Flexible Pricing Mechanisms

Flexible Pricing Mechanisms: Are Payer and Manufacturer Ready?
Presentation at the European Pharmaceutical Pricing and Reimbursement Meeting in London, October 6, 2015

There is major frustration on current drug pricing approaches from all stakeholders. The issues are primarily related to early access, value-for-money, affordability and equity. Historically, pricing has been based on uniform pricing schemes, e.g. price-per-pill or price-per-vial, and within oncology, increasingly, with various forms of local discounts.

Recently, various novel pricing schemes have been put forward. One such scheme that has had some major attention is “performance-based-pricing”, i.e. a pricing scheme where you get paid based on the actual treatment outcome. However, this approach has had some difficulties in achieving wider diffusion, primarily because of management and logistic complexities.

Another novel pricing scheme that has been put forward is based on the principals of price discrimination. This approach addresses many of the key concerns, including budget uncertainty, cost-effectiveness and patient access. A price discrimination approach that is used in many other industries, e.g. telecom and software, are the so-called “two-part-pricing” scheme. In this approach, the buyers pay for a contract that gives them the right to buy the product, an entry fee, for a certain time-period and for a certain constituency. When they actually use or order the product, they only pay a fraction of the public price, perhaps somewhere between 10% and 20% of the list price.  Although “two-part-pricing” can provide improvements for patients, prescribers, payers and manufacturers, it has so far rarely been used if at all. The question is, if the industry and/or the healthcare providers are ready to test some novel pricing schemes?