Dr Ira Klein on Pharmaceutical Interest in Alternative Payment Models

Pharmaceutical companies would like to see value-based contracts that are multi-year and over large populations, said Ira Klein, MD, MBA, FACP, senior director of healthcare quality strategy for the Strategic Customer Group at Janssen Pharmaceuticals.

Transcript (slightly moified)

What are pharmaceutical companies interested in with respect to alternative payment models?

I think that anything that really helps in unlocking the true value of a product over time is what the pharmaceutical industry is interested in. Now, if you think about the research and development time cycle, and the amount of failure of potential drugs to make it to market, it’s really a very long ramp up for the few products that actually make it. So, when you think about measuring a value in value-based contracts, it’s probably difficult to actually capture the real value in a 12-month contract, because drugs by meliorating disease, meliorating suffering, tend to have their real value explained over a number of years. Actuarially, while this may become more difficult, I think value-based contracts, if they can be multi-year and over large populations, those are the things we would like to see in the contract.

We’d also like to be able to measure some of the factors that are not traditionally measured, but are very important to patients, such as their quality of life, their outcomes, and what it means for them to be able to care for others, maintain employment, and participate in meaningful activities that they otherwise wouldn’t be able to participate in.

Additionally, I just want to say that as we move into a more aggregated system, where the delivery side has become more group-oriented in ACOs and IDNs, we think that the ability to manage these value-based contracts will become easier because these aggregated delivery systems will be able to present us with that large set of holistic data that I referred to that we will need to actually show the real value of the products in the marketplace for real patients.