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Evidence-Based Diabetes Management December 2017

Moving Pharma Contracting Into the Era of Accountability

Thomas R. Graf, MD
A chief medical officer for a major payer outlines the challenges making sure that certain high-cost therapies are directed to the patients who need them.
There’s also the challenge of defning a realistic comparator. Total medical expense, a likely best candidate, is often harder to determine than it would first appear—and absent a solid comparator—the relative impact is impossible to judge. Pharma has ofered several interesting ideas for how this might be managed:
  • The challenge of rebates. We are now well past the era of using volume discounts to help control costs. The goal today is controlling the total cost of care, especially pharmaceutical costs, which have outpaced the overall medical spend. Some have looked at rebates or refunds if certain complications occur, such as heart attacks.13 The challenge is that these practices do not necessarily support the optimal use of the medication, that they encourage widespread marketing to the lowest-risk patients to ensure complications do not occur too frequently. This also does not get at the underlying issue: the therapy may simply cost too much. Offering a 30% reduction for certain patients on a drug that is 50% overvalued does not control costs.
  • Pay-for-performance. The idea of not charging patients who do not respond to a treatment is another approach. This model is uniquely suited to the high-cost specifc-use medications being introduced in cancer care; it would fail for other drug classes where determining response is more difficult. To truly develop comprehensive accountability, a program that includes annual total cost of care and trend impact is needed. The challenge here is that there are many factors outside of a specifc disease and certainly beyond a drug’s impact that afect the total cost of care. Many pharmaceutical companies have developed or partnered with others to provide wrap-around services to improve adherence and modify lifestyle—offering stress reduction treatments or help with exercise and diet to support improved outcomes and reduced healthcare utilization. However, these services may interfere with similar programs at the health plan or provider level. Also, these programs are either not explicitly tied to cost or only focus on the cost of the specifc diagnosis or disease state. This makes perfect sense from a pharmaceutical and provider perspective. However, from the payer, employer, and patient perspectives, programs that reduce CV costs and utilization but raise costs in other areas are not helpful. Proving causality or even an indirect relationship between the two is even harder.
  • Making partnerships scalable. For this approach, a collaboration between physicians, other providers, and drug manufacturers would help with the all-encompassing nature of total medical expenses. However, this only becomes practical for companies that have medications for multiple disease states and systems that have large numbers of patients. For insurers, this works only if the same pharma–provider coalitions care for a signifcant number of their members. The practical application of these global innovations is challenging.
What can we really do? How can we move forward? It is clear that there is no silver bullet to improving quality while driving down cost in healthcare; in the pharmaceutical arena, as well. A tailored approach blending all the ideas will be necessary. We also need to look for related areas in which we can eliminate non–value-added costs from the system. Examples include site-of-service issues, where the infusion location often translates into a 2- to 10-fold cost difference, or cost-plus-percentage markups for medications that work well when medications are priced in the hundreds of dollars but fail when prices reach $500,000. These are simple changes that can impact cost that do not really create accountability but do rationalize the overall pharmaceutical spend.

Creating a direct link between the impact of the proper use of the medication and the corresponding price paid is critical to the long-term success of healthcare. The keys are:
  1. Reaching agreement among payers, providers, and pharma on a process for measuring the direct and long-term impacts, quality, utilization, and cost of new therapies.
  2. Agreeing on a process to ensure selection of the optimal patients for each new therapy, along with a mechanism to create accountability for patient selection.
For many, the idea of a rebate for treatment failures or complications makes sense; for others, the idea of overall cost of care for a specifc disease category on an annual basis works; for still others, By working through these areas and tailoring the methodology to the disease state and specifc medication profle, we can best make lasting progress to drive quality improvement to reduce total cost of care rather than just cutting a few dollars today.

Author Information

Dr Graf is vice president and chief medical officer, Horizon Blue Cross Blue Shield of New Jersey. 

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