Outcomes-Based Contracts

Ryan J. JunkinsPharm.D. & M.B.A.

CandidateButler University 2017

Agenda1. Background2. Benefits3. Examples4. Challenges5. Keys to Success6. Future Possibilities

1. National Healthcare Expenditures2. Prescription Drug Expenditure3. Traditional Pricing Model4. Fee-For-Value

Background

4

National Healthcare Expenditures

Source: National Health Expenditure Data. Centers for Medicare & Medicaid Services website: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html. Accessed: June 29, 2016.

5

Prescription Drug Expenditures

Source: National Health Expenditure Data. Centers for Medicare & Medicaid Services website: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html. Accessed: June 29, 2016.

6

Healthcare Affordability A Top Concern

Source: Kaiser Family Foundation Health Tracking Poll, October 2015

7

Traditional Pricing Model

Source: J Carlson, et al. “Linking payment to health outcomes: A taxonomy and examination of performance-based reimbursement schemes between healthcare health plans and manufacturers.” Health Policy. 2010 Aug;96(3):179-90.

8

Fee-For-Value Becomes Mainstream

Source: Kuzel M. 5 Keys to Success in New Patient Economy [webcast]. MM&M. http://engage.vevent.com/index.jsp?eid=1058&id=886&seid=885. Published June 23, 2016. Accessed: June 23, 2016.

Value-Based

Drug Contracts

Outcomes-Based

Pay-For-Performance

10

What are Outcomes-Based Contracts?

Source: J Carlson, et al. “Linking payment to health outcomes: A taxonomy and examination of performance-based reimbursement schemes between healthcare health plans and manufacturers.” Health Policy. 2010 Aug;96(3):179-90.

11

Value-Based Pricing Agreements

1. Pharma Companies2. Health Plans (Private & Public)3. Employers4. PBMs5. Prescribers/Health Care Professionals6. Consumers7. Policy Makers – State & Federal Government

Stakeholders

Source: Stanley E, Keckley P, Snyder G. Value-based pricing for pharmaceuticals: implications of the shift from volume to value. Deloitte Center for Health Solutions: http://deloitte.wsj.com/cfo/files/2012/09/ValueBasedPricingPharma.pdf. 2012. Accessed: June 6, 2016.

Benefits of Outcomes-Based Contracts

Pharma Companies• Improve drug’s position on a health

plan’s preferred drug list• Accelerate availability of new

treatments• Secure reimbursement when long-

term benefits are less known• Gain faster access to the market

Health Plans• Lower costs• Better performance• Reduced risk of paying too high a price for a

pharmaceutical that may ultimately have low-value in the real world

• Improve allocation of resources toward customers likely to receive the most benefit

Consumers• Pay less out of pocket• Better outcomes (due to receiving

targeted, high-value pharmaceuticals)

• Transparency of the medications value contribution

Providers• Financial Rewards via “Shared Savings Models”

with payers• Selecting the correct high-value pharmaceutical

at the right time for the patient• Monitoring, collecting, and submitting

consumer value attribute data• Assessing and addressing drivers and obstacles

to consumer complianceSource: Stanley E, Keckley P, Snyder G. Value-based pricing for pharmaceuticals: implications of the shift from volume to value. Deloitte Center for Health Solutions: http://deloitte.wsj.com/cfo/files/2012/09/ValueBasedPricingPharma.pdf. 2012. Accessed: June 6,

2016.Source: Drug value in the new health ecosystem. PwC: http://www.pwc.com/us/en/health-industries/health-research-institute/publications/assets/pwc-10min-drugvalue.pdf. July 2013. Accessed: June 16, 2016.

Source: Weisman R. Harvard pilgrim adds new drugs under ‘pay-for-performance’ deals. Boston Globe. June 27, 2016. https://www.bostonglobe.com/business/2016/06/27/harvard-pilgrim-adds-new-drugs-under-pay-for-performance-deals/2OQYId32R5RSc0s8wGKooM/story.html. Accessed: June 28, 2016.

1. Payment based on desired outcome2. Larger rebate in absence of desired outcome3. How well drug performs against competitive

drug(s)4. Indication-specific pricing

Types of Outcomes-Based Contracts

1. Payment based on desired outcome

• Heart Failure

• Novartis AG

• Aetna, Cigna, & Harvard Pilgrim

• Payment based on reduction in hospitalizations

15

$5,475 per year

Source: Livingston S. Cigna, aetna enter outcomes-based contract with Novartis for heart drug. Business Insurance. February 10, 2016. http://www.businessinsurance.com/article/20160210/NEWS03/160219978. Accessed: June 6, 2016.

2. Larger rebate in absence of desired outcome

• High Cholesterol

• Amgen, Inc.

• Cigna & Harvard Pilgrim

• Larger rebates for missing cholesterol goals and exceeding utilization goals

16

$16,920 per year

Source: Weisman R. Harvard pilgrim strikes ‘pay-for-performance’ deal for cholesterol drug. Boston Globe. November 8, 2015. https://www.bostonglobe.com/business/2015/11/08/harvard-pilgrim-strikes-pay-for-performance-deal-for-cholesterol-drug/iGIV7rBie4K20HNbKORsPJ/story.html . Accessed: June 6, 2016.

3. Performance against competitive drug(s)

• Type 2 Diabetes

• Eli Lilly and Company

• Harvard Pilgrim

• Rebate amount based upon Trulicity patients reaching A1c target (< 8%) compared with those using other GLP-1 drugs

17

$8,967 per year

Source: Stanton T. Lilly’s trulicity joins pay-for-performance trend with harvard pilgrim deal. FiercePharma: http://www.fiercepharma.com/pharma/lilly-s-trulicity-joins-pay-for-performance-trend-harvard-pilgrim-deal?utm_medium=nl&utm_source=internal&mrkid=22430845&mkt_tok=eyJpIjoiWldSbU5qTXhOREE0TlRBNSIsInQiOiJBQnJcL3dtcjFwMU5iVWk0MkpwSmE1QUErbzdjS1ZsWTZCYmVVeFMwXC92eVQ5dEFnZFwvXC9mNE5zZ0FmRW5HQkxkY1ZhcTZSNkZHdFF2SGp5amM3cWJMTTN0N

m9jaFBpZmVDNEdVT2RsMlVnaUU9In0%3D. June 28, 2016. Accessed: June 28, 2016.

4. Indication-Specific Pricing

• Lung & Pancreatic Cancer

• Genentech, Inc.

• Express Scripts

• Higher pricing in lung vs. pancreatic cancer based on survival benefits

18

$105,788 per year

Source: Edlin M. Performance-based pricing for pharmaceuticals. Managed Healthcare Executive: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/performance-based-pricing-pharmaceuticals. September 30, 2015. Accessed: June 6, 2016.

1. Finding the “Right” Drug2. Finding the “Right” Partner3. Determining (and agreeing upon) Outcome Measure4. Admin Burden of Collecting Necessary Information

Challenges of Outcomes-Based Contracts

Source: Merrill J. Outcomes-based contracts aren’t so easy, harvard pilgrim cautions. Health News Daily: https://www.pharmamedtechbi.com/Publications/Health-News-Daily/2016/6/6/OutcomesBased-Contracts-Arent-So-Easy-Harvard-Pilgrim-Cautions?result=3&total=136&searchquery=%253fq%253dharvard%252520pilgrim. June 6, 2016. Accessed: June 9, 2016.

Keys to Success – Pharma Companies

• Ability to measure outcomes in short time frame, with clear indicator (biomarker)

• Undeveloped evidence base, opportunity to gather real-world evidence

• Product with clinical advantage over lower-cost competitors

• Few comorbid conditions, limited size of target patient population

• Availability of multiyear clinical data (midlife cycle rather than newly launched products)

• IT infrastructure to track and audit data and manage patient registries

Source: Reinke T. Drug companies ask plans to just say ‘yes’ to risk. Managed Care: http://www.managedcaremag.com/archives/2016/4/drug-companies-ask-plans-just-say-yes-risk. April 2016. Accessed: June 17, 2016.

Keys to Success – Health Plans

• IT infrastructure to track outcomes and switched patients, simple audit systems

• Clear payment or reimbursement mechanism (free initial therapy preferable to later rebates if outcomes are not reached)

• Unequivocal outcome measure (for example, valid biomarker)

• Clear outcome-reporting flow from physicians

Source: Reinke T. Drug companies ask plans to just say ‘yes’ to risk. Managed Care: http://www.managedcaremag.com/archives/2016/4/drug-companies-ask-plans-just-say-yes-risk. April 2016. Accessed: June 17, 2016.

Future Possibilities – Therapeutic Areas

Source: Desai R. Health plans are interested in tying drug payments to patient outcomes. Avalere: http://avalere.com/expertise/life-sciences/insights/health-plans-are-interested-in-tying-drug-payments-to-patient-outcomes. June 16, 2016. Accessed: June 29, 2016.

Growth in Specialty Medicines

Source: “Affordability and value – the economics of pharm’s new science”, Accenture, 2016

Outcomes-Based Contracts Benefits for patients,

payers, pharma companies, and providers

Not without challenges Future is bright

• Cigna signs outcomes-based contract that may be first deal for specialty drug. Specialty Pharmacy News. 2011; 8(4). https://aishealth.com/archive/nspn0411-01. Accessed: June 17, 2016.

• Edlin M. Performance-based pricing for pharmaceuticals. Managed Healthcare Executive: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/performance-based-pricing-pharmaceuticals . September 30, 2015. Accessed: June 6, 2016.

• Loftus P, Mathews A. Health insurers push to tie drug prices to outcomes. The Wall Street Journal. May 11, 2016. http://www.wsj.com/articles/health-insurers-push-to-tie-drug-prices-to-outcomes-1462939262. Accessed: June 17, 2016.

• Mehr S. Value-based contracting for pharmaceuticals: getting ready for prime time? AJMC. 2013; 19. http://www.ajmc.com/journals/evidence-based-oncology/2013/2013-1-vol19-sp3/value-based-contracting-for-pharmaceuticals-getting-ready-for-prime-time/P-2 . Accessed: June 17, 2016.

• Stanton T. Lilly’s trulicity joins pay-for-performance trend with harvard pilgrim deal. FiercePharma: http://www.fiercepharma.com/pharma/lilly-s-trulicity-joins-pay-for-performance-trend-harvard-pilgrim-deal?utm_medium=nl&utm_source=internal&mrkid=22430845&mkt_tok=eyJpIjoiWldSbU5qTXhOREE0TlRBNSIsInQiOiJBQnJcL3dtcjFwMU5iVWk0MkpwSmE1QUErbzdjS1ZsWTZCYmVVeFMwXC92eVQ5dEFnZFwvXC9mNE5zZ0FmRW5HQkxkY1ZhcTZSNkZHdFF2SGp5amM3cWJMTTN0Nm9jaFBpZmVDNEdVT2RsMlVnaUU9In0%3D. June 28, 2016. Accessed: June 28, 2016.

• Weisman R. Harvard pilgrim strikes ‘pay-for-performance’ deal for cholesterol drug. Boston Globe. November 8, 2015. https://www.bostonglobe.com/business/2015/11/08/harvard-pilgrim-strikes-pay-for-performance-deal-for-cholesterol-drug/iGIV7rBie4K20HNbKORsPJ/story.html . Accessed: June 6, 2016.

• Risperidone. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Ticagrelor. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Prasugrel. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Sacubitril and Valsartan. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Gefitinib. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Sitagliptin and Metformin. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Sitagliptin. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Alirocumab. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Interferon Beta-1a. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Evolocumab. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Erlotinib. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.• Dulaglutide. Lexi-Comp Online™, Lexi-Drugs Online, Hudson, Ohio: Lexi-Comp, Inc.; Accessed: Jun 30, 2016.

References