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Volume 38, Issue 3
Outcomes-based contracting could be a potential game changer in linking drug cost with value, boosting healthcare efficiency, and ensuring that appropriate patients benefit from innovative medicines. But several complex challenges remain in the bid to make this model a mainstay.
Outcomes-based contracting continues to gain traction as a potential game-changer in linking drug cost with value, boosting healthcare efficiency, and ensuring that appropriate patients benefit from innovative treatments. But several complex strategic and operational challenges remain in the bid to make this model a mainstay
There is little argument that the trend toward so-called value-based healthcare is growing-with no signs of letting up. At the center are an increasing number of reimbursement arrangements struck between payers and pharmaceutical manufacturers based on the quality a treatment provides in the hospital/real-world settings rather than simply the volume of care it delivers. Deals established under these frameworks offer potentially promising ways to support patient access to innovative and expensive-to-produce medicines, such as genetic therapy and precision drugs. Outcomes of therapy effect are measured from payer databases using pharmacy and medical claims.
With more value- or outcomes-based contracting agreements springing up between major insurers and big pharma players, a prevailing sentiment is that these arrangements, on a larger scale, will help lower prices of costly drugs, and, in turn, help stem the tide of soaring US healthcare spending. However, there are a number of aspects to this model-and its ability to achieve those results-that people don’t always think about when they see a headline relating to the topic.
Examples include the fact that outcomes data are not immediate and take a while to assess, the behind-the-scenes work that goes into collecting the data, and the reality that in many cases, various stakeholders are fundamentally not set up to process these types of analytics.
In short, outcomes-based contracting is still a fairly new concept to those involved, with plenty of kinks still to work out. While it may be the future of healthcare, the move to value-based care is not going to be a quick fix for a number of reasons. “If you look at the healthcare ecosystem, some of the data that is currently available wasn’t even available just a few years ago to determine these types of statistics,” Ralph Marcello, national biopharmaceutical leader, life sciences, at Deloitte, told Pharm Exec.
Critics argue the industry has been slow to adopt value-based contracts. But experts say that no matter how much industry may want to participate in this type of reimbursement, it fundamentally can’t happen overnight, even if it’s a high priority on a C-suite executives’ agenda.
“There are real hurdles from a strategic to operational standpoint,” says Marcello. “It starts with, ‘do I have the resources to dedicate…the capabilities to do this?’”
The answer to those questions is causing pharma companies to reallocate resources, build out new departments to manage this, and make a play for top data scientists who would typically be heading over to companies like Facebook, Amazon, or Google.
Value-based care is creating a competitive marketplace for that type of talent, Marcello explains, because to make a reimbursement system based on value successful, pharma companies need people who possess the knowledge to cut through all the data in a meaningful way-to ultimately reveal insights into what tends to be very complicated data.
End-to-end evidence management and building real-world data capabilities are two of the largest potential growth areas Marcello sees within his biopharma clients. By having their own data, it not only gives companies a seat at the table when the value-based conversation comes up, but can also be a vehicle to reduce costs, which is a win-win for everyone involved.
“Our healthcare system structure is traditionally fee for service, and as we move from fee for service to value-based, there needs to be a restructuring, not only in how decisions get made, but where risk is shared in the healthcare system,” says Marcello.
In addition to the internal hurdles that pharma companies face when it comes to value-based care, there are a number of outside factors they have to consider, which can fluctuate dramatically. For example, does the healthcare provider have the capabilities to collect the information? What happens when patients don’t adhere to the therapy that is prescribed, and how is that found out and factored in?
Then, there are more complicated questions, which are not exactly new to those focused in this space, but are still debated. Those include how does one define an outcome and who owns, or is responsible for, all this data?
Working closely with a trusted partner can be vital to making value-based contracts effective. In May 2017, Optum, the health services business of UnitedHealth Group, and Merck & Co. announced a collaboration to develop and simulate the performance of contractual reimbursement models in which payment for prescription drugs is aligned more closely with patient health outcomes.
Through a multi-year collaboration on a shared “Learning Laboratory,” the two companies planned to explore value-based and pay-for-performance models, known as outcomes-based, risk-sharing agreements (OBRSAs), and their potential for broad adoption among payers, pharmacy benefit managers (PBMs), and drug manufacturers. The initiative involves the use of real-world data to co-develop and test advanced predictive
models and codesign OBRSAs to reduce clinical and financial uncertainty with respect to payment for prescription drugs.
But, to Marcello’s point, these collaborations, and the data they’ll measure and the results they’ll deliver, will take time. “Companies are investing in capabilities to extract real-world evidence of how a product actually performs in the market,” he says.