White paper sets roadmap for value-based pharma contracts

Value-based pharmaceutical contracts make sense in the abstract, but stakeholders have barriers to overcome before implementation becomes realistic.

As market interest grows in value-based payment models for pharmaceuticals, payers, manufacturers and regulators must address challenges.

With hospitals feeling the squeeze from rising drug prices, advocacy groups and other concerned stakeholders have increasingly turned on insurers for what they see as an inadequate response to the issue.

As providers have begun to move from paying for value rather than volume, The Network for Excellence in Health Innovation (NEHI) sees potential in bending the pharmaceutical cost curve via a similar movement. Instead of paying drug manufacturers for the drugs purchased by a plan, payers could instead negotiate payments based on the performance of drugs in the marketplace, according to a white paper issued by NEHI.

The report suggests payers show greater willingness to shell out for high drug prices if the cost of the drugs aligns with improved outcomes, especially if those improvements will reduce healthcare costs elsewhere in the system. That implies incentives for all stakeholders, but NEHI points to a set of essential barriers the industry will have to overcome for this vision to reach fruition.

The report recommends the industry:

  • Establish quality metrics. As in other examples of value-based payment methodologies, setting appropriate benchmarks and agreeing on how to measure quality are critical. NEHI suggests shifting the focus of organizations already working on this issue in other parts of the healthcare space toward innovative pharmaceutical contracts.
  • Improve data infrastructure. Even with a set of agreed-upon quality benchmarks, payers need to be able to receive and process the data necessary to track outcomes. The increased complexity of this type of data analysis compared to tracking the volume of drugs sold means payers will need to invest in their data infrastructure to accommodate new data standards developed in concert with clinical networks, per the report.
  • Address regulatory disincentives. Payers and other stakeholders will need to develop a proper definition for value-based contracts in order to ensure appropriate carve-outs to existing regulations, particularly around anti-kickback statutes and regulated communications between payers and manufacturers.