Lessons Learned in Value-Based Contracts

Interest in value-based contracts continues to grow, but the most of these arrangements are not publicly known. A survey of 11 pharmaceutical manufacturers and nine payers found that approximately 29% of payers and 26% of manufacturers have disclosed their value-based agreements, while 71% and 74%, respectively, of agreements that have been implemented are not publicly known.

This secrecy occurs for various reasons, including that a desire to avoid public scrutiny while these contracts are still in the experimental phase, and the competitive advantage to keeping them private.

During a presentation at AMCP Annual Meeting 2018, Robert W. Dubois, MD, PhD, of the National Pharmaceutical Council, Michael S. Sherman, MD, MBA, MS, of Harvard Pilgrim Health Care, and Robert A. Spurr, of Novartis Pharmaceutical Corporation, discussed barriers to use, the current landscape, and lessons learned in value-based contract implementation.

The survey also found various negotiation breakdowns that led to failed value-based contracts. According to manufacturers, this included challenges with providing data and evidence, implementation costs, and difficulty in identifying appropriate outcomes measures. Payers say these dialogue issues stem from disagreements on financial terms and incentive mechanisms. Both cohorts agreed that Medicaid best pricing and lack of partner buy-in/risk-bearing were also issues.

When asked what can be done to help value-based contract implementation succeed, respondents agreed on a few things:

  • The ability to measure outcomes clearly tied to product use
  • Target patient populations that can easily be identified in claims
  • Make sure the administrative burden is reasonable

In the future, value-based agreements are likely to become more sophisticated, more common, and incorporate multiple manufacturers within a contract.

Cost and quality concerns can be addressed by linking payments to outcomes, said Mr. Spurr. The future of these agreements will include a focus on overall clinical outcomes and partnering with customers for better health.

Dr. Sherman gave insights from the payer perspective, noting that value-based agreements that have already been signed are primarily in therapeutic areas where little competition exists and there is a small amount of risk. However, these agreements are most needed in high-cost therapeutic areas where there is significant uncertainty about impact and budget impact concerns.

He delivered some “lessons learned” from implementing value-based agreements:

  • First agreements are about proof of concept, and the second wave needs to demonstrate impact
  • These require real work to implement and operationalize
  • Many contracts require minimum patient numbers, which can cause long delays
  • Metrics must be expanded upon—collect more data
  • Medicaid best pricing is creating significant limitations for all stakeholders
  • Manufacturers also need to demonstrate that their pricing is rational and tied to value

Presentation B5: More than Meets the Eye – Value-Based Contracts are More Prevalent than We Think. AMCP Annual Meeting 2018.