FrontierView’s Director of Healthcare, Stephen Majors, recently presented at the IDN Summit in Phoenix, Arizona and the Pharma CI Conference in Newark, NJ on the future trajectory of value-based healthcare in the United States. Here he outlines key takeaways from his presentation with trends and obstacles healthcare providers are seeing in value-based contracting.

To access the full presentation slides from the Pharma CI conference as well as an audio recording of Stephen’s presentation from the IDN Summit, please fill out the form below.

‘Value-based care’ has become a prominent focus in the US healthcare system – and indeed across many countries. Value-based care now accounts for about 50% of all healthcare payments in the US, but value-based contracting that involves pharmaceuticals and medical technology is just a fraction of that. As pharma and medtech continue to endure public scrutiny for rising costs, they will need to become more proactive about engaging in value-based contracting.

It’s crucial to define what value-based contracting is, given the lack of consensus around what the term means. Broadly speaking, it is a payments and incentives system that is not the traditional fee-for-service arrangement. It can be price/volume-focused contracting, such as the ‘Netflix’ model of providing unlimited amounts of a therapy or device for a fixed cost. Price/volume-focused contracting is one step removed from fee-for-service, or ‘first-generation’ value-based payments. Examples of this type of contracting include Louisiana’s ‘Netflix’ model for HCV treatments for its Medicaid population. Another type of value-based contracting is outcomes-focused: dependent on how patients respond to a treatment according to agreed-upon metrics such as adherence, the prevention of hospitalization, or in comparison to clinical trial results. Outcomes-focused contracting is ‘second-generation’ value-based contracting. Examples of this type of contracting include the Oklahoma Medicaid program’s outcomes-focused agreement for an anti-psychotic drug and Bluebird Bio’s proposal to use ‘performance-based annuities’ for its gene therapies.

However, it’s important to note that neither of these types of value-based contracting addresses the pricing of a drug or device at the front end, as is the case in most countries in Europe and in Japan (and most international markets) – which are reference targets for both President Donald Trump’s and House Speaker Nancy Pelosi’s proposals for international reference pricing in Medicare.

A true value-based system – in which new treatments are evaluated and priced according to their ‘value’ to the healthcare system as a whole and/or in comparison to existing treatments – will be dependent on enhanced data capabilities and sharing of that data across the healthcare value chain.

Stephen Majors, Director of Healthcare

There are several obstacles that prevent more widespread realization of first- and second-generation value-based contracting in the US: data, anti-kickback regulations, Medicaid best-price regulations, fragmentation in the health system, and business models. Data and new business models are perhaps the largest obstacles for pharma and medtech –  true value-based care will require more capabilities around data generation, analysis, and sharing, and a willingness to test new business models that provide value ‘beyond the pill.’ Digital solutions are one area where data and new business models combine. Examples include wearables that transmit patient data, machine learning to help with treatment decisions, telehealth solutions to connect physicians with patients, and drones to deliver medications.

FrontierView’s Healthcare team is at the forefront of key trends impacting the industry. Our goal is to work with clients to deliver tailored growth solutions to support your critical business decisions and growth strategies. Check out our latest insights on Impeachment, Trade, & Pharma: Politics to Ensure ‘Status Quo’ Ahead of 2020,  Medicare for All? It’s the Wrong Question, and What Healthcare Companies Need to Know About Digital Solutions.

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Fill out the form below to access the full presentation slides from Pharma CI as well as an audio recording of Stephen’s presentation from the IDN Summit.