Pharma needs to consider a new reimbursement model that aligns with the value-based care payment models that other healthcare stakeholders are embracing. This short presentation provides a framework for discussion highlighting what's at stake for pharma and how pharma can move towards a true value-based reimbursement model.

1. the road to value-based
purchasing in pharma
framework and case studies
wayne pan, md phd mba
wtp94015@gmail.com
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2. ME WE US
all about it’s aboutcan
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3. no risk partial risk full risk
framework
traditional reimbursement
for drugs based on units
of utilization (fee-for-service)
formulary placement,
prior authorization, step
edits, co-pays
contracting, rebates,
provider detailing,
DTC advertising,
co-pay assistance
revenue
model
payor
management
pharma
commercial
strategies
reimbursement for drugs
based on performance to
label or other clinical
outcome (advanced fee-
for-service)
identification of patient
population, enrollment
into “program,” collecting
clinical data to support
rebate program
targeting population,
clinical data analysis,
contracting, rebates,
provider detailing
annualized total spend
on a specific therapeutic
area, paid on a captitated
basis (value-based
purchasing)
identification of patient
population, enrollment
into “program,”
partnering to improve
patient outcomes
population health
approach, clinical data
analysis, clinical
programs to manage
population at risk

4. framework
metrics
stakeholder
behavior
pharma
clinical
strategies
market
share
population diseased diseased at risk & diseased
no risk partial risk full risk

5. framework
pros
cons
no risk partial risk full risk
most experience with this
reimbursement model;
status quo; no need to
make any changes
other pharma companies
already doing this so it’s
a less controversial step;
we are gaining experience
with this model through
our efforts in innovative
contracting
expands our reach to the
entire population, not just
the diseased population;
enables us to become true
partners with providers and
patients; aligns incentives
with the rest of the
healthcare ecosystem;
reduces knowledge
barriers between bench
and bedside; solves
biosimilar “problem”
biosimilars will put
pressure on pricing;
entering into more
crowded markets will put
pressure on pricing;
customers are moving to
value-based purchasing
and we would still be
perceived as only a
vendor and not a partner
may not distinguish
innovator from biosimilar
manufacturers, so pricing
pressure will still be there;
reducing pharma revenue to
only those patients for which
the drug demonstrates
effectiveness may inhibit
pharma from moving to
full risk as it will reduce
overall budget in the
therapeutic area
still needs regulatory
waivers to operate; we do
not have infrastructure to
manage entire population;
unsure whether providers
and patients will trust
pharma as a partner

6. case study: advanced fee-for-service
PFP contracts signed by Harvard Pilgrim, which is the leading insurer,
and one of the very few, to pursue PFP contracts.
In November 2015, Amgen agreed to provide Harvard Pilgrim with
two PFP rebates if its evolocumab (Repatha), one of the two new
proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitors, failed
to meet two separate thresholds.
In June 2016, Harvard Pilgrim signed two more PFP deals. In one it
obtained a discount from Novartis if its new sacubitril/valsartan
(Entresto) treatment for congestive heart failure does not yield a
specified drop in hospitalizations.
In the other, Harvard Pilgrim agreed to accept a lower rebate from Eli
Lilly if its dulaglutide (Trulicity) diabetes drug lowers hemoglobin A1c
(HbA1c) levels—a common way to track the disease—better than rival
medicines.
from: “Rewarding Results: moving forward on value-based contracting for biopharmaceuticals,”
Network for Excellence in Health Innovation (NEHI), March, 2017

7. case study: advanced fee-for-service

8. case study: advanced fee-for-service

9. case study: advanced fee-for-service
outcomes-based contract
for Avastin® (bevacizumab)
in patients with non–
small-cell lung cancer
(NSCLC)
The operational requirements of outcomes-based contracts can be daunting. The payer is responsible for
tracking an individual patient’s health status and for collecting and reporting patient-level longitudinal data. However,
most payer systems cannot evaluate specific clinical and outcomes data. For example, a payer claims system may
indicate when a patient discontinues a medication, but not why --- a major stumbling block if PFS is the agreed-
upon endpoint in the contract. Determining whether the discontinuation was due to clinical progression, toxicity,
patient or provider preference, or some other reason often requires gaining access to the electronic health record
(EHR), which many payers don’t have. Granting such access to payers can create privacy concerns. Even with
access to EHR data, payers may face challenges, such as missing data fields or pertinent data documented in
nonreadable text fields. If a provider’s EHR system does not capture the desired endpoint, line of therapy, indication
for which a drug is prescribed, or medication dose, it may be difficult for the payer to gain maximum benefit from the
contract --- either because of missing data or because of the overhead incurred in extracting data from text fields or
chart reviews. As these challenges suggest, it is important to balance specificity with simplicity. If complexity makes
operationalizing the contract impractical or cumbersome, either the manufacturer or the payer may be unwilling to
enter into an agreement.
Outcomes-based agreements are a natural extension of a health care delivery-and-reimbursement environment that
is moving toward value. With provider organizations taking increasing accountability for both costs and outcomes,
it is becoming incumbent upon manufacturers to demonstrate the economic, clinical, and quality-of-life
benefits of their medicines. The pilot described here was successful in that Genentech and Priority Health both
learned how to overcome clinical, operational, and contractual challenges and demonstrated that this type of
agreement is feasible.
Overcoming Challenges of Outcomes-Based
Contracting for Pharmaceuticals: Early Lessons
From the Genentech-Priority Health Pilot
John Fox, Marc Watrous
Although not a panacea, outcomes-based contracts may be a useful tool in aligning cost and value, driving
health care efficiency, and ensuring that appropriate patients benefit from innovative medicines.

10. ?
case study: value-based purchasing

11. profit = x% x ( ) + y% x (total cost of care)
steps to value-based purchasing pilot
3) develop clinical strategy to manage population (in partnership with providers
and patients) to keep costs within budget and hit quality metric target(s)
Based on company knowledge of a particular disease area, how providers are managing that disease, how
patients are diagnosed and treated, what are the gaps in quality/care, our relationship with partners who can
help manage this population, ability to influence provider/patient behavior, understanding drivers of total costs of care
4) structure contract based on confidence in our ability to manage the population
(shared savings model - upside only, up- & downside, risk for just therapeutic
drugs, drug risk+ some risk for total cost of care (TCC)), auto-renews if targets met
average monthly therapeutic area expenses during
prior two years + small adjustment for aging population
total therapeutic
budget paid as PMPM
𝝙 between budget
and actual spend
profit = 0
quality
gate
quality metric
targets NOT MET
quality metric
targets MET
if “x” = 100 - full confidence
if “x” < 100 - partial risk
if profit ≥ 0 - upside only
if “y” ≥ 0 - includes TCC
scenarios:
2) calculate total therapeutic budget and specify quality metrics to
measure management effectiveness across the entire at-risk population
1) select a pilot disease state