Prescription drug expense will represent one-third of all health care spending by the end of the decade. Because of this rapid growth, it becomes increasingly important to determine the value of this treatment in relation to the expense. Performance-based models link clinical outcomes and reimbursement to create quality and cost improvements, and take advantage of technology and medical innovations. With outcomes-based pricing for pharmacy, drug manufacturers and insurers share in the accountability for clinical outcomes associated with the drug therapy.
Clinical outcomes are dependent on several factors like patient-physician and physician-pharmacy communication, patient experience, treatment compliance and side effects management, all part of effectively treating the condition. To calculate the basis for paying for the drug treatment in an outcomes-based model, these factors need to be translated into measureable results. A wider acceptance of outcomes-based pricing requires further collaboration between the manufacturers and payers to agree on evaluation metrics, develop the infrastructure needed to collect, share, and report results, and a willingness to adopt new pricing models. While payers and manufacturers agree on the challenges in identifying, measuring and monitoring meaningful outcomes, there is not as much agreement on the solutions.
Payers don’t want to pay for treatment that does not work, and by implementing reimbursement approaches that pay for value, they are attempting to hold the manufacturers accountable for product performance. Manufacturers insist they are providing better patient outcomes through their research and development. Integrating the demand for performance with real world results is really a problem of accessing the data to use for measuring results.
Pharmacy benefit managers (PBMs) are organizations that administer the prescription benefits offered under health plans. PBMs also help provide effective ways to access clinical data based on actual utilization and intervention with medical practitioners. PBMs have the capability to create savings through clinical and utilization management programs and by negotiating drug discounts and rebates with the manufacturers. As payers continue to ask their PBM to provide affordable and sustainable coverage, PBMs recognize the importance of aligning their manufacturer contracts around clinical and financial outcomes, and not just volume. By sharing the risk and paying for value as defined in the agreement, payers should be able to lower overall costs and preserve the clinical value of these drugs. Over the course of time, we would expect to see more outcome-based arrangements, and specifically in the specialty drug category.
Specialty drugs are pharmaceutical products created using a biological, rather than chemical, process. They are complicated and expensive to manufacture and can cost thousands to hundreds of thousands of dollars per treatment. Treatment usually involves a clinician giving an injection or intravenous infusion, as well as oral medications and injections self-administered by the patient. Specialty drugs are expected to account for fifty percent of total drug spend within three to five years.
Outcomes-based pricing contracts could be an important factor in controlling costs in the pharmacy category. These performance models for pharmacy benefits could help moderate the cost of health care for consumers, with better decision-making processes for practitioners. Ultimately, the goal is to align incentives and accountabilities that improve health care quality for everyone.
About LaShai Payne
LaShai Payne is Vice President, Keenan Pharmacy Services. She is responsible for managing the operation of pharmacy benefit programs offered to our customers and developing innovative approaches to pharmacy cost management and clinical effectiveness.