Challenges for Value-Based Contracting in Specialty Pharmacy


The transition to value-based reimbursement is likely to shape the future of health care.

While the specialty pharmacy industry has grown substantially over the past decade, there are a number of major challenges on the horizon. Future executive leadership in specialty pharmacy will be faced with a number of challenges that will require a unique blend of clinical expertise and business acumen to solve effectively.

Leadership will be asked to find innovative solutions to a multitude of problems, including increasing competitive intensity, margin pressures, the emergence of integrated delivery health systems as major players in specialty pharmacy, and value-based contracting, among others. Along with hiring talented and experienced staff, effective leaders will develop plans to position their firms with the competitive advantage necessary to succeed now and in the future.

Along with the challenges just mentioned, the transition from fee-for-service-based payment models to value-based reimbursement is likely to shape the future of health care, including specialty pharmacy. The transition in reimbursement structure has been underway for years, being led by CMS in their effort to control health care costs.

By 2018, alternative payment models tied to value based care will account for the majority of all Medicare reimbursement. Almost all payments will focus on condition specific reimbursement or comprehensive population-based payments.

Similar value-based contracts are now finding applicability in the specialty pharmacy industry. Increased scrutiny is being placed on ultra high cost therapies, and reimbursement is becoming dependent on pre-defined outcomes metrics. Contracts may be structured so that rewards are provided to pharmaceutical manufacturers for achieving outcomes measures while greater rebates are received for payers if outcomes goals are not met.

Examples of clinical endpoints include LDL levels, A1C levels, or relapse rates. The selection of appropriate clinical endpoints is paramount to the success of the program. Selection of appropriate endpoints may be difficult depending on the therapy patients are receiving.

In some cases, it may make sense to capture endpoints similar to what was used in the drug’s pivotal trial that led to FDA approval to prove efficacy. Unfortunately, there are many times where obtaining trial endpoints during patient therapy is not feasible.

The use of these contracts allows manufacturers to differentiate their product(s) from competitors in the marketplace. If structured correctly, the value-based agreements can be beneficial for both the payer and manufacturer. In turn for more favorable coverage and tier positioning received by a manufacturer, payers can share risk and potentially be entitled to additional drug discounts based on product efficacy.

However, there are a number of barriers in place to prevent the wide adoption of value-based contracts. First, anti-kickback statutes create uncertainty between manufacturers and payers. Manufacturers are unsure and reluctant to incentivize payers to encourage adherence.

Second, there is currently a lack of technology that allows manufacturers and payers to communicate effectively during the prior authorization and maintenance process for specialty medications. In order to demonstrate outcomes, manufacturers and health plans need access to large quantities of data.

Moreover, the data elements required would need to be specific to each type of drug therapy. Significant amounts of capital and labor would be required to develop and administer the program on an ongoing basis. Furthermore, health plans would have to share data about their members with manufacturers.

Frequently, there are firewalls in place to prevent a health plan from acquiring patient specific information, and even if they do, the current climate doesn’t foster sharing that information with outside organizations. Even if organizations wanted to, there are a number of HIPAA laws in place that may prevent or complicate the sharing of information.

Value-based contracting offers advantages and challenges for manufacturers and payers. As a key constituent that has more touch points with patients than any other health care provider, specialty pharmacies have an opportunity to provide patient education, impact adherence, drive persistency, and collect data that can be used to demonstrate outcomes related to treatment with specialty drug therapies.

In the future, specialty pharmacies should focus on providing these services and information to their partners to demonstrate value. Investing in the development of unique clinical programs, IT infrastructure, and optimizing pharmacy operations processes to capture data during patient onboarding and maintenance will be critical to success.


Darling, Paul. Transitioning Pharma to Value-Based Payments Will Require More Than Corporate Collaboration. 1, 2016. Accessed 12/1/2016.

About the Author

Justin Smerker earned his PharmD degree in 2009 and his Masters of Science in Pharmacy Business Administration (MSPBA) degree, an executive-style graduate education program designed for working professionals striving to be tomorrow’s leaders in the business of medicines, in 2016 from the University of Pittsburgh.

He is currently a National Account Manager for PANTHERx Specialty Pharmacy. In this role, Justin conducts RFP submissions, assesses channel strategy, participates in contract negotiations, evaluates the FDA pipeline, and prepares financial models for high cost specialty therapies. His experiences include leadership roles in account management for neurology and rare/orphan disease therapies. He is experienced in the implementation and delivery of high-touch patient care services as well as in clinical management, persistency, and adherence programs. Justin has also participated in the successful launch of newly FDA approved medications. Additionally, he has served as an adjunct clinical instructor for experiential education at Duquesne University. Prior to working in the specialty pharmacy sector, Justin successfully managed high volume retail pharmacies. To connect go to

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