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    Four critical components for successful, value-based pharma contracts

    Value-based contracts between pharmaceutical manufacturers and payers look like they are here to stay. And they are growing in number. The Wall Street Journal reported last month that payers and PBMs have reached at least a dozen “value-based” or “at-risk” deals with manufacturers since 2014. These contracts bring higher payment rates for improving patient outcomes, supplanting traditional contracts in which payment brings rebates based on volume and the right place on the formulary.

    Christopher Bradbury, senior vice president, integrated clinical and specialty drug solutions for Cigna Pharmacy Management has said, “When pharmaceutical companies stand behind the performance of their drugs through these kinds of contracts, we can deliver the most value to Cigna’s customers and clients for the money they are spending.”

    Theoretically, value-based or “at-risk” agreements are a positive development. However, because these contracts are still based on rudimentary volumetric math, they are little more than value-based window dressing. As the only drug on formulary within these agreements, manufacturers are still banking on a simple volumetric percentage of efficacy to meet payment and profit goals. Real improvements in outcomes and value-based contracts require more lifestyle factor measurement and corresponding agreement on their evaluation.

    There are some outcomes that are easy to measure: Hospital readmissions, HCV cure rates and diabetes A1c counts, for example. What’s not easy, and what is desperately needed for value-based contracts to demonstrate higher potential, are outcomes that are lifestyle dependent and involve some sort of care team.

    “Insurers and manufacturers say the complexity of tracking a patient’s health—which falls on the insurer—can be a barrier, and most supply contracts still tie payments to volume of prescriptions,” according to the WSJ article. Moreover, “Alan Lotvin, executive vice president for specialty pharmacy at CVS, said the setups can be difficult to execute because many achievements—such as a reduction in heart attacks and deaths for cholesterol drugs—can take years to become clear, and patients may be impossible to track over time as they change insurers and jobs.”

    Related: Opinion: Top 4 lessons learned at Asembia 2016

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