Tricky Path to Risk-Sharing Agreements

June 15, 2016

Despite enthusiasm from payers and pharma companies for innovative drug reimbursement strategies linked to positive patient responses, negotiating such deals is no easy business.

Despite broad enthusiasm from payers and pharma companies to devise innovative drug reimbursement strategies linked to positive patient responses, negotiating such deals is no easy business. There’s much talk about forming performance-based risk-sharing arrangements (PBRSAs) between manufacturers and health plans and insurers, and some action in Europe and other industrial nations. But so far only a few deals have been announced in the U.S.

PBRSAs may become more common, though, as insurers gain more familiarity with value-based purchasing on the provider side, where federal policies are encouraging more contracting with hospitals and physician groups based on performance and savings. And pharma companies are learning to assess which payers may make good partners, based on whether a health plan has experience conducting value analyses, and a data system able to capture patient responses to a drug.

“We have had very collaborative discussions with pharma companies,” observed Michael Sherman, senior vice president & chief medical officer at Harvard Pilgrim Health Care of Massachusetts. “But it’s a big leap from discussions to putting something in place,” he said at the May 2016 annual meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) in Washington , D.C. There’s no “template” for negotiating PBRSAs, and many moving parts, such as formulary tier placement for a drug engaged in a value-based deal. His plan looks for a clear relation of a drug to outcomes, whether that can be measured, if the pharma company is willing to deal, and what would be the benefit to the payer. Opportunities are likely where there is notable variability in patient response and the drug is overpriced, he noted. If we can do two or three deals over the next year, he said, “that will be a big success.”

Value-based contracts initially have focused on specialty drugs, but now are shifting to larger therapeutic areas, noted Kathleen Hughes, vice-president at Avalere Health. Avalere has linked up with Bristol-Myers Squibb (BMS) and Inovalon to support real-world outcomes and value-based contracting initiatives. And Cigna recently announced a PBRSA for new PCSK9 inhibitors with Amgen (for Repatha) and with Sanofi and  Regeneron (for Praluent).  The manufacturers will further discount the cost of the drugs for patients who fail to reduce LDL cholesterol to certain levels.

Such arrangements may be particularly tricky for cancer drugs, where health gains can be difficult to measure. Oncology outcomes may take more than a year to emerge, noted BMS senior vice president Michael Ryan at the ISPOR session. A marketer needs a predictive analytical  model to show the payer, along with sound probability analysis around outcomes, he explained:  “You have to do your homework.”

Jim Clement, executive director for industry relations & financial strategy at Aetna, noted that his firm doesn’t want to measure outcomes for periods exceeding 36 months, as many patients leave plans or change providers during that period. Similarly, outcomes for cardiovascular therapies take “longer to play out,” he noted. “You need to pick the right drugs, and the right manufacturing partners,” particularly those who have “digested internally” the value of pursuing discussions about PBRSAs.

The high cost of many rare disease drugs makes them appealing PBRSA targets, even though outcomes may be weak. And there are concerns about what to do for non-responders. With some 800 orphan drugs in the pipeline, Aetna will be looking for value-based contracts on some of these, said Clement, noting that such arrangements will require sophisticated IT systems that can replicate reimbursement models and collect data fairly quickly.

An important issue for all parties is to revise federal policies to support innovative contracting for drugs more clearly. This involves providing exceptions to Medicaid best-price requirements for value-based contracts, which could end up reducing payment for a drug to a level below best price.

Sherman said that Harvard-Pilgrim is looking for situations where it is particularly beneficial to have payment based on patient response, which tends to involve high-cost drugs with variable benefits. The aim is not to minimize drug spending, he noted, but to drive value, which could be seen in reduced hospitalizations and in more predictable costs for larger employers. Despite the multiple issues related to PBRSAs, Clement believes that “the future is bright” for such arrangements in order to get away from current discount models and to better correlate the value of a pharmaceutical to improvement in patients’ lives and reduced medical spend.