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Value Depends on Real-World Evidence

Healthcare stakeholders must work with regulators and policy makers to reduce barriers that prevent the alignment of a drug’s value and price.
Published Online: Jul 28,2017
Dan Leonard, President, National Pharmaceutical Council
News about potential breakthrough treatments that cure diseases or dramatically improve patient health compete with news that highlights how drug pricing and insurance access rules make it harder for patients to obtain new therapies.

These competing headlines set up one of the most important challenges for biopharmaceutical manufacturers, payers, and policy makers: how to create a healthcare system of economic incentives that encourage innovation and improve broad-based affordability and access.

It is important to remember that the past 5 decades have seen tremendous progress in patient health. Death rates attributed to cancer, diabetes, heart attack, and stroke have declined dramatically, including by more than 75% for deaths from stroke.1

We have seen curative drugs for hepatitis C, important progress in the fight against cancer, and new treatments that give patients with multiple sclerosis greater ability to function and remain at work.

But we have yet to truly sort out just how much these advancements are worth. What if we had a drug that slowed the progression of Alzheimer’s disease? The one-time costs would be large, but the benefit to patients, their caregivers, and society overall would be profound.

For payers and biopharmaceutical companies, talking about value is not always straightforward—there are some parameters about what they can discuss, along with other regulatory concerns. These conversations often require real-world evidence, which are data and studies that show how (and whether) a particular drug performs in typical patients and usual care settings. This data frequently provides complementary information beyond the traditional randomized clinical trials used for product approval.

Payers and biopharmaceutical companies are using real-world evidence in their development of value-, or outcomes-based, contracts, which are growing in use. Through these contracts, payers and biopharmaceutical companies tie the cost of the medication to parameters based on how well the treatment performs in a given population or how the treatment impacts the total costs of care.

Insurance plans are increasingly looking favorably on these types of arrangements, according to a recent survey. One-quarter of the plans surveyed had value-based contracts in place, another 30% were negotiating at least 1, and 70% of the plans viewed them favorably.2

Payers also are testing indication-based pricing, under which the cost of the medication differs when it is used to treat different conditions. For example, a treatment that improves survival for patients with breast cancer might have a lower cost when the treatment is used to treat lung cancer, where it might not be as effective.

Standing in the way of more progress on the value-and-price front and testing these types of innovative contracts are regulatory hurdles that restrict communications between payers and manufacturers, as well as other barriers that currently create disincentives to paying for value.

Manufacturers and payers must be able to communicate about a drug’s potential benefits and risks. Those communications might need to be broader than the specifics included on a drug’s label. For example, understanding the projected budget impact of a treatment or whether medication use is associated with fewer emergency room visits or hospital readmissions is typically part of product approval. Yet, these conversations are especially needed to enable a drug maker and a payer to set benchmarks for the terms included in an outcomes-based contract.