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Including VBID Principles Can Avoid Negative Effects of Outcomes-Oriented Contracts

Since its inception in 2005, the University of Michigan Center for Value-Based Insurance Design (V-BID) has led efforts to promote the development, implementation, and evaluation of innovative health benefit designs balancing cost and quality. A multidisciplinary team of faculty, including A. Mark Fendrick, MD and Michael E. Chernew, PhD, who first published and named the VBID concept, have guided this approach from early principles to widespread adoption in the private and public sectors. The Center has played a key role in the inclusion of VBID in national healthcare reform legislation, as well as in numerous state initiatives. The basic VBID premise is to align patients' out-of-pocket costs, such as copayments, with the value obtained from health services and providers.
This article was collaboratively written by A. Mark Fendrick, MD, director of the Center for Value-Based Insurance Design (V-BID), and several V-BID Center staff. 

Outcomes-oriented contracts have the potential to align the interests of patients, health plans, and manufacturers around the goal of responsible healthcare spending while preserving access to care. A new brief from the Center for Value-Based Insurance Design (V-BID), funded by Boehringer Ingelheim, discusses how incorporating principles of VBID can help prevent the negative effects of outcomes-oriented contracting, such as cost-related nonadherence.

Outcomes-oriented contracts are financial arrangements that tie payment to achieving pre-specified clinical goals, and they have received increasing attention for pharmaceutical companies. Research has shown that 70% of payers and 60% of manufacturers polled indicated an interest in outcomes-oriented contracting.1,2 Motivating this interest is a rise in targeted therapies for narrow patient populations. Outcomes-oriented contracts offer a way for payers to offer access to expensive, breakthrough therapies despite the lack of predictability surrounding patient responses.

Outcomes-oriented arrangements can provide a means for payers to prevent excessive expenditures for patients for whom a drug is not appropriate. However, high cost sharing for patients and potential nonadherence should remain the top priority of payment design.

VBID principles can reduce the risk of cost-related nonadherence by aligning patients’ out-of-pocket cost-sharing with the value of the underlying service. This encourages the use of high-value care while also reducing low-value spending. Outcomes-oriented contracts should, therefore, set patient cost sharing at levels that are not burdensome, as well as ensure that utilization management protocols—such as prior authorizations—are not barriers to access.

To read more about the role of VBID and other recommendations for outcomes-oriented contracting, see the full brief.

1. Duhig A, Saha S, Smith S, Kaufman S, Hughes J. The current status of outcomes-based contracting for manufacturers and payers: an AMCP membership survey. J Manag Care Spec Pharm. 2017:1-6. doi:10.18553/jmcp.2017.16326.
2. Desai R. Health plans are interested in tying drug payments to patient outcomes. June 16, 2016. Accessed March 8, 2018.

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