Outcome-Based Contracting Acceptance Grows in Market

Outcome-Based Contracting Acceptance Grows in market with the concept of taking on financial risk on complex contracts as a result of market pressure combined with more familiarity.

Outcome-based contracts between pharma companies and health insurers are becoming increasingly popular. In 2016, Novartis, Amgen, and Sanofi publicized risk-sharing, value-based, outcomes-based, or pay-for-performance deals, all of which vary slightly in definition.

In October 2016, Merck and Aetna announced two agreements, each of which aims to address the gaps in a health system that often allow chronically ill patients with type 2 diabetes to get sicker.

At the end of 2016, the Centers for Medicare & Medicaid Services (CMS) had initiated the most PBRSAs (Performance-based risk-sharing arrangements) through its Coverage with Evidence Development (CED) program, which makes Medicare coverage of Parts A (hospital) and B items (physician) and services contingent on additional evidence collection either through an approved RCT (randomized controlled trial) or registry.

There are a number of key elements necessary to implement a successful outcome-based agreement, which include the risk from a performance other than that predicted by the clinical trial results is distributed between manufacturer and payer.

Likewise, there are a number of key barriers that may derail a successful outcomes-based contract, including payer concerns about adverse patient selection, manufacturer concerns over locus of control.

Healthcare experts see promise in outcomes-based agreements, which can help drugmakers create market share by ensuring volume or preferred formulary status.

At the same time, these agreements also force pharma companies to stand by the value of products they market to insurers, which often foot the bill for costly and sometimes unproven new drugs.

Access Market Intelligence’s recent Outcomes-Based Contracting webinar detailed the key elements and barriers to contract success, as well as additional insight by Dr. Randy Vogenberg and Anita Burrell that has proven helpful to companies considering initiating this type of contract.