Outcome-based deals with insurers tough to implement, pharma CEOs say

Though health insurers are starting to pursue value-based deals with drug and device manufacturers, two pharmaceutical executives think the U.S. healthcare industry isn't quite ready to switch to that pricing model, Reuters reports.

Novartis CEO Joe Jimenez and Roche CEO Severin Schwan tell the news outlet that though the current pay-per-pill model is unsustainable, there are some major barriers preventing outcome-based pricing from going mainstream.

"I wouldn't call it resistance, I would call it practical hurdles that need to be overcome," Schwan says. "This is a complex road."

These hurdles include resistance from doctors, medical privacy concerns and a need for better IT infrastructure, according to Jimenez and Schwan. On the IT front, the CEOs note that current electronic medical record systems can't accurately measure whether and how much the use of a prescription drug is able to reduce hospitalizations or emergency department visits, making it difficult to tie insurers' payments to outcomes.

Such challenges became clear to Jimenez when he tried to pursue a risk-sharing arrangement with insurers for the new heart drug Entresto, hoping they would agree to pay more if the treatment was able to reduce hospital visits. But insurers said his plan was too complicated, Jimenez tells Reuters. So Novartis pursued a traditional pricing model instead.

Still, as health plans grow increasingly concerned with the rising price of prescription drugs, many are looking for ways to solve the problem, including shifting more of the costs onto customers.

Yet as Emory University's Kenneth Thorpe, Ph.D., writes in a recent blog post, "reducing a treatment's worth to calculations about medical costs and offsets and impact on budget constraints ignores the real-life benefits that the latest therapies, procedures and devices provide."

To learn more:
- read the Reuters article

Related Articles:
Novartis, Roche CEOs see performance-based future, but U.S. isn't ready yet
The problem with insurers determining value of drugs, devices
Health plan CEOs: Prescription drugs pose major cost concerns
Why payers must focus on paying for value for Rx drugs
Payers, providers push manufacturers toward value-based deals

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