Outcomes-Based PBM Contract Guarantees: Boon or Bust for Employers?

By Brett McCabe
Thu, Aug, 24, 2017 @ 14:08 PM

There’s long been chatter in the healthcare market about value-based contracting and other initiatives designed to assure payers that what they purchase is both cost-effective and promotes better patient outcomes. One innovation getting buzz these days involves pharmaceutical outcomes-based guarantees. But employers should retain healthy skepticism – for now – regarding whether such arrangements really provide undisputable value.

Under an outcomes-based contract, a pharmaceutical company will promise a payer (generally a health plan or PBM) that their new drug will perform better than existing market therapies (based on pre-defined outcomes measures), or refund some portion of money spent on the drug. For example, a manufacturer with a new product for blood pressure may “guarantee” that patients taking its product will experience greater reductions in blood pressure levels than patients on other hypertension products, or experience fewer side effects, and therefore, demonstrate higher adherence rates, than patients taking older therapies.

So, is this development good news? To a large extent, it is still too early to tell if arrangements such as these will actually deliver on their initial promises. That will take time and the collection and analysis of more patient and claims data. But there are good reasons why employers should remain skeptical at this stage.

First, bear in mind that outcomes-based contracting represents a way for pharma to influence formulary and other utilization management (UM) restrictions that would otherwise be in place to curtail uptake and potential excessive use of a drug.

Specialty drug manufacturers Biogen and Amgen are currently engaged, at least on a small scale, with payers regarding similar outcomes-based contracting arrangements, making it possible, although not certain, that some PBMs will extend this offer to employer clients at a future date.

What should employers do if their PBM starts offering outcomes-based guarantees from manufacturers? Employers would need to weigh such offers by their PBM carefully, as this could mean loosening or giving up formulary and UM safeguards – and likely increase the use of these newer most expensive products. Also, be aware that by loosening up restrictions, the PBM stands to gain financially because it will earn greater rebates and revenue on the higher-priced drug as it picks up greater market share.

The main problem we see with outcomes-based guarantees is that the outcomes measures we have seen to date around these types of arrangements have been incomplete, and therefore, inconclusive. It is one thing to show, for example, that a new blood pressure medicine lowered patients’ average blood pressure levels by five more points, compared with the older, less expensive hypertension agent. But it is quite another to show with certainty that this “bonus” five point drop further decreased actual heart attacks and strokes.

Other challenges include the ability to collect and report on required data, such as laboratory values, because these can require significant cost outlays to collaborate with medical carrier and claims systems. Sometimes, there may not be a clinical marker that can be readily measured, or there will be lag times between treatment and reliable outcomes data, which makes quantifying ROI very difficult.

The bottom line for employers: don’t be sidetracked by the shiny new toy of outcomes-based guarantees, at least for now. Be skeptical until more is known. Stay focused on using drug utilization and cost management tools that are proven effective in reducing costs and maximizing savings, including equitable and realistic drug benefit design, formulary and UM tools, and PBM audits.

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