How Will Value-Based Contracting Influence the Future of Specialty Pharmacy?

Pharma manufacturers in the future will reimburse payers on payments for ineffective therapies based on outcomes.

The emphasis placed upon moving away from fee-for-service agreements to value-based contracting is undeniable. CMS has charged ahead and is looking to tie quality into 90% of its fee for service payments by 2018.

In addition to simply tying payments to quality, there is a push towards alternative payment models. These alternative payment models will have a positive impact on the health care industry, as providers and payers move to enhance patient experience and customer satisfaction.

In the past, fee-for-service was the traditional model of payment, a quid pro quo exchange of care for payment. This model, unfortunately, incentivized overuse of services, resulted in costly duplications of care, and undermined the need for preventative care.

Under this model of payment, hospitals and providers benefited from having unhealthier patients and larger patient populations. This method ultimately proved unsustainable and resulted in unmanageable health care spending that the United States has been unable to reign in.

More recently, the model of payment utilized by the health care industry has been “fee-for-service with quality.”

This method improved upon the old system by emphasizing quality and positive patient outcomes.1 For example, while prior payment methods could incentivize poor care (a broken leg that must be tended to repeatedly, due to poor care, will result in more hospital invoices), this new method began to place value on higher quality.

Under “fee-or-service with quality,” poor health care outcomes are penalized with payment revocations for service providers who fail to meet standards.2 Often, this is measured by metrics such as re-hospitalization, infection control, and inpatient duration of stay.

This system has helped to improve the quality of care provided, but has a limited individual patient scope. This narrow scope, which focuses only upon singular patients, fails to consider large population health trends. Therefore, a new model of payment must be introduced in order to reverse the increase in health care spending while minimizing the negatives outcomes in patient care.

Currently, the United States spends more dollars on health care than any other country, despite being one of the least healthy countries among developed nations. To reverse this trend, the payment models that exists must be redesigned to emphasize value defined by healthier patients and lower fees.

The alternative payment model that shares reward and risk must become more commonplace as drug therapies get more expensive and more specialized. In the past, we have seen this with per-member, per-month maximums negotiated between manufacturers and insurers.

As this new payment model becomes standard, specialty pharmacy will be impacted in significant ways. In the future, if outcomes are not realized by adherent patients, pharma manufacturers will reimburse payers on payments for ineffective therapies.

Further, specialty pharmacy will be subsequently tasked with creating new ways to prove adherence on a daily, rather than monthly basis, in order to strengthen their data collection and analysis. It is also likely that specialty pharmacy will find a unique intersection between insurers and manufacturers.

Those who can efficiently dispense and monitor drug therapy, while reporting outcomes accurately, will stand to gain as these payment models become commonplace. In the future, this new payment model will impact specialty pharmacy by affecting the ways in which pharmacies are graded or judged, based upon patient outcomes.

As an example, a pharmacy may be graded well for having 80% or higher patient adherence scores, which could result in better reimbursement agreements and higher customer ratings. Conversely, a pharmacy that is shown to have less than “acceptable” patient adherence could be penalized via lower reimbursement rates. Further, lower patient adherence records could limit the ability of specialty pharmacies to dispense new drug therapies and therefore limit the patient reach that a pharmacy could manage.

To prepare for this change in payment models, specialty pharmacies can take a multi-pronged approach to ensure that they will be able to manage new expectations among payers and patients. First, specialty pharmacies should make efforts to expand their technology infrastructure and software to better amass, track, and analyze data.

By prioritizing the collection and review of data, pharmacies can stay abreast of real-time patient adherence metrics, and therefore be more proactive when adjusting their approach to encouraging patient adherence. With a strong data collection and analysis program, pharmacies will stay ahead of the curve and be better equipped to address any faults, failings, and issues with their patients.

Further, specialty pharmacies should develop their systems for patient outreach and education. By improving methods of education among the population regarding drug adherence and creating better systems for connecting with the patient population, specialty pharmacy can get to the root of patient adherence and drive the results from the very first step of the prescription drug process.

Finally, specialty pharmacies should be proactive in working with payers to gradually adjust to this new payment model. By anticipating this change and working with the new trend, specialty pharmacy can proactively make changes to standard procedures and current systems of payments in order to be better prepared when new models take effect.

If specialty pharmacies can collaborate better with payers and adapt to new methods now, they will be more successful in managing the changes when they inevitably take effect in the future.

About the Author

John Meehan earned his PharmD degree from Duquesne University in 2010. He worked in retail pharmacy in rural North Carolina before transitioning to a clinical pharmacist position at Chartwell PA in Pittsburgh, PA. John completed his Masters of Science in Pharmacy Business Administration degree in 2016 at the University of Pittsburgh.

Works Cited

1. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/index.html?redirect=/QualityMeasures/

2. http://kff.org/medicare/report/payment-and-delivery-system-reform-in-medicare/