Payer Interest in Outcomes-Based Contracts Grows

A recent study found that many health insurers have taken interest in outcomes-based contracts with pharmaceutical companies, especially for oncology and hepatitis C virus (HCV) drugs.

According to a survey conducted by Avalere Health in 2015, 65% of insurers had high or very high interest in these outcomes-based contracts for HCV drugs, and 53% had high or very high interest in these contracts for oncology drugs.

Specialty drugs tend to be more popular targets for outcomes-based contracts since they account for the majority of prescription drug spending and comprise a majority of the drug pipeline. However, a more recent study by Avalere found that insurers are starting to become more interested in these contracts for other non-specialty drugs as well.

Non-specialty drugs, such as PCSK9 inhibitors, show potential for outcomes-based contracts since a broader population may need access to these drugs, resulting in higher costs for insurers. Payers believe contracts for broadly used non-specialty drugs could decrease spending, according to Avalere.

“The growth of outcomes-based contracts between plans and manufacturers is a clear response to the health system’s call for cost-containment without restricting patients’ access to new, breakthrough therapies,” said Dan Mendelson, president at Avalere. “Plans, manufacturers and providers are all looking for ways to reduce cost without comprising patient outcomes and access—these types of contracts are one possible solution.”

The study noted that not only do insurers benefit from these contracts, but so do manufacturers and providers. These contracts can increase cooperation between various important stakeholders, resulting in better predictability for coverage and reimbursement.

Outcomes-based contracts also have the potential to create a better understanding for which patients will benefit the most from which drugs. Hurdles are still faced between both companies about how the medication’s success will be analyzed, but new platforms and solutions are being created to fix this problem, according to the study.

“Despite the difficulties that plans and drug manufacturers may face when entering into a risk-based contracts, there are opportunities for all stakeholders involved to benefit in the end,” concluded Kathy Hughes, vice president at Avalere. “Coming to agreement on all of aspects of a contract—design, management, payment, implementation, and data collection—is a difficult but necessary process that requires the full commitment of both parties.”