Value-Based Contracts May Lower Patients' Out-of-Pocket Costs by 28%

PhRMA calls for reforms to allow more of these arrangements

Commercially insured patients in health plans with value-based contracts for diabetes, high cholesterol, and human immunodeficiency virus medicines in the past two years had copays that averaged 28% lower for those medicines compared to patients in other plans, according to an analysis from the Pharmaceutical Research and Manufacturers of America (PhRMA).

"Results-based or value-based contracts can reduce health care system costs and can make medicines more affordable and accessible for patients," said Stephen J. Ubl, President and CEO of PhRMA, which represents leading biopharmaceutical research companies. "The health care market is starting to move in this direction, but we need public policy reforms that allow greater flexibility for innovative payment arrangements that lower out-of-pocket costs and enable patients to access the right treatments the first time."

PhRMA worked with Avalere Health to analyze formulary coverage for existing outcomes-based contracts. Aetna and Harvard Pilgrim have announced outcomes-based contracts with biopharmaceutical manufacturers for several newer medicines for diabetes, high cholesterol, and human immunodeficiency virus. For the medicines included in these contracts, patient copays from 2015 through 2017 silver-level exchange plans were 28% lower, on average, for medicines when covered by the payers with outcomes-based contracts compared to the market average silver-level exchange plan, the PhRMA analysis said. While it is not clear whether the silver-level exchange plan population was included in the payers’ outcomes based-contract, this finding suggests that outcomes-based contracts can contribute to reduced cost sharing for patients.

The data highlight the potential for results-based contracts to reduce health care costs, PhRMA said. For example, if results-based contracts lower the burden of diabetes in the United States by 5%, the nation could save more than $12 billion annually. This data complements an earlier analysis by Avalere that found 33% of payers that used results-based contracts experienced cost savings and 38% saw improved patient outcomes.

Through value-based contracts, biopharmaceutical companies agree to take on more financial risk, which may ultimately result in insurers offering lower copays and coinsurance for patients. Value-based contracts tie reimbursement for medicines more closely to value for individual patients. These voluntary, private arrangements include performance-based contracts that link payment to demonstrated patient outcomes, varying payment based on how a medicine is used and other forms of risk sharing.

Seventy percent of commercial health plans have indicated a favorable attitude toward outcomes-based contracts, with nearly a quarter of plans reporting that they have implemented at least one such contract and another 30% reporting that they are currently in negotiations, the PhRMA report says.

While these innovative approaches to paying for medicines can improve patient affordability and access, many barriers limit the scale and scope of their impact, PhRMA said. Fostering more of these arrangements would require updated rules that better facilitate the responsible and timely sharing of product information with insurance companies, clearer protection for value-based arrangements under the Anti-Kickback Statute, and more certainty about how to address these arrangements under government price reporting rules like Medicaid best price, PhRMA said.

Sources: PhRMA; February 26, 2018; PhRMA report; February 26, 2018.