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Addressing the Affordability Issue of Novel Treatments

Laura Joszt
New targeted therapies reduce waste and identify patients that will benefit most, but their high price tags have left the healthcare industry scrambling to figure out how to pay for these treatments and cures.
The age of the Human Genome Project has resulted in more targeted therapies that can be given to the patients that will respond the best. However, while these new targeted therapies reduce waste, they come with high price tags, which has prompted a discussion of how to pay for the treatments.

During one session at the Academy of Managed Care Pharmacy Annual Meeting, held March 27-30, 2017, in Denver, Colorado, speakers discussed co-pay concerns, adherence issues, and paying for value.

Steven G. Avey, vice president of specialty clinical programs at Medimpact Healthcare Systems, Inc, discussed what he called the co-pay “conundrum.”

“We really do believe that members need to have a stake in the game,” he said.

When co-pays were just $1 or $2, members didn’t understand the value of their medication and there were resulting adherence problems. However, it’s well known that when co-pays are too high, adherence and persistence are reduced.

“So it’s arriving at that balance of what’s an appropriate co-pay,” he said.

Complicating the issue further is the rise of high-deductible health plans, Avey added. As of 2016, more than 50% of individuals had a deductible of $1000 or more, said Michael Ciarametaro, MBA, vice president of research at the National Pharmaceutical Council. Research has shown that when people pay more out of pocket, utilization decreases and it decreases irrespective of value. This means that patients cut out both low-value and high-value services.

“So really this becomes a tool that is focused more on cost than value,” he said.

Ciarametaro outlined 4 tools that provide a better way to center on value:

  1. Value frameworks
  2. Value-based insurance design (VBID)
  3. Value-based contracting
  4. Financing

Value Frameworks

These tools are important in determining what is high value and what is low value. However, each one has its own methods and intended audience and understanding those differences is critical, said Ciarametaro.

While these frameworks have a lot to teach, they have a lot of room for improvement, he said, such as increased transparency and stakeholder involvement. In addition, they represent a single determination of value, which is not adequate. They need more flexibility for population, condition, and region of care.


With about 30% of healthcare dollars spent on low-value care, VBID aims to reduce utilization of low-value care and increase utilization of high-value care through benefit design. VBID would have a higher out-of-pocket cost for low-value services and a lower out-of-pocket cost for high-value services.

For example, a patient with familial hypocholesterolemia who tried and failed the standard of care should have a lower out-of-pocket cost for a PCSK9 inhibitor than the patient with familial hypocholesterolemia who has not tried the standard of care.

Value-Based Contracting

Ciarametaro broke value-based contracting into 2 parts: outcomes-based contracting and indication-based contracting. In outcomes-based contracting the payer shares budget risk with the manufacturer by contracting on terms linked to outcomes that could include hospitalizations and emergency department visits. Indication-based contracting acknowledges that some drugs have multiple indications and utilization will vary across payers and solves the issue where the drug has the same price across indications.

However, there are a number of barriers to value-based contracting, which include learning how to set them up, a lack of data infrastructure, the challenge of how to define outcomes, a lack of control over adherence, and regulatory barriers and concerns.


The trouble with paying for these new drugs is that while they are very effective, they are very expensive and payers are wary of anything with a large upfront cost when they know members are likely to move to another insurer.

Ciarametaro outline some policy solutions to this issue that are being considered:

  1. Drug amortization. This would spread the cost back out over time as a debt that would be held by the manufacturer and that the payer would pay off. Ideally, the debt would follow the patient.
  2. Health currency. The idea is that the government would issue a coin to the payer covering the therapy. The value of the coin would depreciate over time and the coin would follow the patient to new payers.
  3. Reinsurance. This is insurance for the insurer. However, this is not a long-term sustainable solution, he said.
  4. Tax coverage/patent buyout. These are both government interventions.

The drug amortization proposal has the greatest buy-in from payers and manufacturers.

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