One of the biggest challenges in global healthcare is the rapidly increasing cost of healthcare. The US alone contributes to around one-third of the global healthcare spent. By 2019, the US healthcare spending doubled to $3.8 trillion in comparison to $1.4 trillion in 2000. Therefore, the goal is to make healthcare financially sustainable.
Under a value-based care structure, providers are paid for aiding patients to improve their health by decreasing the effects and incidences of chronic diseases and making sure that they are living healthier lives. Strong competition among providers and an increase in pressure to reduce cost and expand care is leading to a shift from volume-based health care to value-based health care.
In the pursuit of driving value-based care, the pharmaceutical companies are also taking value-based initiatives in the form of:
- Value-based pricing
- Outcome-based contracting
- Value-based partnerships
Value-based care initiatives by big pharma companies
All of the large pharma companies are committed to moving towards value-based healthcare, and the majority have already begun driving this transition through multiple initiatives.
Novartis was among the first pharmaceutical companies to move into value-based contracting for medicines, linking pricing and reimbursement rates to specific outcomes. Novartis’ position on value-based pricing focuses on R&D outcomes that are of importance to patients as well as complementing their medicines with value-adding features. The approach Novartis took for pricing Kymriah (a CAR-T cell therapy) is an example. Value-based agreements are also in place for its breakthrough therapy, Luxturna. Payment is dependent on the accepted clinical threshold reached by patients at agreed time points based on a commonly used light sensitivity test.
Johnson & Johnson in cooperation with Swiss hospitals started value-based healthcare programs that are designed to optimize patient care while reducing the cost of treatment. For Invokana, the company agreed to provide the insurer with a rebate if a pre-specified percentage of members taking the drug need to add another diabetes drug to meet their treatment goals.
Bayer’s Vitrakvi Commitment Program, an innovative industry strategy offers a performance commitment to all stakeholders. If a patient does not gain clinical benefit from this drug, Bayer will refund up to the first 60 days of treatment for patients with NTRK fusion–positive tumors, when the conditions of the program are met.
Partnerships in value-based healthcare
Partnerships are gaining popularity among the healthcare providers as these allow partners such as payers, manufacturers and provider organizations to co-develop programs, solutions and initiatives collaboratively for the benefit of patients and healthcare systems.
For example, Amgen is investing in 110 value-based partnerships in Europe across 21 countries. This includes 33 in Cardiovascular, 36 in Orthopaedics, 31 in Oncology and 7 in Nephrology and Inflammation.
Additionally, Prime Therapeutics LLC has entered into a value-based agreement with Pfizer Inc., in 2019, where the companies are using real-world data with the purpose to improve patient outcomes and ultimately lower healthcare costs.
The pharma industry has already started to deliver to the demands of value-based healthcare. With high-cost treatments such as gene therapy and those for orphan diseases, value-based contracts have become imperative. Health plans are increasingly becoming more receptive to any treatment that increases cost predictability. Hence, biopharma companies will have to accept more risk for the commercial performance of their drugs than they were willing to do so historically.
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Sources
https://www.foreseemed.com/value-based-care
https://www.amgen.eu/about-us/partnership-and-support/amgen-value-based-partnerships