Value Depends on Real-World Evidence

AJPB® Translating Evidence-Based Research Into Value-Based Decisions®July/August 2017
Volume 9
Issue 4

Healthcare stakeholders must work with regulators and policy makers to reduce barriers that prevent the alignment of a drug’s value and price.

News about potential breakthrough treatments that cure diseases or dramatically improve patient health compete with news that highlights how drug pricing and insurance access rules make it harder for patients to obtain new therapies.

These competing headlines set up one of the most important challenges for biopharmaceutical manufacturers, payers, and policy makers: how to create a healthcare system of economic incentives that encourage innovation and improve broad-based affordability and access.

It is important to remember that the past 5 decades have seen tremendous progress in patient health. Death rates attributed to cancer, diabetes, heart attack, and stroke have declined dramatically, including by more than 75% for deaths from stroke.1

We have seen curative drugs for hepatitis C, important progress in the fight against cancer, and new treatments that give patients with multiple sclerosis greater ability to function and remain at work.

But we have yet to truly sort out just how much these advancements are worth. What if we had a drug that slowed the progression of Alzheimer’s disease? The one-time costs would be large, but the benefit to patients, their caregivers, and society overall would be profound.

For payers and biopharmaceutical companies, talking about value is not always straightforward—there are some parameters about what they can discuss, along with other regulatory concerns. These conversations often require real-world evidence, which are data and studies that show how (and whether) a particular drug performs in typical patients and usual care settings. This data frequently provides complementary information beyond the traditional randomized clinical trials used for product approval.

Payers and biopharmaceutical companies are using real-world evidence in their development of value-, or outcomes-based, contracts, which are growing in use. Through these contracts, payers and biopharmaceutical companies tie the cost of the medication to parameters based on how well the treatment performs in a given population or how the treatment impacts the total costs of care.

Insurance plans are increasingly looking favorably on these types of arrangements, according to a recent survey. One-quarter of the plans surveyed had value-based contracts in place, another 30% were negotiating at least 1, and 70% of the plans viewed them favorably.2

Payers also are testing indication-based pricing, under which the cost of the medication differs when it is used to treat different conditions. For example, a treatment that improves survival for patients with breast cancer might have a lower cost when the treatment is used to treat lung cancer, where it might not be as effective.

Standing in the way of more progress on the value-and-price front and testing these types of innovative contracts are regulatory hurdles that restrict communications between payers and manufacturers, as well as other barriers that currently create disincentives to paying for value.

Manufacturers and payers must be able to communicate about a drug’s potential benefits and risks. Those communications might need to be broader than the specifics included on a drug’s label. For example, understanding the projected budget impact of a treatment or whether medication use is associated with fewer emergency room visits or hospital readmissions is typically part of product approval. Yet, these conversations are especially needed to enable a drug maker and a payer to set benchmarks for the terms included in an outcomes-based contract.

The rationale for those restrictions make sense, as regulators want to ensure that discussions about a drug’s benefits and risks are consistent with what the FDA approved.

But in today’s world, with new discussions about linking reimbursement to a drug’s benefits and the real-world evidence to inform those conversations, more detailed communications are needed to shape care delivery, improve system efficiencies, and achieve better health outcomes.

In a survey the National Pharmaceutical Council (NPC) conducted with Xcenda, payers and providers told us that communications that are not specifically on the FDA-approved label, but are consistent with its content, would yield benefits that were more important than the risks. In fact, the types of information payers consider when making treatment decisions (eg, ability of a product to help achieve health quality measures; information comparing treatments in everyday use) often extend beyond what is included on the product’s label.3

The bipartisan 21st Century Cures Act broadened the rules that govern these manufacturer—payer communications, allowing for clinical assumptions in addition to health economic analyses to be communicated if the audience is payer-related or making coverage decisions for populations of patients rather than individuals. Draft guidance subsequently released by the FDA in January provides greater clarity but has yet to finalized.

This kind of communication is especially critical when it comes to the new specialty treatments or product indications that garner headlines. Given the cost of those treatments, a payer—manufacturer exchange of information is needed, not after the drug is approved, but at least 12 to 18 months before.

Such advance communication would help health plans that submit rate proposals for regulatory approval each spring for the subsequent year. If an insurance plan incorrectly forecasts the costs or use of a new drug because a treatment is approved for a new condition during the following year, the financial impact could be significant. If product use is underestimated, the health plan could lose money. However, it is even more problematic if costs are overestimated and result in higher health premiums for consumers.

It’s not difficult to see the potential benefits for both payers and manufacturers. A preapproval exchange of information prior to the recent introduction of hepatitis C cures may have better prepared payers for the coming demand for treatment. With that information in hand, appropriate budgeting could have occurred in a more timely way.

Payers aren’t just waiting for real-world evidence to be shared with them, however. They are already utilizing their own databases to develop real-world evidence to improve care and make health systems more efficient. Their usage sophistication varies, ranging from predictive analytics to determine which treatments work best to basic utilization management and medication adherence programs.4 But conducting these analyses requires the high-quality data and good research methods that will ensure the integrity of the results. It can be challenging for payers and other healthcare decision makers to sift through these outside studies and determine which ones are most applicable to the decision at hand.

That’s why the NPC, along with the Academy of Managed Care Pharmacy and the International Society for Pharmacoeconomics and Outcomes Research, formed the CER Collaborative to help insurance plans and others assess the relevance and credibility of studies. To date, the collaborative’s online tools and training program have been used by thousands of people interested in assessing the quality, credibility, and relevance of real-world evidence and related studies.

The value of the new information is lost if it cannot get into the hands of the end user—the health plan setting up the guidelines for coverage and reimbursement for patients. If we can work with regulators and policy makers to reduce the barriers to the alignment of a drug’s value and price, and use good methods to understand what works in the real world, the public’s interest in health and safety will be well served. The promise of a more affordable and healthier future depends on it.


1. Ma J, Ward EM, Siegel RL, Jemal A. Temporal trends in mortality in the United States, 1969-2013. JAMA. 2015;314(16):1731-9. doi: 10.1001/jama.2015.12319.

2. Choe SH, Learch C. Health plans are actively exploring outcomes-based contracts. Avalere Health website. Published May 30, 2017. Accessed June 27, 2017.

3. National Pharmaceutical Council. Comment from National Pharmaceutical Council on the Food and Drug Administration (FDA) proposed rule: manufacturer communications regarding unapproved uses of approved or cleared medical products; availability of memorandum; reopening of the comment period. website. Published April 20, 2017. Accessed June 27, 2017.

4. Avalere Health and National Pharmaceutical Council. Health plan use of patient data: from the routine to the transformational. National Pharmaceutical Council website. Published April 25, 2017. Accessed June 27, 2017.

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