Value-Based Contracting Between Insurers and Drug Companies Faces Tough Hurdles

When Harvard Pilgrim Health Care recently unveiled value-based contracts for two expensive medications, etanercept (Enbrel) and teriparatide (Forteo), the news caused a stir because it’s an example of where health care wants to be.

Unfortunately, just because stakeholders want value-based contracts for medications, doesn’t mean they’ll become widespread anytime soon, according to a report by the Network for Excellence in Health Innovation (NEHI), a health policy institute. There is certainly a lot to like about value-based contracts in theory. However, the reports states that “federal regulations that guide enforcement of laws around drug purchases—both purchasing through federal programs and those made by private, commercial payers—do not explicitly incorporate guidance regarding value-based contracts. This lack of explicit guidance creates a degree of uncertainty that inhibits negotiation and execution of value-based contracts.”

In addition, the metrics don’t necessarily align. For instance, measuring how much medication is sold is pretty straightforward. Measuring outcomes in a way that everybody can agree on might be more of a lift. In fact, measuring outcomes period could be problematic, the report states. “Results of a drug’s use among patients is proven through data collection and analysis. These activities create administrative complexity and cost not present in conventional contracts that link payment solely to the volume of drugs sold.”

What do payers and phrama companies mean by value? It’s one thing to measure hospital readmissions and cancer treatment, but an entirely different story when if comes to something like quality of life. Something else to consider: People tend to change jobs, and therefore health insurers. The contracts that Harvard signed with Amgen and Eli Lilly are for two years, and that seems to be the limit. It would be difficult to structure a value-based contract around future outcomes for things like heart attacks.

Despite these and other hurdles, the value-based goal is well worth pursuing, the report states. Here are ways to work toward it, according the NEHI report.

  • “Continue development of health care quality and performance measures: The work of organizations focused on developing quality metrics (e.g. the National Quality Forum) should continue, with research priorities tied where possible to the need for innovation in pharmaceutical contracting.
  • Invest in data infrastructure: Large national clinical data networks structured around common data formats and standards, such as PCORnet, the research network developed by the Patient Centered Outcomes Research Institute (PCORI), could streamline data collection essential to value-based contracts, and should be sustained.
  • Continue to push for interoperability: Federal and cross-sector efforts to achieve reliable clinical data exchange and electronic health record interoperability should be continued.”

Source: Network for Excellence in Health Innovation