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Reality check: Value-based contracts are good for patients

Michelle Drozd   |     April 25, 2018   |   SHARE THIS

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Biopharmaceutical companies are joining stakeholders across the health care system to pursue flexible ways to pay for medicines that focus on results, lower out-of-pocket costs and enable patients to access the right treatments the first time.

Recent criticisms of value-based contracts – or results-based contracts – are off base in questioning whether these contracts are having an impact on drug and health care spending. The fact is these payment arrangements underscore how biopharmaceutical companies are willing to put their money where their mouth is when it comes to better value in health care. 

Here are four things you need to know about results-based contracts:

  1. Results-based contracts can lower patients’ out-of-pocket costs. In the past two years, commercially insured patients in health plans with results-based contracts for diabetes, high cholesterol and HIV medicines had copays that were, on average, 28 percent lower for those medicines compared to patients in other plans. In addition, these contracts can reduce costs for the health care system. For example, if results-based contracts lower the cost of treating diabetes in the United States by five percent, the United States could save more than $12 billion annually.
  2. Stakeholders across the health care system are pursuing value-based contracts. Earlier this month, CVS cited several types of value-based contracts among the tools they used to keep specialty medicine cost growth to 3.7 percent in 2017. Additionally, an Avalere survey of payers engaged in these contracts found that one-third of payers report that they have experienced cost savings. Express Scripts has also utilized some types of value-based contracts.
  3. Many biopharmaceutical companies are pursuing value-based contracts. There are 39 publicly announced RBCs and recent data from the Academy of Managed Care Pharmacy and PwC confirm that these are only some of the RBCs in existence. At least 19 biopharmaceutical companies are using these types of innovative payment arrangements for more than 25 medicines. And an analysis published in Value in Health last year showed that outcomes-based contracts can lead to a range of potential outcomes, depending on the medicine’s performance.
  4. Despite the promise of value-based contracts, certain barriers often prevent them from occurring. Regulations instituted before innovative contracting approaches were developed can create uncertainty for biopharmaceutical companies looking to pursue results-based contracts and can discourage them from entering into these beneficial agreements. Our industry’s interest in addressing these barriers is based on a genuine need for clarification of rules developed for a time when reimbursement was solely based on volume, not value.

Despite the positive impact results-based contracts have on costs, they are still in early stages of development. As biopharmaceutical companies and payers learn from these initial efforts, and as policy barriers are addressed, these new contracting approaches can be brought to scale.

Learn more at www.phrma.org/value-collaborative.  

Michelle Drozd

Michelle Drozd Michelle Drozd is a Deputy Vice President in the Policy and Research department at the PhRMA where she focuses on the evolving healthcare system and how to improve the use of medicines. Prior to joining PhRMA, she worked at Partners Healthcare and RTI International in Boston. Michelle spends her free time reading and doing house projects with her husband and two boys.

Topics: diabetes, out of pocket costs, Value-Driven Health Care, The Value Collaborative

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