Why IBP is important for industry, payers and society

What IBP could mean for industry, payers and society

IBP could work in favor of both industry and payers for the reasons argued above, respectively. And yet, IBP is currently considered ‘a difficult sell’ to payers, mainly since there are no precedents of broadly-implemented IBP to see how it might impact drug expenditure in practice, and partly because payers are skeptical that an industry-led approach to pricing would come at their (inflated) expense.
Benefits of IBP for industry and payers include:

• Manufacturers could expand indications to lower-value therapeutic areas/patient profiles, without risking a reduction in price for existing (higher-valued/priced) indications. Currently, manufacturers may avoid pursuing indication expansion to lower-value areas if doing so might compromise the price paid in higher-value therapeutic area.
• IBP would allow/encourage manufacturers to maximize a single drug throughout its product lifecycle by exploring additional indications. It would also allow manufacturers to optimize return on investment from R&D efforts.
• IBP may lead to some prices being higher than with a uniform price, (and some prices being lower).

• Where IBP expands access, even to lower-value indications that have unmet need, it increases social welfare (more patients get access to new or repurposed medicines).
  Indication expansion would likely drive competition at the indication level, which in theory should result in price competition and lower prices for payers.
• Value-based prices and/or IBP would likely see manufacturers pursue the highest-priced indication first, which payers could use to set a price ceiling. From here, competition at indication level can drive prices down, and subsequent indications would probably be reimbursed at a lower price.
• IBD sends a ‘pro R&D’ signal to manufacturers to invest in R&D and indication expansion, potentially resulting in medical advancements and less duplication of effort.

IBP increases the potential number of patients who can benefit from a health technology. Both manufacturers and society benefit but is likely to result in higher expenditure for payer.

Difficulties associated with IBP implementation in practice include:⁵

• More complex payment arrangements.
• Administrative/negotiation and agreement management time and cost of implementation and upkeep/reimbursement.
• Challenges in collecting data to support mixed prices for different indications. 
• Finding the ‘right’ ‘ceiling price’ for the first indication, knowing that price competition is more likely at indication level, and that subsequent indications for that health technology will likely attract a lower price.
• In some countries with single payer healthcare systems, e.g., Spain, one national price is set, making a shift to IBP even more difficult. 
• There is a higher potential administrative burden on hospitals and clinicians in managing data collection and indication/prescription reporting. Currently, most reimbursement models that would facilitate implementation of IBP – especially in single payer markets – do not differentiate by indication (e.g., the UK).
• Legislative barriers including “anti-kickback” provisions and the Medicaid “best price rule” in the US complicate public payer reimbursement for IBP-priced health technologies, meaning IBP implementation could be limited primarily to private payers (at least initially). 
• Perverse incentives. Reimbursement and contractual arrangements may unintentionally create incentive for prescribers to report prescription of the high-priced indication of a drug, or where physicians have a fixed budget, to report prescription for the lower-priced indication. 
• Arbitrage (re-selling), off-label use, and how to attribute value among drugs included in combination therapies are all complications for which an adequate solution is yet to be proposed.

What can industry do now? How should we start the conversation?

Engage payers, other companies and key stakeholders to explore and openly brainstorm ways to overcome challenges to IBP so that the benefits of it can be distributed and realized for industry, payers and patients.

Given that IBP is not a buzzword or a priority for payers, dialogue with policy-makers on this topic should commence with conversation around expanding patient access and maximizing efficiency of R&D.

Recall that IBP should be positioned as a way to shift the needle for policy, pricing and reimbursement towards value-based pricing.