1536O - Indication-specific pricing and weighted-average pricing: Estimated price and cost savings for cancer drugs

Background

In the US, single drug prices do not reflect the value of supplemental indications. Indication-specific and weighted-average pricing were suggested for drugs with multiple indications. Under indication-specific pricing, a distinct price is assigned to the differential value a drug offers in each indication. Under weighted-average pricing, a single drug price is calculated reflecting the value and/or volume of each indication. This study estimates price reductions and cost savings for cancer drugs under indication-specific pricing and weighted-average pricing.

Methods

FDA-approved cancer drugs and indication (2003-2022). Data on each indication were collected from FDA labels, the Global Burden of Disease study, clinicaltrials.gov, and Medicare and Medicaid. A multivariate regression analysis, informed by original indications’ innovativeness, disease, and trial characteristics, was used to predict indication-specific prices for supplemental indications. These indication-specific prices were combined with each indication’s prevalence data to estimate weighted-average prices and potential cost savings under each policy.

Results

The FDA approved 162 anti-cancer drugs with 373 indications between 2003-2022. Of these, price data were available for 149 on-patent drugs. On these drugs, Medicare and Medicaid spent a total of $28.3 billion in 2020. Adopting indication-specific pricing reduced drug prices by an average of -2.9% with cost savings of -$4.4 billion (-15.5%). Spending was particularly reduced on orphan drugs treating rare and common diseases, e.g. partial orphans (-10.0%). However, higher prices for ultra-rare diseases increased spending by 16.8% (+$44 million). Adopting weighted-average pricing also reduced spending by -$4.4 billion (-15.5%). Weighted-average pricing reduced prices for and spending on ultra-rare diseases by -21.3%.

Conclusions

Indication-specific and weighted-average pricing could help to align new indications’ value and price; thereby reducing Medicare and Medicaid’s expenditure on cancer drugs with multiple indications.

Clinical trial identification

Editorial acknowledgement

Legal entity responsible for the study

The authors.

Funding

Has not received any funding.

Disclosure

All authors have declared no conflicts of interest.