New therapies are hitting the market at an unprecedented pace, and the innovation behind the treatments combined with the proportion designed to treat rare diseases is putting pressure on every segment of the industry.
Demonstrating the value of a new therapy’s benefits versus its price is the core of marketing new pharmaceuticals. And long before third-party organizations began to create independent value frameworks, formulary decision makers had used their own analyses to make assessments separate from life sciences companies.
Smaller clinical studies, higher prices, and uncertainty about patient populations are forcing companies to prove their products work in the real world, and to continuously demonstrate their clinical, economic, and societal value.
Life sciences companies have a variety of tools to demonstrate the value of their medicines in the real world, but any innovative agreement or study should definitively answer these five questions:
1. What problem is a VBA designed to solve?
A Value-Based Agreement (VBA) is a broad concept that can morph into many forms. At their core, VBAs should help solve a problem or resolve an uncertainty that a payer may have about a product or the patient population that it can serve.
The most common uncertainty is clinical outcomes, especially for high-priced therapies. Well-controlled clinical trials, particularly those with very small patient populations or novel endpoints, produce results that payers want to see replicated in the real world.
A VBA structured so that payers get rebates if clinical criteria are not met or if conditions worsen can help speed access to patients. When communicating to non-payer audiences, being able to announce a VBA at approval can demonstrate that a company’s price is “fair,” given the results are guaranteed.
But VBAs can also solve other problems such as:
- Providing discounts relative to a patient population in a rare disease category.
- Addressing other key variables like frequency of dosing or adherence to treatment.
Payers have specific concerns related to each patient population and each new treatment. And when demonstrating the value of your product in the real world, being innovative around VBAs and what they guarantee can help speed access to patients and showcase a company’s commitment to delivering innovation, both in their clinical and commercial approach.
2. Does my real-world evidence account for the real world’s irregularities?
VBAs need to be paired with healthcare outcomes data to demonstrate that a treatment works well outside of the clinical setting, where patients had been selected based on strict criteria.
Real-world evidence is critical for demonstrating value in an outcomes-based contract. Analysis of electronic health records and medical claims is one way to show the real-world application of a drug and can even tell us how that product may be prescribed and used off-label.
Examination of real-world dosing behavior can reinforce the durability claims made at launch. As technology and data collection improve, VBAs will have increasingly reliable methods for collecting and demonstrating the value of a drug over time.
3. Will COVID-19 change the landscape?
Some of the changes to the healthcare industry caused by the COVID-19 crisis will be permanent—we just don’t know which ones yet. We already know that clinical trials are delayed, as locations become unavailable and patients with health conditions do not feel safe traveling to a trial site.
Trials that straddle the pandemic may have challenges related to data, given the potential interrupted dosing, or having patients in the trial who are stricken with COVID-19. In the future, exposure to the virus could factor into the inclusion criteria for some trials, which can create mismatches between the clinical trial participants and real-world patients.
The pandemic is leading to massive expenditures for insurers, and creating additional cost pressures. Seeking rate adjustments as a result in an economy that will be less robust this year than it was last is politically challenging. So, whether or not your treatment is for a patient population that is susceptible to COVID-19, the outbreak will be a consideration for insurers.
4. Does my plan meet the needs of government payers, and can either of us be flexible?
The need to demonstrate value to government payers will continue to grow. The Medicare population is projected to hit 80 million beneficiaries by 20301, up from 60 million today2. And, at least temporarily, we may see a large influx of Medicaid beneficiaries stressing state budgets as a result of COVID-19’s economic impact.
With limited funds to go around, government payers will demand substantial discounts for pharmaceutical products. VBAs could be one way to structure payments that stretch over a period of time and reduce government costs if products are not as effective for a particular subset of patients.
The main roadblock to this approach is the Medicaid Best Price policy, which requires that Medicaid pay the lowest price of a drug offered to other payers. Under this policy, if a VBA with a private payer results in a discount to a payer that exceeds the Medicaid rebate, then Medicaid’s pricing floor drops. This is too blunt a tool for precision medicine—and it prevents some manufacturers from entering into VBAs with private payers.
Congress has expressed some interest in exploring different reimbursement approaches, including agreements that would allow Medicaid programs to finance gene therapy over time.
A provision to do just that was recently included in a Senate bill designed to lower patient out-of-pocket costs in Medicare. But it will require a broader overhaul of Medicaid pricing policy to make VBAs more feasible for both government and private payers.
5. Is your product so innovative that it requires a new payment model?
Science is moving at a much quicker pace than policy, and in some cases, scientific advances are calling for a fundamental change in the way we pay for treatments. In gene therapy, a patient may only need one treatment to have a curative effect on a disease that would otherwise have lasted their lifetime. The cost of this one-time treatment can be high—much higher than we are used to seeing in traditional drugs that would otherwise treat chronic symptoms.
But we don’t yet know for certain whether a gene therapy that has been tested for two years in a clinical trial will actually have the intended effect for a person’s entire lifetime, or at least the 10 years of durability that is typically used for analysis. Rather than delay a highly anticipated drug’s launch for a decade while testing durability, manufacturers are looking for ways to get the treatment on the market and to the patients quickly.
New payment structures are part of the solution, with manufacturers proposing agreements that spread payments out over time (say, five years) while the manufacturer collects data on real-world use and effect of the drug. If the drug does not have the intended effect, the payer pays only a portion of the total cost or gets a rebate. The drive toward more personalized medicine as we learn more about a person’s genetic makeup will only amplify the need for innovative payment models.
The FDA anticipates approving 10 to 20 cell and gene products every year by 2025, and with many of those expected to launch with high-price tags, VBAs will play a critical role in supporting patient access to transformative therapies.
Pricing pressures will continue to mount, driven by cost strains on the system and a political environment that has been unrelenting for the last five years. Showing a commitment to value-based pricing signals to payers that you believe in your product and you are willing to share some of the risk involved in providing a high-cost treatment for patients. Continuing to demonstrate the value of your therapy in the real world is an imperative—to payers, policymakers, and most importantly, patients.
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