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July 18, 2017

In Vivo

The Value Lab: Moving Value-Based Health Care from Theory to Practice

By Roger Longman

Medical product costs re- main a central concern to payers, employers and individuals in the US. Although the Trump administration has yet to issue formal policies altering drug and device reim- bursement, it continues to highlight the issue via public statements and social media supporting “competition in the drug industry” and promising “pricing for the American people to come way down.”

The private sector, however, is not waiting for government-led change. US payers continue to struggle to manage costs on two fronts: rst, high-volume, high-cost chronic diseases; second, high-cost specialty products. As a result, they are interested in new value-based models that link a drug’s performance to emerging real-world evidence of improved patient outcomes. Announcements by Harvard Pilgrim Health Care Inc., Cigna Corp., Aetna Inc. and several other pay-

ers of newly signed value-based contracts (VBCs) are examples of this trend. More- over, a recent study by Avalere suggests that as of May 2017 nearly 25% of all US payers have already constructed at least one value-based contract. (Also see “Bril- inta/Bydureon’s Measurable Outcomes Are Smooth Fit For Contracts” – Pink Sheet, May 31, 2017 and “Lilly’s Performance Contract For Trulicity Hinges On Head-To-Head Superiority” – Pink Sheet, June 26, 2016.)

Drug manufacturers are also increas- ingly willing to consider the access advantages that arise via such novel contracts, partially due to evidentiary gaps between a medicine’s performance in highly controlled clinical trials and its real-world utility. (Also see “A Road Map To Strategic Drug Pricing” – In Vivo, March 2016 and “Smart Segmentation: Success In The Payer-Dominated Pharma Marketplace” – In Vivo, July 2016.)

Indeed, an analysis by EY shows that 44% of drugs launched between 2005

and 2013 underperformed compared with forecasted sales expectations two years after launch; roughly 20% of these un- derperforming products were medicines to treat cancer, an area that historically has been free of reimbursement pressure.

In addition, VBCs represent a method for measuring important patient-centric mechanisms such as quality of life, improved medication adherence and reduced worker absenteeism. Such outcomes are not usually prioritized by health technology assessment groups or traditional payers, unless there are accompanying real-world data demon- strating improved outcomes.

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