Innovative contracts drive access for patients and value for the system

Katie Koziara
Katie Koziara September 9, 2020

Innovative contracts drive access for patients and value for the system.

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Our health care system is far from perfect, but there are solutions that will help address patient affordability concerns without sacrificing innovation, access or quality of care. For example, biopharmaceutical companies are working with other health care stakeholders to develop new ways to pay for medicines through innovative, results-based contracts that can improve affordability and more tightly link the price of medicines to the outcomes they deliver for patients. Solutions like innovative contracts support continued access and innovation in health care in the United States by building on the current system and strengthening market competition – rather than importing the flawed policies of foreign governments where cutting costs often comes at the expense of patient care quality and choice.

Innovative contracts are flexible payment arrangements between biopharmaceutical companies and insurers that can generally be divided into three categories: (1) results-based contracts, (2) alternative financing arrangements or (3) a hybrid of those two models. To date, insurers and biopharmaceutical companies have announced 75 such partnerships – covering nearly 30 conditions – and their continued use promises to deliver even greater value to the health care system in the future.

Innovative Contracts Landscape Graphic_PhRMA_Branded

  • Value-based contracts: Also known as results-based contracts, value-based contracts are agreements between biopharmaceutical companies and payers that link payment for a specific medicine to how well it works for patients, thus balancing risk between innovators and insurers. These agreements can take several forms such as outcomes-, indication- or regimen-based contracts and are designed to help payers control costs while maintaining incentives for biopharmaceutical companies to invest in future research and development for new treatments and cures. Value-based contracts can be beneficial to patients by improving access to medicines and lowering out-of-pocket costs
  • Alternative financing agreements: These include pay-over-time and expenditure caps methods as a way to provide access to new medicines.
    • Pay-over-time models allow payers to pay for a medicine across an extended period.

    • Expenditure caps limit the per-patient cost of a medicine to an agreed-upon threshold. In subscription models, a type of expenditure cap, the potential cost for payers is averaged across the population covered, and payers agree to pay a prospective per member per month cost to buy therapeutic coverage for their members. Under increasingly popular expenditure cap models, such as those used by some states to treat hepatitis C, the payer pays a fixed sum for an unlimited supply of the medicine.
  • Hybrid models: Hybrid approaches combine aspects from value-based contracts and alternative financing agreements, such as when a biopharmaceutical company and payer agree to enter into a contract where payment is issued over time, contingent upon tangible treatment benchmarks.
With the unprecedented pace of biopharmaceutical advances we’re witnessing today, it’s encouraging to see stakeholders turn to innovative contracts to make new medicines more affordable and accessible for patients.

To learn more visit www.phrma.org/value-collaborative.

Topics: Access, The Value Collaborative