New Video Explores Pay-for-Value Rx Pricing

August 15, 2017

Innovation comes at a price, one that health insurers may hesitate to pay.  While some patients reap a benefit from breakthrough drugs, others do not.  So how can insurers reduce their financial risk and give patients access to the innovative prescription drugs their doctor prescribes?  A new video from the Alliance for Patient Access explores one intriguing option: value-based contracting.

“Understanding Value-Based Contracting,” explores the idea of linking a drug’s cost to its impact in one of two ways:

  1. Outcomes-based pricing, in which a drug’s cost is directly related to how well a patient responds to it.
  2. Indication-based pricing, in which a drug’s cost is based on how effective clinical data shows it to be for the condition it’s used to treat.

“These methods can make it less risky for your health plan to cover innovative treatments,” the video explains.  They also have the potential to lower patients’ out-of-pocket costs.

Many health plans have signaled their interest in value-based contracting.  So why is this approach not more widely used?

First, defining and measuring value metrics can be tricky.  Treatment goals and concepts of value may vary widely among individual patients, physicians and health plans.  Second, existing laws on drug pricing and pharmaceutical companies’ communication with physicians may deter companies from entering into such agreements, the video notes.

As prescription drugs become more advanced and more expensive, value-based contracting presents a novel way to improve access while also controlling costs.  “Understanding Value-Based Contracting” urges policymakers to address legal barriers and work toward consensus on how to gauge and meet patients’ definitions of value – allowing more patients to access innovative medicine.

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