Insights Brief. Advancing outcomes-based contracting. Overcoming barriers of trust, knowledge and data management

Transcription

1 Insights Brief Advancing outcomes-based contracting Overcoming barriers of trust, knowledge and data management

2 Highlights Establishing trust between life sciences companies and health plans is critical in the design and implementation of outcomesbased contracts. This may be best achieved with solutions that can deliver visibility into shared outcomes and the risk taken by both parties. Life sciences companies seeking to move beyond high-publicity agreements are providing their Market Access teams with flexible analytic and forecasting tools to more rapidly and efficiently assess various potential contracts. Implementing scalable performance monitoring solutions has the potential to generate valuable, proprietary, real-world evidence data sets for life sciences companies and should be carefully evaluated as part of the outcomesbased contracting strategy. Truven Health Analytics was acquired by IBM in 2016 to help form a new business, Watson Health. Watson Health aspires to improve lives and give hope by delivering innovation to address the world s most pressing health challenges through data and cognitive insights. Introduction Truven Health Analytics, an, held discussions with more than a dozen life sciences companies to gather in-depth insights on their experience and intentions for outcomes-based contracts (OBCs). Viewed as an innovative way to improve patients access to the right therapies, life sciences companies are facing strategic and tactical challenges implementing OBCs. In this brief, we share insights from our discussions and recommendations on how to move the industry forward in executing more OBCs in the US. Observations 1. Trust To date, implementation of OBCs in the US has been driven from the top of the organization. In our discussions, life sciences companies shared that their CEOs and Heads of Market Access ask payer liaisons to implement innovative contracts to garner press and to find a new way of improving market access for specialty drugs. However, payer liaisons cited challenging conversations with payers, noting skepticism about the contract potential and how much of the risk is truly shared. At the core of this skepticism is a misbelief that life sciences companies want their therapies used as widely as possible. The truth, according to the life sciences companies we spoke with, is they want their therapies used for the right patients. Yes, they want to maximize revenue and may price their therapies accordingly; however, in general, they impart an innate desire to improve patients outcomes. Establishing this type of trust begins with a shared understanding of baseline outcomes. Before contract negotiations can occur, both sides need confidence and shared visibility into the data sets and analysis methods used to inform the contract structure. Today, this is achieved with third-party publications and/or custom health economics and outcomes studies requiring significant resources from the manufacturer or performed inhouse by the payer, limiting the widespread use of insights. Industry-driven value-assessment framework initiatives, such as the International Society for Pharmacoeconomics and Outcomes Research Initiative on Value Assessment Frameworks 1, are under way to improve standardizing value measurement, but these initiatives are likely to remain separate from individual contract pricing. In the near term, the availability of standardized, disease-based financial and clinical outcomes reports could allow both sides to establish baselines from which to start contract negotiations. While likely requiring refinement for specific patient populations depending on the health plan and therapy under discussion, significant time and cost could potentially be saved by early identification of endpoints that are available, measurable and clinically meaningful through standardized reports and definitions. Moreover, these reports could lay the foundation for more advanced budget impact modeling and treatment sequencing decisions that are viewed as critical for long-term drug cost containment. Page 2

3 2. Organizational knowledge Evaluating and engaging in OBCs deviates from the traditional rebating conversations that life sciences companies have established from years of negotiating with US payers. Our indepth conversations revealed some innovative approaches to implementing new processes and aligning key stakeholders to enable more OBCs. In Market Access departments, some life sciences companies are arming payer-facing teams with flexible analytic and forecasting tools to more efficiently assess the various constructs proposed. For example, using analytics on realworld data to identify patient sub-populations and predict therapeutic performance can help to increase the specificity of contracted endpoints and performance thresholds to make OBCs more successful. Organizations that provide these capabilities could help to increase the success rate during the payer negotiations and accelerate market access for their therapies. In addition, some life sciences companies shared they have a specialized contracting expert working with payer liaisons in developing and finalizing novel contracts. In this role, the specialized contracting expert has the knowledge to make tradeoff decisions between increased rebates, improved access and net price. This expert is also able to support additional finance needs, including best price and revenue recognition reporting. To help address legal concerns in the near term, life sciences companies are beginning to establish their own positions on critical items, such as how to engage health plans without violating regulations imposed on manufacturer communications and avoiding kick-back penalties. In the long term, life sciences companies recognize the need to work together to drive industry alignment and, alongside Congress, to clarify the key regulations inhibiting the ability to execute more OBCs. Nearly all life sciences companies shared they are using external consultants to supplement their internal capabilities, as the expertise in OBCs is specialized and spans multiple departments. Over time, as life sciences companies invest in novel decision support tools and gain experience, they may realize resource savings from building out internal expertise to manage OBCs. 3. Data management A minority of the life sciences companies we spoke with shared that the administrative burden of negotiating and managing OBCs is significant and outweighs the benefits from engaging in innovative contracting today. For the remaining majority of life sciences companies that have entered into OBCs, they expressed facing challenges in monitoring the performance of the contracts. We can segment their approaches for performance monitoring into those that either (a) accept a summarized performance report from the health plan or a third party, or (b) invest in a proprietary data management solution to apply contract terms to patientspecific outcomes and monitor contract performance. While a summarized performance report was more common with those we spoke to, the life sciences companies viewed this approach as limiting the benefits of engaging in risk-sharing contracts with health plans. They would prefer to receive de-identified, patient-level data to better understand the source of outcome performance. Additionally, the life sciences companies noted that summarized performance can expose the organization to higher levels of contract risk by relying on the processes established by a health plan and requiring arbitration if the parties disagree during the settlement period. Life sciences companies also indicated they accept a summarized performance report to keep overhead costs lower, and sometimes, for a faster implementation time. On the other hand, implementing a scalable monitoring solution across OBCs has the potential to generate significant data asset value for life sciences companies when incorporated as part of the outcomes-based contracting strategy. However, life sciences companies noted that contract and patientoutcome performance management can require large technology infrastructure and data management capabilities, which is not their focus or expertise. The infrastructure may need to maintain patient privacy, apply contract-specific terms and facilitate reporting on a regular basis. Sharing patientspecific outcomes between health plans and life sciences companies often requires heightened security and privacy measures, especially as those outcomes may be turned into insights and used for future marketing and development efforts. On average, life sciences companies we spoke with cited that for a single contract with a health plan, it may take an IT system analyst four to six months to set up the necessary systems, which can delay the contract implementation. We recommend that as life sciences companies evaluate their real-world evidence strategies, outcomes-based contracting should be part of the discussion. Technology and service investments to support standardized performance monitoring may benefit life sciences companies in the long run. Page 3

4 Conclusions OBCs are attracting a lot of attention, and life sciences companies that commit to OBCs as a key tool in their market access and value strategy may see benefits accrue across their organizations. We believe that investments in the tools to assess contract value and monitor contract performance will be differentiators for life sciences companies seeking productive negotiations with health plans around OBCs. Footnote 1. International Society for Pharmacoeconomics and Outcomes Research. Initiative on US Value Assessment Frameworks, Index. Accessed Oct. 12, About the author Denise Meade, Director, IBM Watson Health, has operated at the intersection of healthcare and technology throughout her career, and advises life sciences and health plan clients on how to best enable value-based contracting to improve patient care. For more information This insights brief is part of an ongoing series on value-based contracting. To engage the author in a discussion about this topic, please us at scienlif@ibm.com or visit truvenhealth. com/life-sciences for more information about our life sciences research and analytic services. About Truven Health Analytics, part of the IBM Watson Health business Truven Health Analytics, part of the IBM Watson Health business, provides market-leading performance improvement solutions built on data integrity, advanced analytics and domain expertise. For more than 40 years, our insights and solutions have been providing hospitals and clinicians, employers and health plans, state and federal government agencies, life sciences companies and policymakers the facts they need to make confident decisions that directly affect the health and well-being of people and organizations in the US and around the world. The company was acquired by IBM in 2016 to help form a new business, Watson Health. Watson Health aspires to improve lives and give hope by delivering innovation to address the world s most pressing health challenges through data and cognitive insights. Truven Health Analytics owns some of the most trusted brands in healthcare, such as MarketScan, 100 Top Hospitals, Advantage Suite, Micromedex, Simpler and ActionOI. Truven Health has its principal offices in Ann Arbor, MI, Chicago, IL and Denver, CO. For more information, please visit truvenhealth.com Page 4

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