Pharma group blames lack of outcomes-based drug contracts on regulatory red tape

The pharmaceutical industry is inching toward more outcomes-based pricing contracts for private insurers, but one group says red tape stands in the way of growth. 

And such contracts could have trouble expanding into government plans. 

The National Pharmaceutical Council said earlier this week in a white paper that many regulatory barriers get in the way of payers and drugmakers making value-based contracts, which could lead to lower costs and increased innovation.

Under these contracts, the drugmaker is reimbursed based on the effectiveness of the treatment, giving both sides some financial risk. Such arrangements are becoming more popular, especially expensive medications, like ones that treat cancer. 

Payers have shown willingness to cover high-priced drugs if there is evidence of better outcomes. The device industry is also starting to get on board with outcomes-based pricing as well, citing increased accountability and better care.

Some of the barriers listed by the council include restrictions on what information drugmakers and payers can use in developing a contract, current Medicare and Medicaid reimbursement regulations, and legal restrictions under the Anti-Kickback Statute. 

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NPC suggested some remedies, including allowing drug outcomes—like hospitalizations—that fall outside the scope of an FDA-approved label and exempting contracts from Medicaid's best price caps rebate limit.

The white paper isn't the first time the council has pushed for greater access to value-based contracts. Last summer, NPC and consulting firm Avalere released a report that said patient data is furthering private value-based contracts and altering physician networks to include top-performing physicians. 

Other groups, including policy researchers at the Duke Margolis Center for Health Policy, have called for broader use of patient-generated data to drive new payment models. 

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Due to the increased use of the contracts in the private sector, some have called for the Centers for Medicare & Medicaid (CMS) to expand the programs for the federal reimbursement programs. The agency has voiced support for additional value-based models, and one for pharmaceuticals could makes its way into the Medicare agency's innovation center.

The agency could see some backlash from the pharmaceutical industry for pushing for value-based payments under Medicare and Medicaid, which typically reimburse less than private insurers. 

Additionally, research has been inconsistent about whether outcome-based payment contracts can reduce overall healthcare costs or improve patient care, according to the Commonwealth Fund