November 14 2017 | 0 Comments | 202 reads Average Rating: 3

7 Advantageous Attributes of Successful Payer-Pharma Outcomes-Based Contracts

by John Pagliuca in Life Sciences

Healthcare costs are spiraling upward. That’s why it is more important than ever to get what you pay for. This is especially true when considering prescription drugs.

The problem: Drug prices are rising – without much knowledge about their performance.

The solution: Outcomes-based contracts between payer organizations and pharmaceutical companies. Under such agreements, if a drug does not reach certain performance thresholds, then the drug manufacturer provides a rebate to the payer. If the product reaches or exceeds these levels, then the payer offers the drug to a wider array of members – providing the pharma company with a great market expansion opportunity.

The task at hand for payers and pharmaceutical companies is to risk-stratify patients and then work jointly to drive costs down and to improve care under outcomes-based contracts that include the following 7 attributes:

1) A meeting of the minds between the participating parties. Risk typically means something different to each organization. As such, payers need to understand what risk means to pharma companies, and vice versa.

2) Commitment and trust. Drug manufacturers and payers need to have confidence in the fact that they will each devote time and resources to the design, implementation and monitoring of outcomes-based contracts.

3) A little help from an outsider. To create and analyze the data that the contract will be based on, it is best to use a third-party analytics team. As such, neither payers nor pharma companies will have any reason to suspect that the other side is producing self-serving data.

4) A clear destination. The outcomes stated in the contract should be clearly defined and measurable. In addition, it’s best to keep the outcomes measures simple.

5) The right contenders. When developing contracts, payers and pharma companies need to work together to select conditions and medications that are good candidates for outcomes-based contracting – as some simply are not be cut out for this model. For example, it would most likely be more difficult to successfully define and then reach desired results when treating rare conditions, compared to when working with common chronic conditions.

6) A verifiable way to keep score. Endpoints need to be easily obtained and quantifiable in a fair time frame. As such, payers and pharma companies should agree upon measures that can be quantitatively and subjectively measured – and realized in a pre-determined time frame, whether that be six months, nine months, a year, or more.

7) Insight into the needle-moving potential. To assess the patient’s potential to engage and comply with therapy, organizations can leverage a plethora of data – medical or prescription claims, EMR, socioeconomic, behavioral, and other – to create patient personas. These personas shed light on impactability, a measure that described how receptive a patient or a group of patients will be to making the changes necessary to improve their health and listening to the messaging around how they can move in the right direction to do so. These patient personas also offer insight into how the payers and pharma companies should actually “message” patients over time to increase compliance and adherence to drug therapy.

Surely, these attributes can help payers and pharma companies develop and implement the outcomes-based contracts that work. For a more in-depth discussion of payer-pharma outcomes-based contracting, tune into our webinar, “Outcomes-based Contracts between Pharma and Payers: Preparing for the Future.”

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John Pagliuca
Vice President, Life Sciences

John is responsible for leading the commercialization efforts of SCIO’s SaaS solution suite and advanced analytics within the US Life Science vertical. He has more than 15 years of sales, marketing and technology experience, with particular expertise in quantitative analytics and SaaS solutions for Life Sciences.

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