Challenges and Prerequisites for an Indication-Based Drug Pricing System in Korea

We have examined the technical feasibility of introducing an indication-based pricing (IBP) system for multi-indication pharmaceuticals.The implementation of IBP systems can be designed in three ways.First, a separate pharmaceutical permit can be pursued for each indication, with prices for each product set separately ("indication-specific individual permit method").Second, the listing price of the same pharmaceutical product remains the same during the distribution process regardless of the indication, but the actual prices are determined based on the indications and are established between insurers and pharmaceutical companies after listing ("post-settlement method").Third, the listing price of the same drug is set differently according to the indication during distribution ("separate listing-price method").All three designs entail institutional challenges for actual implementation.Due to the various institutional prerequisites required for introducing an IBP system, it is essential to consider potential costs from the perspective of insurers preparing for such requirements.Consequently, the introduction of an IBP system should be contemplated from the long-term perspective and there is an imperative need for a quantitative estimation of the drawbacks and benefits of introducing an IBP system.