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Pharmaceutical Value-Based Pricing Contracts Remain Rare


September 26, 2017

A recent report from PricewaterhouseCoopers (PwC) found that a majority of drugmakers have not entered into value-based pricing contracts with payers.

“With intense pressure on drug prices, the pharmaceutical industry is turning to value- based contracts—which link the price of a prescription drug to its clinical or economic performance—to ease the tension,” Kelly Barnes, a partner, and US health industries leader and global health industries consulting leader at PwC, and colleagues, wrote in the report. “But insurer usage of these new drug pricing models remains limited despite an active minority of enthusiastic participants. Manufacturers that want to increase usage of these payment models may need a higher tolerance for financial risk, regulatory change, and the willingness and flexibility to collaborate closely with payers and providers.”

The researchers conducted a survey study with 101 pharmaceutical executives – ranging from director-level to C-suite – working at public and privately-held pharmaceutical companies. The survey was conducted between November 2016 through January 2017.

The report found that the vast majority of medications are still sold on a per-dose basis. Researchers reported that 61% of drugmakers are not participating in value-based pricing, with only 25% of companies confirming participation and another 14% responding that they were not sure if they were using value-based pricing.

However, the researchers found that value-based pricing is popular among those drugmakers who have used it, with 80% reporting the contracts as successful.

The researchers determined that drugmakers are reluctant to embrace value-based pricing due to a perception of a limited return on investment. They found that only 38% of drugmakers reported the risks of a value-based contract worth the rewards.

PwC also reported that most drugmakers see value-based pricing as a win/win in theory—however, they also found barriers in uptake associated with PBMS.

“Other insurer and PBM executives, however, remain skeptical of such agreements,” they wrote. “Most PBMs are not involved with an insurance plan’s medical benefits, which makes it difficult to assess a drug’s full impact on a patient population.”

The researchers concluded that integrated health systems are uniquely positioned in the industry to help value-based pricing thrive.

“Integrated health systems may be best positioned to influence prescribing practices among providers, assess patient health outcomes and estimate financial impacts that span drug and medical benefits,” they wrote. “PBMs wishing to form indication-specific contracts, for example, would need to access data that identifies which disease an individual prescription is targeting for each patient.”

David Costill

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