Indication-specific Pricing: What should manufacturers expect in key markets

By Xcenda

It is not uncommon for a single health technology to have clinical benefit in multiple indications or patient populations. The magnitude of clinical benefit and value of a technology may vary substantially across indications, which can complicate pricing strategies. Indication-specific pricing (ISP) of health technologies, however, may better align reimbursement with value. In this article, we describe models in which ISP may be implemented, and the pricing policies and use of ISP in France, Germany, Italy, Spain, the United Kingdom (UK) (EU-5), and the United States (US).


Indication-specific Pricing: What should manufacturers expect in key markets

By David Campbell, PharmD, MS

It is not uncommon for a single health technology to have clinical benefit in multiple indications or patient populations. In fact, in 2014, over 50% of major cancer medications were approved for multiple indications, and this number is expected to increase to 75% by 2020.1 The magnitude of clinical benefit and value of a technology may vary substantially across indications, which can complicate pricing strategies. Healthcare systems that assign a single price for health technologies across all indications and sub-populations of interest, regardless of differences in value, have the potential to discourage development of therapies for high-value areas and increase barriers to treatments. Indication-specific pricing (ISP) of health technologies, however, may better align reimbursement with value. In this article, we describe models in which ISP may be implemented, and the pricing policies and use of ISP in France, Germany, Italy, Spain, the United Kingdom (UK) (EU-5), and the United States (US).

Models for Implementing ISP

ISP reimbursement models reflect the differential value of a single health technology across indications and key sub-populations. There are 3 modalities for achieving the desired outcomes of ISP, which manufacturers may encounter across key markets.

ISP Adoption in Key Markets

 As health systems around the world seek to align healthcare reimbursement with value, the pricing of health technologies is under increased scrutiny. Manufacturers preparing global market access strategies for multi-indication products should be aware of the unique pricing and reimbursement systems of each market. Here, we explore the reimbursement and pricing environments for multi-indication products in the EU-5 and the US.

In France, the price of biopharmaceuticals reflects the value across their indications. Each indication and key sub-population is evaluated and assigned a separate clinical and incremental benefit (ASMR) rating.3 The pricing committee considers the value and estimates the population size for each indication to define a single weighted price. Manufacturers may be required to collect and report the actual volume of product sold for each indication, and the pricing committee may revise the established price if weighted volumes do not match the committee’s initial assumptions. Since the current pricing system captures the value of a product across indications, implementation of a true ISP system is unlikely as it would require a deep transformation of the price-setting process and would likely yield only marginal savings.
Additionally, France does not have the infrastructure necessary to completely and appropriately capture data that are needed to implement ISP—due largely in part to legal and regulatory hurdles that limit the ability to monitor prescriptions by indication out of the hospital. It is not permitted to write the indication on the prescription, for example, making it remarkably difficult to determine reimbursement in the context of a flexible pricing environment.

Germany, like France, considers the differing value of a drug across multiple indications and sub-populations in a single price, weighted by volume. Under AMNOG regulation enacted in 2011, all new products and indications are evaluated and assigned a medical benefit rating by the Federal Joint Committee (GBA). Once a medical benefit rating has been assigned 6 months after market launch, manufacturers enter into pricing negotiations with the GKV-SV (Gesetzliche Krankenversicherung-Spitzenverband), which considers the clinical benefit rating among other criteria.3,4 Germany allows for initial free pricing at market launch with the negotiated discount becoming effective 1 year after launch. Since all new indications must follow this appraisal and pricing process, the current system is able to align drug pricing with value, and it is unlikely that an ISP scheme with unique prices will be pursued.
The current data structure is also a barrier to implementing a differential pricing scheme. Payers receive only high-level ICD-10 data which lack the granularity needed to implement ISP, and indications for drug use are not reported on prescriptions or communicated to a pharmacist due to data protection regulations.3 It is, therefore, perceived that the current approach is the best (pragmatic) method of ensuring affordability and is likely to persist. Currently, health insurances are lobbying extensively to enable ISP as a way to manage costs. However, all other stakeholders, particularly physicians, are opposing ISP as they believe it will result in significant bureaucratic burden that most likely would not be remunerated. An important regulatory change for 2017 is that free pricing of new technologies during the first year will be subject to a revenue limit of €250m. If revenue exceeds this cap during the first year free pricing window, then a discount will be retroactively instituted for all previous and future transactions.

In Italy, some drugs have differential pricing by indication. The Italian Medicines Agency (AIFA) maintains indication-specific patient registries which allow for 3 main types of discounting methods—payment by results, cost-sharing, or risk-sharing—in addition to standard volume discounts. As a result, net prices for a single drug may vary significantly across indications.
Take, for example, Avastin® (bevacizumab), an oncology product reimbursed for 7 different indications. AIFA ensures the appropriate use of Avastin and, through patient registries, has the means necessary to collect data and measure its therapeutic effect in different contexts, leading to risk-sharing agreements for Avastin that differ by indication. Similar arrangements exist for Cimzia® (certolizumab pegol), Erbitux® (cetuximab), and Afinitor® (everolimus).

In Spain, when manufacturers seek reimbursement for a new indication of an already approved drug, they must provide new forecasts of the estimated number of units that will be sold over the next 3 years. This forecast along with the evidence package informs reimbursement discussions as the price is renegotiated with the manufacturer.5 The current legal framework and decentralized structure of Spain’s healthcare system dissuades the use of ISP. While there is no legislation that directly prohibits ISP, pharmaceutical formulations are statically linked to a single Anatomic Therapeutic Chemical (ATC) code despite the potential for use in multiple indications.6 Additionally, most high-cost medications— those where ISP would have the most impact—are delivered through hospital pharmacies, and drug costs are managed as part of the institution’s total annual budget.3 Hospitals forecast annual budgets based on historical costs and predicted changes. Thus, implementing ISP would require a significant investment in data infrastructure and a major transformation to the current budgetary system.
In addition, ambulatory prescriptions are tracked in comprehensive electronic systems which could provide the groundwork needed to adopt ISP. However, these electronic systems are managed at the regional level, and differences in coding would need to be addressed. Implementation of ISP would require an overhaul of current funding mechanisms and information systems for true systems integration to take place. Due to these concerns, ISP is unlikely to be broadly utilized in Spain in the near term.

The UK
In the UK, most multi-indication biopharmaceutical products have a single negotiated price. However, under the 2009 Pharmaceutical Price Regulation Scheme (PPRS), manufacturers may be allowed to increase the price for a major new indication, but there are limitations. Manufacturers are only allowed to increase the price once and must continue to sell the product at the original price for the original indication. This multi-indication pricing scheme is uncommonly utilized due to its complexity.1
Additionally, ISP is feasible in the UK through the standard appraisal route via (confidential) price discounts on the health technology that could differ by indication. However, under current regulation, these discounts would not be based on formal indication-specific value assessments, and despite being simple in theory, use of differential discounts by indication is uncommon for single branded products.
The UK’s current data capabilities to support true ISP are limited and heterogeneous across its member countries. One report found that data linkage capabilities were far more advanced in England—which can match diagnoses across primary and secondary care by a patient’s NHS number—than in Wales, Scotland, and Northern Ireland—which lack the tools to collect and link hospital prescription data.7 Therefore, the adoption of national centralized data sets remains a critical starting point for streamlining ISP-based efforts in the UK.

The US
In the US, most payments for biopharmaceuticals are made using traditional flat pricing (price per unit) or volume-based contracts. Although there is broad interest in more directly aligning biopharmaceutical reimbursement to value, such as ISP, progression to value-based reimbursement approaches have been limited by current legal and regulatory barriers.
A 2016 memorandum by Anthem and Eli Lilly and Co. described the current challenges of the US healthcare system and perspectives on creating legislative and regulatory options designed to promote value-based contracting arrangements for manufacturers and commercial health plans.8 In the US, regulations and laws inhibit the implementation of indication-specific pricing. Under current regulations, manufacturers are required to charge the Medicaid Best Price (lowest price) for biopharmaceuticals and, therefore, would be required to charge Medicaid the lowest price for even high-value indications. Additionally, federal anti-kickback statutes may prevent manufacturers and health plans from pursing indication-specific pricing or other value-based reimbursement mechanisms, as violations carry significant financial penalties. Federal anti-kickback regulations prohibit arrangements that could be viewed as inducing, rewarding, or compensating referrals for items (such as biopharmaceuticals) or services paid for by federal healthcare programs. Despite current regulatory challenges, US health plans are increasingly adopting indication-based strategies into their formulary management.


ISP may help healthcare systems better align reimbursement of biopharmaceuticals to their value, but its adoption in key markets is varied. Indication-specific patient registries in Italy allow for differential pricing across indications of a single product. In France, Germany, and the UK, multi-indication products have a single weighted-average price that reflects the product’s value across indications. However, the current regulatory and healthcare infrastructure in Spain and the US has inhibited adoption of ISP and value-based reimbursement. Thus, as manufacturers seek to expand their footprint in the global market, it is becoming increasingly important to understand the complexities of ISP and have proper market access and reimbursement strategies to successfully navigate in this new era of value-based care.

The article should be referenced as follows: 

Campbell D. Indication-specific Pricing: What should manufacturers expect in key markets. HTA Quarterly. Winter 2017. Jan. 19, 2017.

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