Value-Based Contracting in Oncology

Pharmacy Practice in Focus: OncologyJuly 2020
Volume 2
Issue 3

Meaningful breakthrough therapies are receiving accelerated approval based on evidence of impact on a surrogate end point rather than evidence of impact on the actual clinical benefit for which the drug is intended.

A record-setting number of approvals are coming out of the FDA, the most significant of which are relevant to oncology-based pharmacy practice. Meaningful breakthrough therapies are receiving accelerated approval based on evidence of impact on a surrogate end point rather than evidence of impact on the actual clinical benefit for which the drug is intended, often occurring 4 months or less after FDA acceptance of their new drug application or biologics license application. The good news is that we have new therapies to make patients’ lives better and to give the oncology pharmacy new platforms from which to provide care.

However, these new products often come with a high price tag, and these costs have several justifications. In oncology, as in other specialty areas, these products treat complex diseases in smaller patient populations, which equates to higher drug costs; typically, this is due to greater development expenses, more treatment complexity, and significant manufacturing costs, spread over relatively few unit sales.

Let’s look, for instance, at the newer chimeric antigen receptor (CAR) T-cell therapies, which come with multiple 6-figure price tags. Producing CAR T-cell therapies requires the extraction of a patient’s white blood cells. This extraction requires that several specialized sources be deployed, often taking 3 weeks or more. Combined with other dynamics, stakeholders have become more willing to be creative in approaching how patients can access these drugs to treat their cancer. This has forced the industry to consider alternative methods of reimbursement and payment to provide “affordable access” to these potentially lifesaving therapies.

Value-Based Contracting Defined

Value is generally defined as the result of quality divided by cost, or the health outcomes achieved per dollar spent. Value-based contracting (VBC) involves payment or reimbursement based on indicators of value, such as patient health outcomes, efficiency, and quality. This is distinct from volume- or fee-for-service—based contracting, which involves payment for every unit of service delivered, often without terms related to outcomes, quality, or cost performance.

VBC is not new. In the United Kingdom, a handful of manufacturers deployed this strategy with the National Health Service in the form of a larger rebate being paid when, in the case of 1 particular product, it did not change patients’ blood counts as intended.

We can learn from this experience.

Setting Up VBC

Although VBC has many merits, note that not all drugs or circumstances are alike, and that includes oncology products. Setting up VBC can be very labor-intensive, and typically the relevant patient populations are often small. The process of collecting data across differing sets of medical and pharmacy benefits can be challenging, often resulting in higher administration costs to appropriately execute VBC. This can be the case, for example, for oncology products that have obvious treatment benefits and when oncology treatments are known to be highly effective when used correctly. Also, VBC may have less value for those oncology therapies with relatively low costs, such as generic drugs and some biosimilars. Consider, too, those products for which biomarker tests are administered and oncology teams can more precisely and effectively treat patients; this reduces the uncertainty over the effectiveness of the cancer treatment, with a corresponding decrease in benefit of VBC for all stakeholders.

The generally accepted criteria for an oncology product that is considered more attractive for VBC are an association with less certain patient outcomes, very high cost, and validation that the clinical results that were shown in the studies leading to its approval are replicated once it is introduced commercially to the market.

As mentioned, VBC requires considerable resources, including the effort, time, and expense of assuring that all information is correct, the integration of multiple stakeholders is in place, and the analysis is a true reflection of the patient’s outcome as a direct result of the therapy. If these requirements are not met, falling back on more traditional methods of partnerships, such as discounts and rebates, is reasonable.

In oncology pharmacy, many VBC agreements have provisions to assure that patients are adherent to their medication; these include extensive aggregation and analysis of claims data, pharmacy data, and other data associated with the patient’s health record.

The health care environment has a long way to go before all these systems, beyond pharmacy claims data, can be standardized and electronically integrated to the point of being analyzed. We need to have greater collaboration among payers, providers, institutions, pharmacy, and pharma manufacturers.

Also, notably, for VBCs that are based on indications, it is critical to determine for which indication, and in which setting, an oncology product will be used for the VBC to be reliable and acceptable to all stakeholders.

How do we pull all of this together? What are the relevant steps?

Include all relevant stakeholders. The 5 core stakeholders are the patient with cancer, pharmacy, provider, manufacturer, and payer. These 5 entities must come together so that the tactics deployed by each are synergistic.

The patient with cancer is at the center of the process. Assuring treatment access mandates that the pharmacy and the payer align around payer policy and that any prior authorization requirements are met.

Although the payer is the principal decision maker in the formulation of the contract, the oncology pharmacy must work toward enforcing those polices as a function of their network participation agreement.

The oncologist must do their part in appropriately diagnosing disease and prescribing the products offered under VBC and, in the case of many of VBC agreements, monitor the patient to provide key metrics that (in a perfect system) the pharmacy and payer can simultaneously access. Ultimately, the oncology pharmacist and team are managing patient behavior, ensuring that the patient is educated on how to be take and stick with their therapy. Manufacturers often use hubs to coordinate care with patients and providers. The art of bringing this all together involves closing all potential gaps, and that is where technology plays such a key role in delivering the best possible patient outcomes.

Measures. Each oncology product presents with potential measures based on multiple factors, which may include quality, cure, outcomes, adherence, cost, and so many more. Objective measures are best when designing a VBC initiative. Oncology pharmacy can be the focal point of data convergence. In the case of oncology products, interpretation of and action taken in the management of pharmaceutical care with multiple payers and pharmacologic expertise help reduce abandonment and improve adherence.

Technology. Pharmacy has always led in the area of real-time reporting, initially focused on reimbursement and payer support; those same systems provide patient education, monitoring, and medication management.

Oncology pharmacy. Oncology pharmacy is at the core of managing VBC agreements. Patient care and integrated pharmacy systems are evolving, and the many assets of oncology pharmacy can be leveraged by linking them all. Oncology pharmacists, nurses, reimbursement specialists, and other experts comprise the heart of the oncology pharmacy team.

Although much of the support for VBC involves the concept of risk shared between the manufacturer and the payer, the brunt of that risk initially falls on the health insurance company. Before seeing the results of the predefined measurable outcome, the payer is responsible for covering the high costs of those prescribed innovative therapies. Defining and reaching agreements about those measurable outcomes can be a complex process for stakeholders.

On the professional front, we as pharmacists have worked hard to shift from a product focus to a patient focus. VBC for cancer care has moved beyond the experimentation phase and into the realm of accepted and preferred health care payment practices. To get ahead of this change, oncology pharmacists and practices should consider adapting to payment systems that reimburse them for the value of care they provide to patients with cancer, not for the volume of services.

Are Value-Based Contracts the Future?

VBC is still a new enterprise, and we have much to learn. The collaborative effort inherent in VBC agreements is nonetheless promising, and it demonstrates the willingness of health care stakeholders to engage in innovative approaches. VBC can be among the best approaches to managing the risk of specialty product drug costs. Stakeholders must figure this out so that innovative and lifesaving therapies become affordable; the risk of not doing so will lead us back to a focus on price versus outcomes. VBC can be the best path forward to assure that our society continues to expand access to lifesaving oncology therapies.

Dan Steiber, RPh, operates Genesis Pharma Consultants, a consulting practice responsible for commercial operations and trade-supply chain strategy development. Steiber has served in several senior positions in pharmacy, distribution, and industry over the course of his 40- year career. Steiber is a licensed pharmacist in Texas, Washington, California, and Pennsylvania. He is affiliated with several professional associations and publications and a frequent speaker on behalf of many professional organizations. Steiber graduated from Washington State University College of Pharmacy. He has participated in a variety of postgraduate programs in law and business development/marketing at Harvard University and Northwestern University.

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