, how to design and implement ISP initiatives in the US market.

ISP involves setting different prices for different indications or for distinct patient subpopulations eligible for treatment with a medication.  The relative clinical benefit of a drug can vary widely between different indications or between different subpopulations within the same indication.  ISP is one means of addressing that discrepancy with a new approach to pricing.  In addition to the CMS announcement, both Express Scripts and CVS (the country’s two largest pharmacy benefit managers) have announced that they are launching ISP pilot efforts this year.

“With value-based pricing the common goal, there is a tremendous amount of interest in indication-specific pricing as one way insurers and manufacturers might work together to make progress,” noted ICER’s President Steve Pearson.

Dr. Pearson continued, “However, even with the optimism implied by the CMS announcement, there remain significant challenges to designing and implementing these programs in the US.  Our white paper emerged after months of investigation of international models and discussion with insurers and manufacturers in the ICER membership program.  We have sought to capture these lessons and perspectives in order to provide a clear-eyed view of the opportunities – and the potential pitfalls – of indication-specific pricing, and to help recommend how to contemplate the first steps forward.”

You can find the full report here.

The white paper is a product of the ICER membership program.  The program brings together a small, influential group of evidence leaders from insurers, pharmacy benefit management firms, health technology assessment groups, and life science companies to address key controversies in evidence methods and policy.  Working together in a balanced, non-adversarial environment, ICER members gain the skills and insights in evidence policy necessary to strengthen their competitive position in the marketplace.

The December 2015 meeting where the ideas in the paper germinated, had leaders from 22 leading insurer and pharmaceutical companies participating in this collaborative effort.  Importantly, no assertion, judgment, or recommendation included in the white paper should be viewed as representing the opinion of any participant or their company.  ICER alone is ultimately responsible for the final content.

The meeting had representatives from the following organizations:

Payer Organizations: Aetna, Association of Health Insurance Plans, Anthem, Blue Shield of California, CVS Caremark, Express Scripts, Harvard Pilgrim Healthcare, Kaiser Permanente, OmedaRx, Premera, United Healthcare

Life Sciences Organizations: AstraZeneca, Bristol Myers-Squibb, Eli Lilly, Genentech, GlaxoSmithKline, Johnson & Johnson, Merck, National Pharmaceutical Council, Novartis, Pfizer, Takeda

About ICER

The Institute for Clinical and Economic Review (ICER) is an independent non-profit research institute that produces reports analyzing the evidence on the effectiveness and value of drugs and other medical services. ICER’s reports include evidence-based calculations of prices for new drugs that accurately reflect the degree of improvement expected in long-term patient outcomes, while also highlighting price levels that might contribute to unaffordable short-term cost growth for the overall health care system.

ICER’s reports incorporate extensive input from all stakeholders and are the subject of public hearings through three core programs: the California Technology Assessment Forum (CTAF), the Midwest Comparative Effectiveness Public Advisory Council (Midwest CEPAC), and the New England Comparative Effectiveness Public Advisory Council (New England CEPAC). These independent panels review ICER’s reports at public meetings to deliberate on the evidence and develop recommendations for how patients, clinicians, insurers, and policymakers can improve the quality and value of health care. For more information about ICER, please visit ICER’s website.