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Does Value-based Contracting Even Have a Heart Beat?

A survey just released by the Pharmaceutical Strategies Group confirmed what we already know….. that the COST of specialty medications is the tipppty toppest key concern of payers. They also updated a basket of other key measures that you will want to consider.

What is surprising in the survey is the agonizingly slow pace of adoption of value-based contracting. The survey found that just 12% of payers are now employing value-based models for pricey specialty therapies. 

Value-based contracting is arguably the fairest way to compensate for uber costly drugs that ‘may’ or may not work….. so why the lack of interest?

The reasons holding back value-based contracting are actually simple. 

It requires a mutually acceptable snd very detailed metric by which value is….. or isn’t….. determined.

It requires tracking and analysis….. and lots of it. 

And it requires patience….. lots of it…..  as it may take many months – or even years – to determine if a therapy finally delivers the results set forth in the metric….. sometimes on a patient by patient basis. 

It is also surprising that SPs haven’t been proactive in value-based contracting. 

OK, it isn’t likely that the payer and manufacturer will invite a lowly intermediary to such lofty discussions. But, that’s unfortunate as the SP can shoulder much of the heavy lifting in tracking, analyzing, measuring, and reporting progress towards the required metric. 

Isn’t that what SPs have been doing for manufacturers for years now?


Survey: Why value-based contracting for specialty drugs remains rare

By Paige Minemyer, Fierce Healthcare

May 1, 2023 — Insurers gave a mixed review to copayment assistance programs, which offer coupons and other discounts to consumers to cover the cost of high-price drugs. 

Use of value-based contracting for specialty drugs is relatively rare, and payers cite multiple hurdles to rolling out these models, according to a new report.

The Pharmaceutical Strategies Group released its annual look at trends in benefits around specialty medications, where it surveyed more than 180 employers, insurers and labor unions. The survey found that just 12% are using value-based models for pricey specialty therapies.

Why is adoption so low? The surveyed payers said they need to see more evidence that the models are effective and also cited challenges in agreeing on and tracking outcomes. In addition, they said that resources and buy-in were lacking, making it harder to roll out value-based contracting for these therapies.

The survey also found that 14% of employers and 7% of health plans are deploying alternative funding models, while 14% and 33%, respectively, are exploring their use. However, 68% of those polled said they don’t view these models as sustainable.

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“As plans continue to seek ways to offset specialty drug costs, the market is divided as to whether alternative funding is a positive option or a detriment,” said Michael Lonergan, Pharmaceutical Strategies Group president, in a press release. “Affordability of specialty drugs for plans and members is driving this interest, while there is a concern about sustainability in these models.”

Insurers also gave a mixed review to copayment assistance programs, which offer coupons and other discounts to consumers to cover the cost of high-price drugs. Most (70%) said they were necessary to assist people in affording high-cost medications, however, 68% said that these programs encourage patients to take pricier brand-name drugs rather than select the lower-cost alternative medication.

Given the growing number of specialty drugs with eye-popping prices, costs in this area are a major concern for employers and payers in the long and short term, according to the survey. For instance, less than a quarter (24%) of those surveyed currently had a member taking a gene therapy drug, but 81% expect the affordability of these products to be a significant or moderate challenge in the next two to three years.

Insurers said the biggest concern in this space is ensuring parity in costs across both the medical benefit and pharmacy benefit, according to the survey, while employers said the largest hurdle is the affordability of cost-sharing for members. Due to their size, large employers are better positioned to manage these expenses, the survey said.

As these drugs grow in number, value-based contracts will prove vital, said Renee Rayburg, vice president of specialty at the Pharmaceutical Strategies Group, in the release.

“Rare disease treatments that are being targeted by cell and gene therapies will drive future spending,” Rayburg said. “[Value-based contracts] represent an effort into finding strategies for keeping costly specialty drugs accessible and affordable.”

However, as evidenced by the low uptake of value-based contracting found in the study, disrupting the existing paradigm is difficult. Just under half (49%) of those surveyed said they support eliminating rebates and instead deploying upfront discounts, down from 64% who said the same a year ago.

Most (95%) of the surveyed payers use prior authorization for these drugs, and 85% said they can track and report on their approval and denial rates, up from 66% in 2022. More than half (54%) said they have prior authorization in place for a branded drug that has a biosimilar available, and 51% said they use step therapy, which would require a patient to try a biosimilar first.

Sixty-two percent of those surveyed, however, said they were moderately or greatly concerned about the potential for unintended consequences related to prior auth, such as member dissatisfaction or care delays.


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