Proceedings: DIA 2018 Global Annual Meeting

Optimising Value-Based Contracting:
Are the Stakeholders Ready to Collaborate?

Inka Heikkinen
DIA Senior Scientist


alue- or outcomes-based contracting (contracts with clinical outcomes related clauses or other arrangements to share the risk) with regard to medicines is quickly becoming a trend when it comes to specialty drugs. Consuming already almost 50 percent of the total budget, specialty drug payment models need quick action to make the system sustainable and affordable, while still rewarding innovation. To move away from the convenient fee-for-service model and discount-driven contracting models, the stakeholders need to agree and align on how to ensure that value is delivered.

The DIAmond session “Value-Based Assessment and Contracting: What Needs to be Done to Make it a Best Practice?” highlighted elements that determine value and their impact on contracting practices, administrative challenges for implementing innovative contracting models, and the value of emerging technologies to enable better outcomes assessment.

Key Takeaways

  • All stakeholders (providers, physicians, patients, PBMs, industry, and academics) need to be involved in the discussion and agree to make changes at their end.
  • Current infrastructure should be utilized for the new models but new innovations and capabilities should be invested in to allow for collecting outcomes more accurately and efficiently.
  • Expenses should be considered holistically instead of dividing pharmaceutical and medical treatment budgets into separate entities, because the outcomes are interlinked.
  • New payment models, fit for curative or one-time fees, are needed as innovative technologies, such as gene therapies, become more prevalent.
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Michael Rosenblatt and Barbara Lopez Kunz discuss key points raised during the DIAmond session on value-based contracting.

Very often the discussion about contracting models takes place between industry and payers. Yet, there are many system changes required to make them optimal, and all too frequently some stakeholders, such as providers looking at budget impacts, physicians entering outcomes data, and patients reporting the data and being one of the payers, are not invited to the table. The prominent challenges relate to agreement on the metrics and the timeframe when one can expect a positive clinical outcome. There are discussions–and much political attention–on what constitutes an acceptable price and how it should be monitored. To paint a complete picture, one should also look at the budgeting practices and incentives for providers, existing data capabilities and practices in collecting the data, and also at the role of stakeholders and how the rebates are distributed among those paying for the treatment.

Providers are moving towards integrated care networks that allow better monitoring of the total medical expense instead of, for example, surgeries or other physical treatments being assessed in isolation from the medical expenses. If a medicine reduces the need for physical intervention or hospitalisation and thus the total spent on the patient, the budget impact should be assessed by looking at the total expense and comparing resource allocation. This increases the value for the patient as well as the value for the provider through more coordinated care, transparency on metrics to assess value, efficiency of care and satisfaction of the patient, system-wide patient retention, and reduced penalties for providers when readmissions occur.

Indranil Bagchi, Global Value and Access

Samuel R. Nussbaum, EBG Advisors, Inc.

DIAmond Session Panelists
Indranil Bagchi, Vice President and Franchise Head, Global Value and Access

Samuel R. Nussbaum, Strategic Consultant, EBG Advisors, Inc.

Luca Pani, Professor, Department of Psychiatry and Behavioral Sciences, University of Miami

Michael Rosenblatt (Moderator), Chief Medical Officer, Flagship Pioneering

Ellen Zane, CEO Emeritus and Vice Chair, Board of Trustees, Tufts Medical Center

What Are the Barriers for Moving Towards Value-Based Contracting?

The current regulatory landscape, related to for example reporting list and average selling prices and the Anti-Kickback Statute, does not fully support advancing alternative contracting models. There is not enough trust among the stakeholders to come to an agreement. Data collected through the existing systems may not have the required quality and those entering the data may not have adequate understanding of the important parameters, which might reduce comparability of the outcomes. The Novartis CAR-T example demonstrates that high one-time costs do create barriers to access, and high budget impact will cause issues similar to those associated with the hepatitis C treatments a few years ago. Some academics have proposed models that allow short-term return on investment and long-term access, making the model more sustainable. At the same time, a lot of hopes are directed towards better data collection, most notably with regard to the FDA’s Sentinel initiative that focuses on safety but could be a model for collaboration for effectiveness data, too.

At the end of the day, it becomes clear that no single stakeholder can move the needle enough to increase the value output through value-based contracting or other means; the effort needs to be collaborative. The discussion has to open up and the range of participants has to widen to make sure all voices are heard and the challenges are understood. Rapid advancements are needed, and the time to find solutions is finite. Feedback on emerging value- and outcomes-based agreements will provide a good foundation for ironing out the challenges, and, hopefully, for building trust between parties. Innovation is not only important in science but also desperately needed in rethinking and designing the system to make it fit for the future of healthcare.