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Opportunities and Challenges With Value-Based Contracting

Given the need to provide patients with access to effective medications, it is likely that we will see more value-based contracts in the future; however, some key operational, communications, and regulatory barriers will need to be addressed first.
Published Online: Jun 22,2017
Dan Leonard, MA
At the same time, Eli Lilly and Company and Anthem have forged a partnership to begin a public dialogue about ways to move toward an “environment conducive to allowing health plans and manufacturers to enter into a variety of value-based contracting arrangements, aligned with the shift toward value-based payment and the goal of promoting access to high-value care.”4

Challenges With Structuring and Implementing Value-Based Contracts
There are many difficulties inherent in implementing value-based contracts, particularly those based on particular outcomes or indications of a drug. These fall into 3 main areas: operational, communications and regulatory.

Operational issues. Significant payer and provider infrastructure is necessary to monitor an outcomes-based agreement. For example, payers may not have the capability to monitor and track pharmaceutical usage and outcomes relevant to the contract due to a lack of a robust information technology, data infrastructure, or staff expertise, among other issues.
Without proper tracking mechanisms in place, it can be difficult to ensure medication adherence. Manufacturers are reluctant to accept financial consequences when they cannot control how a drug is prescribed or used. In addition, agreeing on outcomes that are meaningful and measurable within a reasonable timeframe is challenging.

Communications concerns. Payers may be interested in lowering expenditures for a particular patient population, such as reducing hospital visits and costs. Yet, this type of clinical or economic outcome might not be included on a drug’s label, which must be approved by the FDA.

As a result, payers and manufacturers cannot agree to a contract based on an outcome that is not listed on the drug’s label, even if strong data exists for that outcome, and this limits their ability to effectively share risk. FDA is currently reviewing how it regulates the exchange of information between payers and manufacturers, so this concern could be addressed in the near term.5

Regulatory barriers. Medicaid Best Price was enacted as a way to keep federal spending in check and guarantee that Medicaid is getting the lowest price that the manufacturer can afford to sell it, which is roughly one-fourth of a drug’s average manufacturer price.6

Manufacturers are reluctant to develop value-based contracts that might result in an effective greater discount than Medicaid Best Price, because the lower “discount” or price would apply not only to the population in the agreement, but to the entire Medicaid population as well.

Fear of inadvertently running afoul of the federal anti-kickback statute, which prohibits the exchange or offer of anything of value in an effort to reward the referral of business, is another reason some manufacturers and payers shy away from value-based contracting.

Value-added services could include activities such as nurse coaches, case management support or adverse event monitoring, all of which have benefits in the administration of a value-based contract. The federal government would need to provide clarity to address this situation.