In an attempt to curb rising costs, the U.S. medical system is moving away from traditional fee-for-service healthcare.¹⁴ Traditional fee-for-service and volume-based healthcare models pay providers for the amount of healthcare services they provide, not the quality of that care. Value-based care is the new model: a system in which providers are paid for performance and patient outcomes.¹ ⁵
Value-based care benefits every healthcare stakeholder:⁵
- Patients benefit from improved outcomes at lower costs
- Providers benefit from better care efficiencies and, therefore, higher rates of patient satisfaction
- Payers benefit from stronger cost controls, plus risk is spread across a larger patient population
- Suppliers benefit from prices aligned with patient outcomes
- Society benefits from a reduction in overall healthcare spending plus improved overall health
These benefits have led to increased focus on value-based solutions in life sciences.
Pressure to switch to value-based contracts comes from all sides. The public is calling for it in response to high pharmaceutical prices. Providers are calling for it: the Mayo Clinic, the American Society of Clinical Oncology, and the Memorial Sloan Kettering Cancer Center—three notable provider organizations—recently published recommendations for dealing with the escalating costs of oncology drugs. Payers are calling for it, seeking to cut costs for specialty pharmaceuticals through value-based contracts with life sciences suppliers.¹To avoid being left behind, life science organizations need to start addressing this payment trend as well.
In this article, we examine the approaches some life science groups are exploring, and the key factors needed to make these solutions a reality.
Aligning product costs with patient outcomes
In the biopharmaceutical and medical device industries, value-based contracts are defined as contractual agreements in which payments for a therapeutic agent are connected to real-world clinical outcomes. This contract type can have many different structures, but the underlying premise is that payment is tied to real-world value.¹
One approach has been to tie reduced costs to positive patient outcomes via rebates or reimbursements.
Aligning product costs with product performance
Medical technology companies are also entering contracts with hospitals and payers that pair payment incentives with product performance in lieu of tying costs directly to patient outcomes. If the product fails to perform its function, the hospital or payer may be reimbursed.⁶⁻⁹ Alternatively, the hospital or payer may pay one price if the product reaches a specific quality target and another if it fails to do so.⁴ ¹⁰
Several major medical device vendors have entered contracts with hospitals requiring them to provide compensation if the device fails to meet clinical standards. In other cases, agreements may guarantee a specific health outcome as well as covering the device. This helps to accelerate market acceptance of new medical products, which benefits life sciences suppliers.¹¹
Risk share by product
This contract type differs from product or service guarantees in that the rebate is derived from some other cost in the process, not the actual product cost.
A risk-sharing contract might offer to cover a patient's hospital costs if the medical device or medication fails to prevent hospital admission. A pharmaceutical company might provide a money-back guarantee for patients who experience life-threatening events after using the guaranteed medication as prescribed. Vendors might refund the medication cost; in other cases, they might pay for hospital and treatment costs as well.
Value-focused solutions
Veradigm's unique portfolio of value-focused solutions provide data-driven, actionable insights that can help life sciences organizations to:
- Align products and services with positive patient outcomes and reduced costs
- Promote medication adherence
Veradigm's Real-World Evidence and Analytics: Resources to promote advances in real-world clinical research, driving improvements in both quality of care and value of care. Veradigm's linked data products allow researchers to use real-world data from a variety of sources.
Veradigm offers two Clinical Data Registries: The PINNACLE Registry® and the Diabetes Collaborative Registry®, operated in association with the American College of Cardiology. They offer longitudinal views of health outcomes for patients with cardiovascular disease and diabetes as they receive care and treatment.
Veradigm AccelRx™: A specialty medication fulfillment solution which streamlines the fulfillment process. Patients can receive specialty medications more rapidly which, in turn, helps to promote medication adherence.
Veradigm StudySource: A tool for facilitating clinical research, StudySource identifies eligible study patients by leveraging electronic health record systems. It helps life science researchers gain access to real-world information, making research more accessible to clinical practices.
To learn more about Veradigm's value-focused solutions for Life Sciences, contact us.
References:
1. Sen I. Value-Based Contracting: Key Considerations for Life Sciences Manufacturers. Huron Consulting Group Inc. Accessed October 10, 2021, https://www.huronconsultinggroup.com/insights/value-based-contracting-key-considerations-for-life-sciences-manufacturers.
2. Pillai I. How are medical device companies responding to value-based healthcare? Clarivate™. Updated August 6, 2018. Accessed October 11, 2021, https://clarivate.com/blog/medical-device-companies-responding-value-based-healthcare/.
3. Shadan M. MedTech innovation amiss unless it serves health systems transitioning to value-based care. Becker's Health IT. Updated September 13, 2017. Accessed October 11, 2021, https://www.beckershospitalreview.com/healthcare-information-technology/medtech-innovation-amiss-unless-it-serves-health-systems-transitioning-to-value-based-care.html.
4. Implications of value-based care for the life sciences industry. Baker Tilly. Updated October 20, 2019. Accessed October 10, 2021, https://www.bakertilly.com/insights/implications-of-value-based-care-for-the-life-sciences.
5. NEJM Catalyst. What Is Value-Based Healthcare? NEJM Catalyst. Updated January 1, 2017. Accessed October 15, 2021, https://catalyst.nejm.org/doi/full/10.1056/CAT.17.0558.
6. Barlas S. Health Plans and Drug Companies Dip Their Toes Into Value-Based Pricing. Pharmacy and Therapeutics. January 2016;41(1):39, 40, 41, 53.
7. Stynes T. Novartis Reaches Entresto Pay-for-Performance Deals With Cigna, Aetna. The Wall Street Journal. Updated February 9, 2016. Accessed October 13, 2021, https://www.wsj.com/articles/novartis-reaches-entresto-pay-for-performance-deals-with-cigna-aetna-1455038859.
8. Staton T. Novartis defies naysayers with newfangled pay-for-performance deals on Entresto. Fierce Pharma. Updated February 10, 2016. Accessed October 13, 2021, https://www.fiercepharma.com/sales-and-marketing/novartis-defies-naysayers-newfangled-pay-for-performance-deals-on-entresto.
9. Humer C. Novartis sets heart-drug price with two insurers based on health outcome. Reuters. Updated February 8, 2016. Accessed October 13, 2021, https://www.reuters.com/article/us-cigna-novartis-drugpricing-idUSKCN0VH25K?feedType=RSS&feedName=healthNews.
10. Bryant M. GE, Medtronic among those linking with hospitals for value-based care. Healthcare Dive. Updated March 29, 2018. Accessed October 14, 2021, https://www.healthcaredive.com/news/ge-medtronic-among-those-linking-with-hospitals-for-value-based-care/519039/.
11. Hodsden S. Medtronic, J&J, St. Jude Pursuing Risk-Sharing Agreements With Hospitals. Med Device Online. Updated July 9, 2015. Accessed October 14, 2021, https://www.meddeviceonline.com/doc/medtronic-j-j-st-jude-pursuing-risk-sharing-agreements-with-hospitals-0001.
12. LaMattina J. Outcomes-based Pricing Not A Panacea For High Priced Drugs. Forbes. Updated May 27, 2019. Accessed October 12, 2021, https://www.forbes.com/sites/johnlamattina/2019/03/27/outcomes-based-pricing-not-a-panacea-for-high-priced-drugs/?sh=5476bfa35c23.
13.Hand S. Is Amgen’s Outcomes-Based Pricing Model for Repatha Benefiting Patients and Payers? Xtalks. Updated April 6, 2018. Accessed October 12, 2021, https://xtalks.com/amgens-outcomes-based-pricing-model-for-repatha-1258/.