In 2020, more than 50% of plans implemented value-based contracts, but less than 60% of all contracts initiated end up being negotiated and implemented, according to presenters at AMCP Nexus 2022.

Speakers of the session highlighted the complexities of value-based contracts including the involvement of stakeholders, compliance/regulatory policy, product characteristics, lines of business, and contractual challenges. They also provided insight on multiple stakeholders being included in value-based contracting as well as where these contracts are going in the future.

“We need far greater third-party engagements and contracts where it includes the manufacturer, the [integrated delivery network] or health system, and providers as well as the payer whether it’s the health plan or the pharmacy benefit manager” said Jennifer Graff, PharmD, senior director of Professional Affairs at AMCP.

Stalls in discussion and negotiation are associated with disconnects in value-based contracting, noted speakers, adding that “Stakeholders need a unified language to discuss and design value-based contracts.”

In terms of value-based purchasing, presenters discussed value-based contracts, which are outcomes, risk, and annuity-based (outcomes) and alternative payment contracts, which are subscription, warranty, and annuity-based.

Advantages, challenges, and applicability to payer types vary as there is no one model that meets all purposes. While the adoption of other models is expected to grow, risk and outcomes-based models are the most common.

“One of the things that we are definitely feeling and seeing are some marketplace dynamics that are creating some positive momentum and acceleration of innovative contracting,” said Robert O’Brien, RPh, vice president of specialty pharmacy at Real Endpoints.

Presenters provided insight on the transition to innovative contracting noting the following:

• In the next 2 years, more than 30 gene therapies are expected to be approved.
• To lessen impact on Medicaid Best Price, there will be new CMS regulations.
• Failure to reach peak sales occurs in half of all drugs launched >$250 million.

According to Business Group on Health’s 2023 large employer survey data, interest in innovative contracting continues to grow among self-insured employers.

The number of innovative contract models is expanding including performance-based contracts, hybrid, and alternative financing arrangements as well as new strategies for implementing innovative contracts such as warranty models and a bundled sales approach.

Dr Good shared how a warranty model might work, which begins with a health plan approving and paying for the therapy, followed by the manufacturer providing a patient-specific warranty policy, and ending with the health plan or patient submitting a claim and the third-party paying costs of additional needed therapy or failed treatment.

He also noted that a bundled sales approach allows implementation of an innovative contract by a manufacturer among multiple payers that agreed to poor their lives together. This approach benefits the manufacturer by allowing them the flexibility to offer a higher patient-level rebate while reducing the risk of triggering Medicaid best (23%). For payers, benefits include an opportunity to receive closer to a 100% rebate on drug price for individual patients that fail.

“Not every product merits a value-based arrangement,” said Dr O’Brien. “Mapping clinical, financial and market considerations can help identify which products are worth the effort.”

Budget impact, size of patient population, line of business, and significant provider revenue through by and bill were highlighted as other considerations that can influence value-based arrangement suitability.

“That’s really what we’re seeing from a current state and where some of the trends are in terms of ways to both build and implement models,” added Dr O’Brien. 

Value-based contracting links to significant outcomes including disease related and overall total cost of care, adverse cardiovascular events, medication persistence, disability progression, weight loss, work outcomes such as an unplanned work absence, and rescue medication use.

“We’ve tried to give priority to clinically relevant outcomes—outcomes that matter to patients as well as other stakeholders like clinicians and other payers,” said Chester B Good, MD, MPH, senior medical director for Value-Based Pharmacy at UPMC Health Plan. “We’ve dabbled with patient-reported outcomes to see how the patients are experiencing these medications.”

Presenters concluded that the future of value-based contracting includes biosimilars, high-cost drugs for common conditions, gene-therapy payment solutions, and digital health solutions.