A Health Affairs post by Dana Goldman and Darius Lakdawalla argues that dose-based pricing for pharmaceuticals is suboptimal. They make a clear distinction between typical goods, where cost and benefits are roughly proportional to quantity consumed, and pharmaceuticals.
Buying two bunches of bananas naturally costs twice as much as one bunch. Twice as many bananas can feed twice as many people. However, why should a patient who responds best to a 100 mg injection pay twice as much as another who happens to need a 50 mg version?
The 100 mg patient rarely receives twice as much value as her 50 mg peer. Even worse, charging more to patients on higher doses discourages physicians from titrating dosage upward, even when it is clinically warranted. What’s more, PPD forces us into a copayment model where patients are penalized for better adherence.
What is the solution? The authors recommend tying pricing to value. Higher value treatments should have a higher price; lower value treatments should have a lower price. The interesting feature of their proposal is that value would not just be measured across treatments but also by type of patient who receives the treatment. They use new cholesterol lowering drugs–known as PCSK9 drugs as an example.
The best solution may be to reimburse pharmaceutical companies for PCSK9i therapies on the basis of heart disease risk—something cardiologists are already good at classifying—and to eliminate copayments per prescription regardless of patient risk. The highest risk group includes those with genetic disorders that elevate their cholesterol to dangerous levels, and who develop heart disease at a very early age. For these patients, the currently announced price of about $13,000/annually is a great deal.
But the answer is not to restrict the drugs just to this group. For other high-risk patients with less elevated cholesterol—e.g., atherosclerotic cardiovascular disease patients for whom statins lower LDL significantly, but not all the way to goal—a different, lower price should apply. With this differential pricing, payers would no longer have incentives to limit coverage. And, prescribing decisions would focus on the clinically optimal way to lower LDL, instead of on the least expensive dosing strategy.
A key barrier to this type of pricing strategy is assessing clinical risk and measuring outcomes. Nevertheless, CMS is already planning to have 90% of payments tied to value by 2018.