Why payers must focus on paying for value for Rx drugs

In order to curb the rising costs of prescription drugs, it's imperative to transition the payment system to charge for value as opposed to volume, according to a recent report from the Center for American Progress (CAP).

In addition to encouraging innovation throughout the industry and lowering out-of-pocket costs for consumers, CAP calls for the development of voluntary recommendations of payment ranges to inform negotiations between payers and drug companies through an independent organization.

"Once the drug enters the market and is assigned, it would be issued a recommended price after negotiating," Maura Calsyn, director of health policy at CAP, told reporters Friday on a call to discuss the report. "If the drug price is outside the payment range, by 20 percent or so, it will then be deemed unreasonable and the government could step in."

CAP additionally proposes reforming Medicare payment for physician-administered drugs, and allowing insurers to pay for treatment success.

CAP is not alone in its stance on drug prices. Even though the federal government cannot directly negotiate rebates due to the non-interference clause, commercial payers can. For instance, health plans are able to negotiate Medicare Part D rebates with manufacturers, and in turn, the rebates are passed along to beneficiaries in the form of lower premiums, FierceHealthPayer previously reported.

"The market right now does not address value to drugs," Topher Spiro, vice president of health policy at CAP, said during the call. "We want innovation ... we had innovation before the rising drug costs, and that's a real challenge we need to address."

Payers have begun negotiating prices with drug manufactures as a way to keep costs in check. For instance, Aetna was able to improve its 2015 outlook after it reached a deal to receive better pricing from Gilead, which makes the pricey hepatitis C drug Sovaldi.

For more:
- here's the report

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