Negotiating Successful Outcomes-Based Contracts

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Of the payers who have an outcomes-based contract in place, only 9% view them as being very successful, while 50% say they are somewhat successful. Panelists agreed that flexibility is necessary for these contracts to succeed.

Of the payers who have an outcomes-based contract in place, only 9% view them as being very successful, while 50% say they are somewhat successful, according to findings from an Avalere survey. During a discussion at the ISPOR 22nd Annual International Meeting, panelists agreed that flexibility is necessary for performance-based risk-sharing contracts to succeed.

Moderator Kathleen E. Hughes, MBA, of Avalere Health, set the stage with Avalere’s survey results of 45 plans representing more than 270 million covered lives and where those plans currently stand on outcomes-based contracts. While 70% are view these contracts favorably, only 24% had one in place. However, another 30% reported that they are currently in negotiations for one.

Hughes said she was surprised to learn the therapeutic areas in which payers see the most opportunity: endocrine (eg, diabetes), infectious disease (eg, hepatitis C), and cardiovascular (eg, hypercholesterolemia, atrial fibrillation). Meanwhile, she felt oncology was underrepresented with only 5% of payers having agreements in oncology and another 14% considering outcomes-based contracts in the therapeutic area.

Jim Clement, MHA, of Aetna, shed some light on the situation, explaining that many of Aetna’s contracts focus on “disease states that will actually impact population health.” Its top 3 therapeutic areas are diabetes, respiratory, and cardiovascular.


“We have many contracts outside of them, but as an organization we are being held accountable to improve the healthy days of the community we serve, and if we’re going to really impact population health, it’s going to be through those 3 disease states,” he said.

Aetna has a few contracts in place, and Clement recommends that to be successful with them there needs to be flexibility in the approach and these contracts shouldn’t be overcomplicated.

Michael L. Ryan, PharmD, of Bristol-Myers Squibb (BMS), added that while his company has made progress, there are enough barriers in place that progress is slow. For instance, there remain infrastructure issues, such as finding companies with data on hand so there isn’t an extra process of independent data agreements that include transferring the information. But he echoed Clement’s opinion on creating successful contracts.

“I don’t know a value-based contract being done that doesn’t have some flexibility,” he said. “It has to work for both parties.”

BMS has both contracts with downside risk only and contracts with upside-downside risk—it just depends on the payer and how they want to approach the contract, Clement said.

Harvard Pilgrim Health Care has been pursuing outcomes-based contracts aggressively. Michael S. Sherman, MD, MBA, MS, of Harvard Pilgrim, noted that his organization now has 11 value-based agreements in place compared to just 2 or 3 from the last time he presented at ISPOR.

“Nothing drives success like success,” he said, adding that pharmaceutical companies are seeing these agreements work, and so they are more open to them. The pharma companies like that they now have another dimension to negotiate and providers like that the pharma companies have more skin in the game.

Not all discussions on value-based agreements end up in a contract. For example, Harvard Pilgrim just had a discussion with a company regarding a rare disease drug that won’t even be on the market for a year, but the measures the company was interested in were function-related, which is not the easiest data to mine from electronic health records.

The challenge was how the data would be gathered. Ultimately, the 2 parties didn’t come to an agreement, but both sides left thinking about the possibilities, he added.

“This is relatively new, uncharted territory, and let’s face it: we’re making it up as we go along,” Sherman said.