Barriers to Implementation
OBRAs can provide manufacturers with an effective market-access tool. They can also provide payers with a strong tool in their
quest to extract greater value from money spent in high cost therapeutic areas. But OBRAs can be extremely complex, especially
when compared to other types of contracts such as straight net-price reductions, volume discounts, access rebates, and capitation
programs. Both payers and manufacturers must consider the critical issues surrounding implementation to ensure that the objectives
of both parties are reached in the end.
The key issues to be considered include:
Market characteristics Single-payer markets, such as those of the EU, are better positioned to implement OBRAs, because manufacturers generally
need to work with a single entity—the government or central health authorities. The US market, by contrast, includes numerous
different payers and other stakeholders. Full-scale market penetration in the US would require negotiating agreements by payer,
by state/region, and by drug or condition, and would demand significant internal personnel resources from both manufacturers
and the aggregate US system. As the US healthcare system becomes more "networked," this issue could be mitigated. But the
system will likely remain quite decentralized for years to come.
Infrastructure The most challenging operational barrier to widespread implementation of OBRAs in the US is having the clinical and information
technology infrastructure to support successful implementation of the programs. Because risk-sharing agreements nearly always
include clinical outcome end points, systems must be able not only to record and store clinical information, but also to accurately,
reliably, and comprehensively report it.
This issue is exacerbated in the highly fragmented and decentralized US healthcare system, where many payer IT systems are
outdated, inflexible, payment-focused (i.e., claims-based, with little clinical focus), or otherwise not built to track and
report clinical quality data. As payers continue to upgrade their information systems and functionality improvements occur,
these issues will likely be alleviated.
Deal structure As the examples above make clear, there are many, many questions to answer in structuring an OBRA. For instance: Will the
agreement include a rebate from the manufacturer or a future payment from the payer once treatment effectiveness has been
The direct and indirect financial impact of deal terms become particularly relevant if the rebate or payment owed is substantial.
The direct impact relates to the time value of money—if a rebate or payment that totals in the tens of millions of dollars
does not reach the recipient's bank account for a year (or more), that money has lost value. The indirect impact is the opportunity
cost of not having those funds available to invest in positive net present value (NPV) projects that could be near or already
providing financial returns by the time the transaction occurs.
Finding the Strategy That Works
Underlying all these implementation issues is a more fundamental question for pharmaceutical companies: How does the use of
OBRAs further one or more of the company's strategic objectives? A specific question in this area is whether the company should
focus on more competitive markets (e.g., statins) or if its comparative advantage lies within niche markets with specialty
products. Do risk-sharing agreements help achieve more favorable market access or competitive advantages? What is out there
to be gained for a pharmaceutical company or can one only lose when using this innovative contracting approach? What is the
theoretic danger of spill-over effects to other therapeutic areas or other product classes a company markets? How does the
company respond when a competitor with a product of similar clinical profile and efficacy, even in an area of high unmet clinical
need, enters into an OBRA with a prominent US payer such as CMS, or a large private payer such as Aetna?
While US market access for expensive pharmaceuticals is currently quite liberal, payers insinuate that the current environment
will not continue for long. As the quality-based US P4P programs have shown, significant operational barriers can be overcome
and more widespread use of these programs can occur. Pharmaceutical companies should therefore not be complacent, even with
the likely scenario that the use of OBRAs will not become widespread in the US for a number of years. In fact, companies should
begin integrating discussions of this tool into strategic decision-making to ensure they can quickly and effectively respond
to competitor actions if (or when) OBRAs take hold and make financial sense. A deeply analytical approach is needed to ensure
that the manufacturers are properly positioned to respond to future competitive dynamics in the marketplace.
Although the outcomes-based risk-sharing movement in the US is in its infancy, it is nonetheless making inroads into the way
healthcare organizations do business. Payers will undoubtedly continue to exert their influence in the market and strengthen
their cost-cutting toolkit as costs continue to rise unsustainably. It therefore behooves manufacturers to think about how
to position themselves and their product-development processes to best meet the operational, clinical, financial, and marketing
challenges these arrangements will entail.
Christian Schuler is a partner at the consultancy Simon-Kucher & Partners. He can be reached at Christian.Schuler@simon-kucher.com
. Laronne P. Faulker, formerly an intern with the firm, is currently studying in Spain. He can be reached at firstname.lastname@example.org