Value-Based Indication-Specific Pricing and Weighted-Average Pricing: Estimated Price and Cost Savings for Cancer Drugs

Daniel Tobias Michaeli () and Thomas Michaeli
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Daniel Tobias Michaeli: Heidelberg University Hospital
Thomas Michaeli: University of Wuppertal

PharmacoEconomics, 2025, vol. 43, issue 4, No 5, 415-427

Abstract: Abstract Objectives For US Medicare and Medicaid, single drug prices do not reflect the value of supplemental indications. Value-based indication-specific and weighted-average pricing has been 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 that reflects the value and/or volume of each indication. This study estimates price reductions and cost savings for cancer drugs under value-based indication-specific pricing and weighted-average pricing. Methods We collected data on US Food and Drug Administration (FDA)-approved cancer drugs and indications (2003–2020) from FDA labels, the Global Burden of Disease study, clinicaltrials.gov, and Medicare and Medicaid. A multivariable regression analysis, informed by characteristics of original indications, was used to predict value-based indication-specific prices for supplemental indications. These indication-specific prices were combined with each indication’s prevalence data to estimate value-based weighted-average prices and potential cost savings under each policy. Results We identified 123 cancer drugs with 308 indications. Medicare and Medicaid spent a total of $28.2 billion on these drugs in 2020. Adopting value-based indication-specific pricing would increase drug prices by an average of 3.9%, with cost savings of $3.0 billion (10.6%). However, 43.7% higher prices for ultra-rare diseases would increase spending by 16.8% ($44 million). Adopting value-based weighted-average pricing would reduce prices by an average of 4.6% and spending by $3.0 billion (10.6%). Under weighted-average pricing, prices for and spending on ultra-rare diseases would be reduced by 22.6% and $55 million, respectively. Conclusions Value-based indication-specific and weighted-average pricing could help to align the value and price of new indications, thereby reducing expenditure on drugs with multiple indications.

Date: 2025
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DOI: 10.1007/s40273-024-01448-x

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