A Manufacturers Perspective on Innovative Value Based Contracting
A Manufacturers Perspective on Innovative & Value Based Contracting Kelly Guntrum Head Innovative and Value Contracts UCB Inc.
The views and opinions expressed in this discussion are my own and do not necessarily reflect the position of any current or former employers
Kelly Guntrum 15 yrs in healthcare including device and biotechnology Roles in sales, leadership, global partnerships and managed markets
Kelly Guntrum • Financial Disclosures • Employee at UCB Pharma
Learning Objectives § Explain move from Volume to Value § List Value Based Contracting Framework & Types § Explain Opportunities & Obstacles in Value Based Contracting § Describe Successful Value Based Contract execution § Trends and Future of Value Based Conversation
Pre-Test True or False • Q: Value Based Contract between Manufacturers and Payers in a specific disease state are all the same? • A: False
Value-Based Contracting vs Fee-for-Service Value-Based Contracts Differs from Fee-for-Service (FFS) Contracts • Fee-for service contracts require a health plan or other payers pay to pay an assigned fee for each covered item and the payer bears all the risk, not the manufacturer FFS is no longer perceived by payers as providing value, nor is it likely to be financially sustainable given the already large share of economy consumed by healthcare • Value-based contracts are an attractive alternative to traditional drug and device contracting for payers and risk-bearing providers as the industry moves from volume to value. However, these contracts require a significant amount of data analytics.
A Shift from Volume to Value MACRA rewards value over volume using a quality payment program, which includes merit-based incentive payment system and advanced alternate payment models 1 -3 Abolish SGR Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) Quality Payment Program Merit-Based Incentive Payment System (MIPS) Advanced APMs (45%) Quality (25%) Promoting Interoperability (15%) Improvement Activities (15%) Cost (Resources) APM, alternate payment model; SGR, sustainable growth rate. 1. Lober CW. Hit a home run with MACRA in 2018: MACRA update, including MIPS and advanced APMs. ASDS Currents. American Society for Dermatologic Surgery. January-February 2018. https: //www. asds. net/Portals/0/PDF/asdsa-macra-current-reprint. pdf. Accessed August 13, 2018. 2. Hathaway K. MACRA 2019 Changes Address Physician Concerns. Michigan State Medical Society. 2019. https: //www. msms. org/About-MSMS/News-Media/macra-2019 -changes-address-physician-concerns. Accessed March 18, 2019. 3. 2019 MIPS Rules. MD interactive. https: //mdinteractive. com/2019 -mips-rules. Accessed March 18, 2019.
Volume-to-value shift in reimbursement 20161 FEEFORSERVICE 20211 Payment determined by quantity of service 1 Rapidly declining as the industry shifts to value-driven care 1 Payment determined by quality of service 1 VALUEDRIVEN 20181 Fee-for-service (FFS) 52% 41% 20% 35% 23% Capitation or global payment 18% 15% 18% 19% Pay-for-Performance Value-driven care models are on the rise 1, 2 Physicians share in the financial risk 2 The healthcare industry is evolving to adapt to the changing managed care landscape 1 -3 *Excluding the following payment models: Episode of care payment/bundled payment, shared savings with upside, and shared savings with upside and downside. References: 1. Mc. Kesson Corporation website. http: //mhsinfo 3. mckesson. com/rs/834 -UAW-463/images/VBR-Study-2016 v 112016. pdf. Published 2016. Accessed April 19, 2019. Health Payer Intelligence website. https: //healthpayerintelligence. com/features/how-payers-should-prepare-for-value-based-reimbursement. Accessed July 16, 2018. 3. NEJM Catalyst website. https: //catalyst. nejm. org/what-is-value-based-healthcare/. Published January 2, 2017. Accessed July 16, 2018. 2. 9
Things are changing Newer Strategies to Manage Pharmaceutical Costs
Key Factors Driving Value-Based Contracts Rising Healthcare Costs with Perceived Low Value Backlash against High Prices & Frequent Price Increases More Government Dollars at risk: Medicaid expansion + Low income subsidies in Exchanges + aging of ‘baby boomers’ PBM management of exclusion lists & increased control Expansion of Value Based Payments in other channels of Healthcare Accountable Care Organization, Oncology Care Models, Hospital Value Based Purchasing Program
Defining Value Based Contract “A value-based contract is a written contractual agreement in which the payment terms for medication(s) or other health care technologies are tied to agreed-upon clinical circumstances, patient outcomes, or measures. ”
Value Defined by Stakeholders & Method Manufacturer: Competitive Edge • Differentiation / create barriers for competitors • Accelerate / retain market acceptance • Leverage stronger products to promote new or weaker products • Obtain better formulary placement • Build better partnership with customers Payer: Control Costs • Reduce uncertainty around products • Cost of product/ class • Product Performance • Align product cost with clinical value • Potentially improve outcomes for patients/members • Lower medical costs through increased adherence PBM: Steer Utilization • Steer utilization to profitable channels • Increase utilization (add revenue through rebates) • Positively market to payers/employer groups • Receive additional rebates • Encourage manufacturer rebates Qualitative Quantitative Clinical outcomes not monetarily linked Medication Cost Patient Experience Social Impact Total Cost of Care Quality Adjusted Life Years • Define the Different Stakeholders in the equation • “Value defined differently by stakeholders”
Value Based Contracts Types of Value Based Contracts: Outcomes Based Contract Risk Sharing Contract/Shared Accountability Coverage with Evidence Adherence/ Discontinuation Subscription ‘Netflix’ Model Pay for Performance Value Based Contracts are intended to align the price/payment to the observed or expected value in a population or patient.
Manufacturer Considerations in Designing Value-Based Contracts • What risk does the payer have that the company can address by taking on risk? • What is the customers primary concern? Do they want to manage spending for the entire therapeutic class or just the manufacturer product? • Is the concern about high spending for individual patients or high aggregate demand for the product? • Is the payer concerned with how the product will perform in the ‘realworld’ vs clinical trials?
Value Based Contract: Perspective Manufacturer Concerns • Improving market access or market share • Avoiding restrictions • Avoiding best price implications • Gaining a Competitive edge • Improve Health Outcomes/Quality of Care • Identify eligible population Payer Concerns • Reducing Cost & Waste • Improve health & outcomes • Reduce financial risk • Predictable cost & outcomes • Guaranteed rebate stream
Who is engaging in Value Based Contracts • Pharmacy Benefit Managers • Care Value Programs • Pay for Performance • Health Plans • Decrease in total cost of care • Increased control of chronic conditions • Medicaid • Increased adherence • Decreased hospitalization costs • Medicare • Improvement in patient measured outcomes
Value Based Contracting Framework Understand the payer environment • Current challenges/opportunities • Emerging challenges/opportunities While Value Based Contracting is not a one size fits all, a consistent approach can be helpful Evaluate the • Definition of value payers contracting • Contract output cost capabilities Consider the products characteristics • Ability to collect data • Indicated population • Measurable endpoints Determine the best VBC type • Outcomes based vs financial based • Timing, data and legal considerations
Four Phases of VBA Development Phase 1: Phase 2: Phase 3: Phase 4: Internal Assessment & Information Gathering Early Dialogue Formal Negotiation Contract Implementation Two parties engage in early, informal discussions to seek the possibility of negotiating a VBA agreement and confirm mutual interest. Two parties formally discuss the terms and conditions of a value-based agreement, for the purpose of establishing a written contract. Begins when two parties have officially signed a VBA and begun execution of the terms and activities stipulated in the contract. Company initiates an internal discussion of the desirability and feasibility of pursuing a VBA, and begins identifying potential partners
Value Based Contracting Challenges Partner Availability Market Alignment Operational Capabilities VBA’s can appear difficult to payers VBA’s work when there are efficacy or outcomes to measure objectively in available data Given their unique structure, VBA’s require additional systems and process to calculate (third parties) Financial Viability Regulation Considerations Business Alignment Price concessions offered in VBA’s are uncertain, performance driven and untested in delivering value Government price reporting and best price issues pose consistent challenges to the manufacturers Structure, goals and management of VBA’s can often conflict with other operational processes
Value Based Contract Challenges Partner Availability • Ability to mange care in therapeutic area • Willingness to move share to preferred products in VBC • Capability to track therapeutic class spend and shift utilization • Visibility to medical claims to measure impact • Ability to use networks to leverage unique aspects of contract Market Alignment • Product must have the ability to produce outcomes metrics that are meaningful to patients, physician and payers while reducing the variability in measure selection, collection burden and cost • In chronic conditions, outcomes may not be measurable or can use a proxy for measure • Small populations must either cost large amounts or have chance for quality improvement
Value Based Contract Challenges Operational Capabilities Payer • Access to pharmacy and medical claims • Ability to collect PRO’s or lab values • Systems or third party able to process and calculate Manufacturer • Ability to allocate/re-allocate rebates upon evaluation • Ability to validate data for VBC inclusion & rebate • Able to handle de-identify PHI Financial Viability • Price concessions often performance driven, methods untested and efficacy unproven • Cost of contract negotiations and evaluation can more than cost of medications • Low number of inclusion can result in same cost for work with small increase in quality or change in costs
Value Based Contract Challenges Regulation Considerations • New and changing laws and regulations pose difficulties to establish consistent processes and controls around VBC’s • Anti-kick back, Best Price, reporting, etc Business Alignment Payer • Value based contract aligned with quality and financial goals of organization Manufacturer • Legal, Compliance and business(sales&marketing) willing to engage in risk based contract • Contract & Pricing able to operationalize evaluation and report internal & external revenues
VALUE-BASED CONTRACTS: 2009 – Q 2 2019 62 Publicly Reported Value Based Contract’s Source: https: //www. phrma. org/Advocacy/The-Value-Collaborative
Successful Implementation of a VBC • During contract development, models should be leveraged that can: • Measure contracts outcomes variability • Quantify the potential risk of contract • Determine the potential contract feasibility • As contract is being negotiated • Determine channels to collect and process data for contract • Ensure details of data gather needed are outlined and can be securely transferred • Execution of VBC • Regular activity & communication between parties to assess contract performance • Launch – then ‘wait & see’ is usually not a viable strategy
What Factors make contract more likely to succeed? Manufacturer Payer • Partner has the necessary data collection & analysis capabilities • Availability of measurable outcomes clearly tied to product use • Availability of measurable outcomes, clearly tied to product usage • Target drug has potential high budget impact or high population impact • Target population can be easily identified in claims • Target patient population can easily be identified in claims • Administrative burden is reasonable • Timeline for collection & analysis is reasonable • Both parties are committed to the agreement • Administrative burden is reasonable
Trends and Future Value Based Contracting
Post-Test True or False • Q: Value Based Contract between Manufacturers and Payers are not stacked on top of base rebates &/or admin fees? • A: False
Post-Test True or False • Q: Value based contracts can only be executed between payers and manufacturers for members of commercial plans? • A: False
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