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Outcomes-Based Contracts Offer Payers New Pharmaceutical Options

Outcomes-based contracts with pharmaceutical companies may reduce the risks of approving expensive precision medicine therapies.

Outcomes-based contracts reduce financial risks of expensive precision medicine therapies

Source: Thinkstock

By Thomas Beaton

- Payers may be more willing to provide their beneficiaries with genetic drug therapies that costs hundreds of thousands of dollars if they enter into outcomes-based pharmaceutical contracts that lessen financial risks.

An outcomes-based pharmaceutical contract is when a drug’s reimbursement rates are based on the beneficiary’s clinical experience after using the drug.

Dr. Surya Singh, Chief Medical Officer of CVS Specialty, explained to HealthPayerIntelligence.com that outcomes-based contracts are ideal for payers purchasing drug therapies to treat conditions with FDA-based evidence guidelines.

“A thoughtful approach to selecting or constructing the right value-based model for different drug categories will help to catalyze the movement [towards value-based care] and ensure that the right drug reaches the right patient at the right time,” Singh said.

Payers may be able to use outcomes-based measures to provide beneficiaries with some of the most expensive treatments on the market, including new precision medicine therapies.  

Harvard Pilgrim is one of the first to explore the potential of value-based contracting with pharmaceutical companies for extremely high-cost drugs s by entering an agreement with Spark Therapeutics around a genetic treatment for inherited blindness.

The payer announced that it will be the first health plan to directly negotiate an outcomes-based contract for Luxturna, a one-time gene therapy treatment for retinal dystrophy which costs upwards of $850,000 ($425,000 per eye), as reported by major news outlets.

“We are thrilled to be able to offer our patients access to this groundbreaking genetic therapy,” said Harvard Pilgrim Chief Medical Officer Michael Sherman.  

“While this new treatment and other new therapies that are in the pipeline offer the promise of dramatic health improvements, their upfront costs are significant, which makes it imperative that we work together to find creative, value-based payment approaches that tie reimbursement level to both short-term and long-term efficacy.”

The contract provides for a reduced net-cost to Harvard Pilgrim and determines payment amount by measuring beneficiary sight improvements at 30 to 90-day intervals, as well as at the 30-month mark. Luxturna’s performance will be measured upon beneficiary light sensitivity based on clinical benchmarks.

If a Luxturna treatment fails, then Harvard Pilgrim would receive a rebate from Spark Therapeutics.

The agreement also allows Harvard Pilgrim to directly purchase Luxturna from Spark Therapeutics, which bypasses price mark-ups for administration and distribution.

Harvard Pilgrim will agree to provide members with coverage for Luxturna that is consistent with FDA guidelines, expedite benefits processing for members that qualify for the treatment, and cap out-of-pocket spending amounts based on in-network limits.

“We are excited for the opportunity to work with Spark Therapeutics on this outcomes-based arrangement that will contribute to our goal of not only ensuring access for our members but also the need to maintain affordability for all of our members,” Sherman added.

Spark Therapeutics is receptive to other value-based purchasing models and proposed a spread-payment option to CMS, the company added.  

The proposed payment model would allow government and commercial payers to purchase Luxturna through installments over several years instead of one up-front payment.

Current government pricing reporting requirements don’t allow drug companies to use these time-based payments, which led Spark Therapeutics to propose a Luxturna-specific CMS demonstration project that uses installment payments and outcomes-earned rebates.

“To help ensure eligible patients have access to Luxturna, we are striving to bring the same level of innovation applied in development to the delivery of, and access to, this product,” said Jeffrey D. Marrazzo, CEO of Spark Therapeutics.

“We believe that access to therapy is a shared responsibility among Spark Therapeutics, payers, health benefit providers, physicians and treatment centers.”

Spark Therapeutics is also collaborating with value-based care experts including leaders at the Duke-Margolis Center for Health Policy at Duke University and the Value-Based Payment Consortium.

“Spark Therapeutics’ effort to implement new pricing approaches with both public and private payers is a critical step to put the focus on long-term outcomes, not just more treatments,” said Mark McClellan, MD, the Director of the Duke-Margolis Center and a former FDA commissioner. 

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