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Tackling some of the unintended consequences associated with value-based contracting in pharma and efforts to advance toward sustainable outcomes-based engagement.
When navigating the new terrain of value-based pricing and contracting, is there such a thing as an intended consequence? The word consequence is somewhat negative, used as a word substitute for punishment with children. As in, “if you do this, there will be consequences.” It’s more of a PC term meant to affirm decision-making skills and you don’t want to use the word “punish” for a child because it sounds extreme. But I digress,
and also included the question from the panel I attended on outcomes-based contracting, which is featured in our issue this month covering the topic. What are the unintended consequences around this type of contracting? It’s very complex, just on the cusp of leaving its nascent stage, and involves multiple stakeholders. It’s not simple and there are consequences.
No one pharma company or health payer has the magic formula for outcomes-based contracting. The articles we present in this issue focus primarily on challenges and real-life tips for getting started. Other articles contributed to this issue focus on the need for pharma to completely re-engineer its pricing models. Again, consequences are coming.
In a recent webinar, PwC presented the idea that if pharma did not provide sustainable engagement with value-oriented customers, the consequences would be negative. Specifically, if pharma comes to the table with weak or unproven value propositions, such as programs too focused on short-term pharma upside: price, volume, adherence, Rx durability; too narrowly focused on cost offset or cost-effectiveness evidence generation; an approach with limited willingness or ability to customize; limited investment horizon; or without any meaningful pharma risk.
Other negative consequences, says PwC, could come with too many operational impediments, such as around regulatory concerns (anti-kickback, HIPAA); data sharing and technology; too much implementation responsibility left to health system; or overly complicated contracting requirements.
Many of these concerns are discussed by the panel members and are offered as insights to help companies take those steps toward sustainable value-based engagement. But let’s tackle some of the unintended consequences.
Significant changes to incentive alignment. What is one company’s revenue stream is another company’s inefficiency. If you make it more efficient, someone is going out of business. That is a simple concept, but doesn’t make it easy to negotiate. There is going to be disruption, noted one panel member; we just don’t know what it looks like yet.
If drugs are going to be paid solely on effectiveness, will companies only focus on drugs that will be successful? We know how much drug development costs, and we know how many programs fail to make it all the way to approval. Companies prevail because they are “rewarded” financially for those few successes. If companies only pursue outcomes acceptable to payers, where will innovation come from?
Who has the responsibility for making sure patients play their part in the outcomes scenario? If a patient doesn’t take their medication, or if comorbidities or other medications cause imbalances in the result, who bears that problem?
Technology. Who has the data, how do you integrate the data, who interprets the data, how is data managed, measured, and modeled? This isn’t so much unintended as completely necessary and discussed further in the articles this month. PwC goes as far as describing ways that value-based engagement and contracting becomes predictive through analytics. This may be true, but in the interim, agreeing on these terms and processes is a big elephant.
The Cobra Effect is well-documented on the Internet as an example of unintended consequences. In Imperial Britain, the government was concerned about the number of venomous cobra snakes in Delhi. So it offered money for every dead cobra, which successfully resulted in a large number of dead snakes. Eventually, however, people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped, causing the cobra breeders to set the snakes free. As a result, the wild cobra population further increased.
In a closer-to-home page from potential unintended consequences comes from one of the scientists who discovered CRISPR. She noted “there’s been discussion about this [...] around the use of gene drives in insects like mosquitoes to control the spread of disease. On one hand, that sounds like a desirable thing, and on the other hand, I think one, again, has to think about potential for unintended consequences of releasing a system like that into an environmental setting where you can’t predict what might happen.”
The world may be paved with good intentions, but unintentional results are always around the corner.