How To Make Value-Based Drug Pricing Work

It sounds like a good idea, writes KPMG analyst Peter Gilmore on the Forbes blog. A drug proven to be effective enough to lower the overall costs of care for patients should be priced lower. It’s a hot topic and a burgeoning (though slowly growing) cost-control tool.

There are problems, Gilmore notes. For one thing, there needs to be common agreement on patient outcomes. For another, measuring value isn’t always possible. “This type of pricing only works for certain treatments and as long as there are no generic versions of the drug because cost cannot be the only relevant factor,” Gilmore writes.

There are also some regulatory hurdles. Many health systems are not equipped to handle value-based pricing. Still, here are Gilmore’s suggestions (in his own words) about how to give value-based drug pricing the best chance for success.

  • Focus on the right patients. The goal of any therapy is to achieve good outcomes at the lowest cost. So it’s important to provide the right drugs at the right time to the right patients.
  • Keep it simple. Accept the fact that patient outcomes will vary. For instance, it’s difficult to fully measure the impact of a drug on reducing hospital admissions. Those measuring the drug’s effectiveness should be satisfied with a link between usage and outcomes.
  • Keep costs reasonable. Creating and maintaining a program to measure outcomes can be so expensive that it undermines the cost effectiveness of value pricing. There’s also the question of who pays for it. The burden is likely to fall on drug companies, so they may need to bundle the cost of measurement into the drug pricing.

Source: Forbes