Background: Marketing of new and existing drugs with new indications used alone or in combination is increasing.
Objective: To identify the advantages and disadvantages of indication-based pricing (IBP) systems for such drugs from the standpoint of economic theory, practical applications and international experiences.
Methods: We conducted a systematic review of published articles and reports using six bibliographic databases: PubMed, ASCO, Scopus, DARE, HTA and NHS EED. We also conducted a search of gray literature in Google Scholar. The same search terms were used as in Towse et al. (The debate on indication-based pricing in the U.S. and five major European countries. OHE Consulting Report, London, 2018). Articles and reports published from 1 January 2000 to 30 September 2018 were included.
Results: A total of 26 studies met the inclusion criteria. There are three main types of IBP: different brands with different prices for each indication, an averaged single price for all indications and a single price with differential discounts. The studies indicate that IBP systems are premised on the idea that charging a different price for different indications reflects the differences in their value and in social willingness to pay for each one and for the investment in R&D based on the indication's incremental clinical benefit. Some argue that a uniform price reduces access and increases the price for lower-value indications, while others contend that if IBP sets prices at the maximum threshold of social willingness to pay for each indication, all surplus is transferred to the producer and consumer surplus is reduced to zero. No practical applications of pure IBP were found. Single pricing for drugs is the most prevalent approach. The system that most closely approximates an IBP model consists of agreements that are generally confidential and linked to risk-sharing agreements.
Conclusions: There are no applications of pure IBP systems and their practical consequences are therefore unknown. More economic theory-based assessments of the pros and cons of IBP and studies different from reviews are needed to capture their intricacies and specificities.