Value-Based Drug Payment
Sept. 25, 2017
Following behind last week's post, I have come across a few articles recently discussing the idea of value-based payments for drugs. In an article from HFMA, they discuss how Harvard Pilgrim Health Care, an insurance company, is working on making outcome-based contracts, OBCs, with different pharmaceutical companies. While this article showed the perks of drug payment following this model, it explains that the excitement for this change is farther ahead than the actual implementation of the plan.
A value-based model, or outcome-based model, would regulate the payment or reimbursement of an insurance company based on the effectiveness of the therapy. For many new medications, patients can begin the therapy, and an assessment of the patient's survival, recovery, or overall outcome, would determine how much the insurance agency will actually pay. A rebate can be sent to the insurance for a percentage back based on the drugs ability to do what was hoped. Unfortunately, for older medications that are known to work, this system is harder to implement, because the manufacturers know the worth of the drug already. While this model would be great for new medications coming to the market, it would take weeks to years to study the efficacy of some drugs. This is why HFMA feels the hype for a quick fix on high drug costs is unwarranted, because in reality, it is not a change that can occur overnight.
Another blog, Health Affairs, discussed the recent change in administration and how this could benefit the transition to value-based payments. Currently, Medicaid has a "Best Price" rule, which in short states that Medicaid must pay the lowest possible price that a manufacturer can sell a drug for. While this sounds great for these recipients, it puts a hold on value-based payments, because the if a drug is sold for $100 and if proven ineffective, the rebate would be $75, according to the best price rule, Medicaid would only pay $25, which would be improbable for the manufacturers.
With the current administration changes, now is the time to integrate these changes, and work with CMS on how to negotiate the best price rule, and make an effective payment system for everyone, including private insurances.
As a science-based student, I think that the value-based payment model sounds wonderful, but I am interested to see how this would be implemented. Patients metabolize drugs differently, and there are a lot of physiological reasons for patients having specific outcomes to drugs. I think this will be an extremely difficult change to implement, as well as the fact that the manufacturers would need to have money set aside for a failed outcome, and the insurers would still need to pay the total cost up-front. I think this is why clinical trials are important and used currently, because it gives a chance for the drug's efficacy to be explored prior to it reaching the market. This could change when a larger portion begins using a drug, though, because of how people metabolize drugs. I think this is a much harder transition to make than these blogs discussed. I am interested to see if this change is able to occur, and if it is the best solution that can be made.
HFMA Value-Based Drug Payment
Value-Based Pricing- Health Affair
Following behind last week's post, I have come across a few articles recently discussing the idea of value-based payments for drugs. In an article from HFMA, they discuss how Harvard Pilgrim Health Care, an insurance company, is working on making outcome-based contracts, OBCs, with different pharmaceutical companies. While this article showed the perks of drug payment following this model, it explains that the excitement for this change is farther ahead than the actual implementation of the plan.
A value-based model, or outcome-based model, would regulate the payment or reimbursement of an insurance company based on the effectiveness of the therapy. For many new medications, patients can begin the therapy, and an assessment of the patient's survival, recovery, or overall outcome, would determine how much the insurance agency will actually pay. A rebate can be sent to the insurance for a percentage back based on the drugs ability to do what was hoped. Unfortunately, for older medications that are known to work, this system is harder to implement, because the manufacturers know the worth of the drug already. While this model would be great for new medications coming to the market, it would take weeks to years to study the efficacy of some drugs. This is why HFMA feels the hype for a quick fix on high drug costs is unwarranted, because in reality, it is not a change that can occur overnight.
Another blog, Health Affairs, discussed the recent change in administration and how this could benefit the transition to value-based payments. Currently, Medicaid has a "Best Price" rule, which in short states that Medicaid must pay the lowest possible price that a manufacturer can sell a drug for. While this sounds great for these recipients, it puts a hold on value-based payments, because the if a drug is sold for $100 and if proven ineffective, the rebate would be $75, according to the best price rule, Medicaid would only pay $25, which would be improbable for the manufacturers.
With the current administration changes, now is the time to integrate these changes, and work with CMS on how to negotiate the best price rule, and make an effective payment system for everyone, including private insurances.
As a science-based student, I think that the value-based payment model sounds wonderful, but I am interested to see how this would be implemented. Patients metabolize drugs differently, and there are a lot of physiological reasons for patients having specific outcomes to drugs. I think this will be an extremely difficult change to implement, as well as the fact that the manufacturers would need to have money set aside for a failed outcome, and the insurers would still need to pay the total cost up-front. I think this is why clinical trials are important and used currently, because it gives a chance for the drug's efficacy to be explored prior to it reaching the market. This could change when a larger portion begins using a drug, though, because of how people metabolize drugs. I think this is a much harder transition to make than these blogs discussed. I am interested to see if this change is able to occur, and if it is the best solution that can be made.
HFMA Value-Based Drug Payment
Value-Based Pricing- Health Affair
I think an interesting aside to this article as well would be that as per many Managed Care contracts, we cannot negotiate our formulary; therefore, we cannot enter into these value based contracts. This was set up by lobbies to protect large pharmaceutical interest groups. Many states have these stipulations with their government sponsored health plans.
ReplyDeleteGreat post exploring an important topic. I have an interview with the CMO of Harvard Pilgrim you might want to check out. http://healthleaderforge.blogspot.com/2015/12/michael-sherman-md-mba-chief-medical.html
ReplyDeleteI'm going to look into this! I think it's a hot topic right now, and I would like to learn more about these value-based compensation models!
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