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Can Value-Based Purchasing Work with Pharmaceutical Companies?

Adding pharmaceutical companies to the value-based purchasing environment may be the next horizon for accountable care.

Pharmaceutical companies may be the next big player in value-based purchasing

Source: Thinkstock

By Thomas Beaton

- The Network for Excellence in Health Innovation (NEHI) believes that developing value-based purchasing contracts between payers and pharmaceutical companies will be a critical next step for healthcare reform.

Having payer and pharma companies negotiate payments based on how drugs are used and how they ultimately perform is a necessary addition to the process of promoting value-based reimbursement.

“Value-based contracting is in keeping with the general movement to more value-based payment within health care, and it is possible that many alternative payment models will simply not be sustainable unless pharmaceuticals are included,” NEHI said.

In what the NEHI calls the “Alternative Approach,” value-based drug contracting can achieve the goals and objectives of value-based care across a multitude of scenarios.

Drug contracting underpins many of the important aspects of value-based care, including medication adherence and population health management.

READ MORE: How Payers Should Prepare for Value-Based Reimbursement

Population health management goals, like cholesterol control, can be linked to the drugs that patients are using, and promote beneficial patient outcomes like reduced mortality rates.

Payment contracts linked to pharmaceuticals are a critical component of value-based care that aims to avoid unnecessary health care costs in medication use. Controlling and reducing the need for drugs will require value-based contracting for medications.

“As this white paper has spelled out, on balance, NEHI’s stakeholder group largely believes that value-based contracting is an innovation that should move forward,” NEHI said.

“There are few if any alternatives to pharmaceutical pricing issues that are as market-based as these arrangements, or that have as much support among different sectors (e.g., manufacturers, payers, and government).”

The move towards value-based drug contracts require payers and manufacturers to focus on monitoring and measuring quality and outcomes, not just the amount of product sold, in order to better align with the value-based care activities taking place in the care delivery market.  

READ MORE: HFPP Provides New Resource for Payers to Combat Opioid Abuse

Organizations such as the National Quality Forum (NQF) are focused on developing quality metrics that can be tied to innovating pharmaceutical contracts.

Drug use monitoring will be complex and expensive in traditional agreements that link payment to the volume of drugs sold, NEHI says, but an investment in data infrastructure, that connects large national clinical data networks could streamline the information necessary to sustain value-based contracts.

One existing example of these efforts is PCORnet, the research network developed PCORI.

Another challenge for the success of value-based drug contracts involves setting appropriate time periods for biopharmaceutical manufacturers to demonstrate the value of their products.

Patients may have a tendency to switch coverage, leaving individual payers unable to see the financial benefits of certain drugs with fragmented use-duration.

READ MORE: Out-Of-Pocket Healthcare Spending on the Decline Since 2000

Federal and private sector interoperability efforts should continue to work towards developing reliable clinical datasets that can determine patient behaviors and drug user over longer periods of time.  

For successful value-based purchasing contracts, payers and pharma companies also need to address regulatory hurdles and solutions to overcome them.

Due to federal drug price regulations, entities such as Medicaid Part B are entitled to the lowest possible price that manufacturers charge a purchaser. Policies such as these would create a disincentive for money-back guarantees, where payers wouldn’t pay anything when a drug proves to be ineffective in patients.

By having CMS create appropriate flexibilities within government pricing regulations, value-based contracting can thrive as money-back guarantees made by manufacturers to payers would still be viable.

However, under the current Anti-Kickback Statute, some pay-for-result discounts under a value-based contract could be interpreted as an unlawful referral to use manufacturer-specific drugs.

The HHS Office of the Inspector General could promote appropriate safe harbor protection under the Anti-Kickback Statute that allows manufacturers and payers to pursue qualified value-based contracting.

NEHI points out that the FDA, which plays a critical role in communicating between drug manufacturers and payers, has released new guidance that could improve the relationship between these stakeholders.

Finalized guidance on communication between manufacturers and payers from the FDA needs to include economic information on drugs and approval dates, NEHI says. To ensure successful communication, the FDA should work with stakeholders to consider some communication about off-label drug use.

Value-based drug contracting is an ambition that can help lower costs across the care continuum and further promote value-based care as a whole. These are just initial thoughts and guidelines that the NEHI hopefully sees carried out by payers and drug companies.

“As noted, many challenges exist to value-based contracting for biopharmaceuticals, and multiple changes in policy and operations will be needed if these approaches are to become more widespread,” NEHI said.

“None of these changes will occur overnight; some will be best tested through pilots and demonstrations that can be evaluated and modified over time. There will be ongoing need for monitoring, research, and thoughtful leadership across cross-sector groups similar to the one NEHI brought together for this effort.” 

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