Much has been talked and written lately about Value-Based HealthCare. The goal of this strategy is to focus on improving outcomes in healthcare. In many of the cases, providers assume risks for member specific outcomes or are monetarily incentivized for positive outcomes and/or a combination of both.

When we talk about Pharmaceutical Value-Based Contracting, we mean that aspects of the therapeutic effect of the drugs are measured against a given goal. These measurements are based on how the drug performed in clinical control trials. This means that drugs that were approved by the FDA because they worked for a particular condition, for example lowering cholesterol, have to prove that they lower cholesterol levels in the real world; otherwise, they could face monetary penalties if fail. Sounds like a safe bet for pharmaceutical companies although the real world sometimes offers certain challenges that are controlled in the clinical trials.

This type of contracting represents a deviation from the traditional rebate contracting where drugs with similar therapeutic and safety profiles compete for better positions in formularies. In other words, in Pharmaceutical Value-Based Contracting, the drugs compete against themselves instead of competing against other drugs. In this scenario, you run the risk of giving preference to the coverage of drugs that do not necessarily represent the most pharmacoeconomically suitable alternative. We advise the industry to be very attentive to the language used in Pharmaceutical Value Based Contracting to ensure high value pharmacy benefits at the lowest possible cost.

We recommend three alternatives for Pharmaceutical Value-Based Contracting:

• have competing drugs in the same category or drugs approved for the same indications and specifically lower cost alternatives, to actually serve as control group so outcomes or surrogate measures and net costs can be compared head to head to those of the drugs with a Value Based Contract. Then, based on results after the first year, you can decide if Pharmaceutical Value Based Contracting makes sense in the specific category evaluated. This guarantees we continue offering high value pharmacy benefits at the lowest possible cost
• have Value Based Contracts on top of regular rebate contracts as a way of enhanced rebates if positive outcomes are not achieved
• a combination of the above strategies

Although we believe Value Based Contracting in healthcare must be the norm when referring to providers (Hospitals, Physicians, etc…), there still a lot to understand in the case of Pharmaceutical Value Based Contracting.