Value Based Contracts James T Kenney RPh MBA

Value- Based Contracts James T. Kenney, RPh, MBA Manager, Specialty and Pharmacy Contracts Harvard Pilgrim Health Care President-Elect Academy of Managed Care Pharmacy © 2016 Academy of Managed Care Pharmacy

Contract Options

Traditional Contracts • Rebate or Purchase Discounts • Access Driven • Market Share Components – National – Regional – Plan Level • Manufacturer’s Primary Objectives – Gain Preferred Tier Status – Avoid Restrictions

Value-Based Contracts A value-based contract is a written contractual agreement in which the payment terms for medication(s) or other health care technologies is tied to agreed-upon clinical circumstances, patient outcomes, or measures. * *AMCP Value Based Partnership Forum June 2017

Other Contract Types • Outcomes-based Contracts – Rebates Paid Based on the Actual Performance of the Drug in Real World Clinical Practice • Performance-based Contracts – Improved or Guaranteed Medical Outcomes as an Offset to the Increased Cost/Use of Pharmaceutical Products • Comparative Effectiveness Contracts – Compare Different Treatment Options for a Specific Medical Condition • Indication-based contracts – Outcomes Focused on Specific Measures Related to an Indication 5

Core Elements

Value Proposition Improved Medical Outcomes Will Reduce Costs and Offset the Increased Use of Pharmaceutical Products (Aligns with Pay-for-Performance and Risk-Sharing Strategies with Providers)

Design Model Outline Potential Options Develop Contract Test Hypothesis Data Extract Measure Baseline

Outcomes Contracting • Starting Point is a Blank Slate • Can be Complicated or Simple • Need to have Buy-In from Corporate Management of Both Parties • Typically Need Pharmacy and Medical Claims Data • Can Start with Basic Pharmacy Claims Only Agreement • Rebates Shared with Risk Holders

Outcomes Contract Basics • Chronic or Acute Medical Conditions • Identifiable and Measurable Outcomes or a Valid Proxy • Population or Individual Based • Upside or Downside Risk • Adherence/Compliance Requirements

Key Drivers for Manufacturers • Improved Product Access • Market Share Growth • Reduce Resistance to New to Market Agents – Develop Concepts Pre-launch – Include Outcomes in Clinical Trial Design • Restrictive Plan Designs/Formularies • Gain a Competitive Advantage

Key Drivers for Health Plans • • Proof of Efficacy with Outcomes Performance Improved Product Access Limit Products to a Specific Population Reduce Financial Risk Insurance for Poor Real World Experience Increase Rebates/Savings Reduce Overall Costs

Measurement Challenges • • • Metrics Timeline Data Collection Method Validation Options/Analytics Third Party Participation Health Insurance Portability and Accountability Act (HIPAA)

Barriers to Success • • • Information Technology Limitations Selection of the Outcomes Measure Insufficient Patients on Drug Transaction/Administrative Costs Lack of Adherence Legislative and Regulatory Issues

Legislative Issues • Federal Anti-Kick Back Laws – Relief Needed to Encourage More Companies to Participate • Medicaid Best Price – Issues with Amount of Outcomes Dollars at Risk • Off Label Promotion – PIE Legislation Could Remove This Barrier – Must Have Outcome Based on Actual Clinical Data in the Label

Federal Anti-Kickback Statute • Prohibits the Exchange of Anything of Value to Induce or Reward Referrals of Federal Health Care Program Business • Safe Harbored Activities – Defined in the Statute – Office of the Inspector General (OIG) Implements Regulations – Value-based Contracts not defined by Congress or Health and Human Services – Needs to Allow the Exchange of Economic Information 16

Medicaid Best Price • Mandatory Rebate of 23. 1% Off of the Average Manufacturer’s Price (AMP) • Paid to Fee for Service and Managed Medicaid Programs • Value-based Payments Could Exceed Best Price • Nominal Price Exemption • Individual vs. Population Based Payments • Money-Back Guarantees • Kymriah™ Example 17

Off-Label Use of Medications • Outcomes Measures Should Be On-label and Referenced in the Product Label or Package Insert • Do Contract Terms Include Off-label Use • Unsolicited Requests are Permitted Under FDA Guidelines • Academy of Managed Care Pharmacy “e-Dossier” On-line Service 18

FDA Areas of Concern • Communication Issues – Off-label Use Concerns – Economic Information – Pre-approval Information 19

Recent Changes to Payor & Manufacturer Communications 21 st Century Cures FDA Draft Guidance Pharmaceutical Information Exchange (PIE) Act

21 st Century Cures • Section 3037 Modernized and Clarified FDAMA Section 114 • • Expanded the Target Audience for Receiving Health Care Economic Information(HCEI) Broadened the Range of Information Shared with Payers to Include Clinical and Economic Information Required Clear Statements Related to Differences Between HCEI and Approved Labeling Clarified the Definition of HCEI

Food and Drug Administration Modernization Act (FDAMA) of 1997 • Section 114 Offers a Regulatory Safe Harbor • Increase Dissemination of Health Care Economic Information (HCEI) • Seeks to Define the Type of Data that Can be Shared • Target Audience of Formulary Decision Makers • Lack of FDA Implementing Regulations 22

FDA Draft Guidance AMCP Recommendations FDA Draft Guidance FDAMA Audience Health care decision makers AND health care decision influencers Health care decision makers only FDAMA Approval Should not be subject to FDA approval, use third-party SME group to develop good research practices Considered promotional and subject to Form FDA 2253 and FDA review PIE New molecules and unapproved indications with an intent to file New molecules only

The PIE Act • H. R. 2026 – Pharmaceutical Information Exchange (PIE) Act Of 2018 • • To Improve Patient Access to Emerging Medication Therapies by Clarifying the Scope of Permitted Health Care Economic and Scientific Information Communications Between Biopharmaceutical Manufacturers and Population Health Decision Makers Introduced by Rep. Brett Guthrie (R-KY) in April 2017 Hearing Held July 2017 Voted Favorably Out of Energy & Commerce Subcommittee on Health in January 2018

Pharmaceutical Information Exchange (PIE) • The creation of a safe harbor to allow biopharmaceutical manufacturers to share truthful and non-misleading clinical and economic information about medications in the pipeline with population health decision makers proactively at least 12 -18 months prior to FDA approval during the forecasting and rate setting process • Target Audience and Payers Must be Clinically Focused • Need to Avoid Any Appearance of Sales Information 25

The PIE Act

Finances

Financials • • • Base Rebate Price Protection Volume Caps Per Member Per Month Guarantees Cost Offsets – Drug Costs – Medical Expenses

Savings Opportunities • Event Avoidance – ER Visits/Hospitalizations – Office Visits – Ancillary Resource Utilization • Reduction in Medical or Pharmacy Expenses Long Term • Reduced Disability Claims • Decreased Absenteeism

First Significant Outcomes Contract • Risedronate (Actonel®) Fracture Protection Program 2009 • Health Alliance Plan • Alliance for Better Bone Health – Sanofi-Aventis – Procter & Gamble • Osteoporosis and Non-Spinal Fractures • Preferred Tier Requirement with Unrestricted Access www. prnewswire. com/Oct 29, 2009

Contract Terms • Base Rebate Offered • Compliance Requirement • Medication Possession Ratio (MPR) Measurement • Reimbursement for Fracture Costs – Hip Fracture $30, 000 – Wrist Fracture $6, 000

Current Outcomes-Based Contracts

Autoimmune Disease • Rheumatoid Arthritis • Contract for Improved Response Rates • Measurements – Radiographic Assessment – Health Assessment Questionnaire Score (HAQ) • Adherence Focused on High Switch Rates in Specific or all Indicated Disease States • Pay Rebates if Duration of Therapy is Short

Multiple Sclerosis • Contract Based on Relapse Rates of Patients • Measurement of Relapses is the Challenge – ER Visits/Hospitalizations – Steroid Use • Contract Based on risk reduction in relapses for patients on drug • Pure Adherence Measure

Amgen - evolocumab (Repatha™) • Harvard Pilgrim Approach – Strict Prior Authorization to Target Appropriate Patients – Contract for Preferred Access – Opted for Exclusive Position • Adherence Component • Performance Measure Based on LDL Lowering • Risk for Higher Use

sacubitril/valsartan (Entresto™) • Aetna, Cigna, and Harvard Pilgrim Health Care • Medication indicated to reduce the risk of cardiovascular death and hospitalization for heart failure (HF) in patients with chronic heart failure (NYHA Class II-IV) and reduced ejection fraction • Contract Focused on a Reduction in Hospitalizations in HF population • Extensive Data Analysis Needed to Measure Outcomes • Multi-Year Benefits www. entresto. com

dulaglutide (Trulicity®) • Indicated as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus. • Outcomes Focused on Patient Response in Terms of Blood Glucose Response • Adherence Requirement • Potential to Demonstrate Value in the Short Term www. trulicity. com

Long Term Goals • Multiple Outcomes Contracts for Competing Therapies • Use Results to Make Formulary Decisions/Changes • Assess True Benefit of Treatments • Get Value in Return for Pharmaceutical Dollar Spend

Questions?