Lisa Carman: The purpose of value-based contracting is to create an arrangement between a typical payor and a manufacturer, that would put some level of risk-sharing or emphasis on the value of the drug.
Deb Curry: So value-based contract is defining value of the product as opposed to driving to volume of the product.
Lisa Carman: The fee-for-service model for contracting now is very basic – you get a rebate based on all utilization.
Deb Curry: Whereas value-based contracting, we're looking at what are some clinical outcomes, what's happening with the product and how is it improving overall health.
Lisa Carman: And the important part about value-based contracting is that you have a little bit more flexibility, but I think there's risk on both sides and you really have to understand the value of your product and be willing to stand behind that.
Deb Curry: Life science companies have to kind of shift their model and shift their roles in how they view their products. Our product has better value than our competitor and we want to work together with you to drive that value.
Lisa Carman: I think trust is going to be important going forward as we try to build partnerships between life science companies and manufacturers. But I think you're going to see some payors really latch on to value-based contracting and figure out ways to use it as a tool to control the formulary and potential costs.
Deb Curry: The future is wide open for value-based contracting.
Lisa Carman: What can we continue to do to make these more viable? How do we make them more efficient? What types of data can we use in more meaningful ways?
Deb Curry: We're shifting the paradigm in the U.S. health care system from “What can we get for the least amount of money?” to “How can we provide the best value for patients?”
Lisa Carman: And I think the implications as we start to challenge the traditional rebates, I think value-based contracting could really be something in the future.
Value-based contracting overview
Deb Curry: A value-based contract could take anywhere from six months to a year to implement.
Lisa Carman: And you really need to understand the value of a product, how it works in the real world, so that at the point in time when you engage with a payor, you're ready.
Deb Curry: Life science companies should really be thinking about value-based contracts as early as possible, even in phase II trials where they're working towards, "What is our value proposition going to be to the payor and what can we offer the payor?"
Lisa Carman: Do the internal work way before launch. So at the time that the drug is going to be launched and payors review in their P&T committees and make coverage decisions, that you've already thought through if this is appropriate for a value-based contract, how would that look? Do we want to participate with a payor?
Deb Curry: Life science companies that don't start early in their life cycle tend to have a more difficult time proving the value of their product.
Lisa Carman: It's a lot harder to go back and try to undo a decision that's been made. So, the earlier that you can start before they make a decision on your product is really the right time.
The importance of being proactive in value-based contracting
Lisa Carman: Payors are looking to life science companies to be willing to put more skin in the game on these contracts. I think they're looking for more financial risk and to making it more meaningful for both sides.
Deb Curry: Life science companies should approach a value-based contract knowing the outcomes that they're hoping to achieve.
Lisa Carman: Looking at a win-win for a value-based contract both from a manufacturer perspective as well as a payor is really important because those incentives don't often align, and you really have to figure out where is that middle ground.
Deb Curry: A lot of times it involves real-world evidence that's already out there in the disease state and looking at what are the gaps in care.
Lisa Carman: There has to be a reason that a manufacturer is going to engage, perhaps it's a better formulary status, it's a better partnership, and it's important to look at it from the payor perspective if they're going to provide access in a contract, there has to be enough meaning for them.
Deb Curry: In order to develop a successful value-based contract, a life science company is going to want to include their Medical Affairs team, oftentimes, their Health Economics and Outcomes Research team, their Commercial-facing team as well as their counterparts at the payor and other consulting companies to develop something that's meaningful.
Lisa Carman: There's two ways to think about timing on a value-based contract. One would be for a product that's already been in the market; it could be a heavily competitive market. The access to that manufacturer isn't optimal. That would be a point in time where you could use a value-based contract to really change how a payor would manage that class. The other piece would be for a new product. And even if that new product is in an innovative space where there isn't a lot of competition, it's important to still think about value-based contracting because it's really more understanding what the product's value is and how you're going to present that to a payor, and the earlier that you do that and engage with a payor rather than waiting until there's a competition or a reason to, is going to make a better partnership.
Key considerations in value-based contracting
Lisa Carman: So value-based services is going to provide clarity for the manufacturer to be able to decide, what's the right time with the right message and what type of information would a payor want to see?
Lisa Carman: It would help prepare them in terms of what do I need to engage with the payor? What types of resources, information, tool can I share with the payor to talk about the value of your product?
Deb Curry: It's very important for a life science company to have a value-based strategy in place before their product is launched because they can help to drive what's happening in the clinical trials, what are we looking for once the product hits the market?
Lisa Carman: It's important for manufacturers to really think about access and value-based contracting as a tool, and that tool would look different based on the management or that type of payor.
Deb Curry: I would say all products are a good fit for value-based services, particularly if they're in the pre-launch phase. If you're going through the process of looking at how does your product provide value, you can get to the point where you say, "Are we going to do a value-based contract or is this on our roadmap?"
Lisa Carman: I think the national payors are still going to drive for value-based contracting, but I think it's going to get bigger than that. It's really about how to prepare the manufacturer to engage with the payor at the right time with the right message.
How value-based services can help prepare for value-based contracting
Lisa Carman: The early pilots that were done in value-based contracting were really around what could be measured, likely to be an event, what can we look at – a hospitalization – a very specific outcome. As the evolution of value-based contracting is kind of following a different path, things like adherence, total cost of care, a little bit more complexity is starting to emerge.
Deb Curry: Another key learning from early value-based contracts is that value-based contracts really are driving to more real-world evidence, which is being recognized and used more and more in decision-making.
Lisa Carman: The most obvious readout from the early contracts was around financial. The "aha" that I think payors are starting to realize is, it's actually telling them how that patient population is doing on that medication. It's showing them real-world evidence in their population.
Deb Curry: We really learned a lot of things about how to make sure you're preparing early, making sure that you're doing due diligence with real-world information.
Lisa Carman: I think there has to be a commitment to value-based contracting. These are not an easy endeavor; they take a lot of resources from both manufacturers as well as life science companies and there needs to be more efficiencies in the system.
Deb Curry: It's key for a value-based contract's success for there to be an unbiased data collection and adjudication of the contract.
Lisa Carman: I think this has been a learning process on the piece of the data and how do you adjudicate these and how do you measure these? In the end, I think what we're learning is - there's still significant challenges across the health care industry to really making value-based contracting mainstream.
Deb Curry: But, as we start to realize that lowest net cost doesn't necessarily lead to the best value, it will help to shift to value-based contracting being more the norm as opposed to the exception.
Key learnings from early value-based contracting
Deb Curry: Some key components of a successful strategy in value-based contracting is really taking the time before you’ve started to go through what is available, what evidence is available, what's happening in the real world right now, and making sure that we're defining key outcomes.
Lisa Carman: So value-based strategy should really line up with the manufacturer's access goals. You know, really thinking about competition, what are the risks to the product, what's the potential to be excluded? I think once you understand where it can line up with the access for a payor, it starts to clarify what is the value of that product and how are payors going to look at it?
I think life science companies really need to do a couple of pilot value-based contracts to really understand, not from just a setup and financial, what outcomes do you measure, but really seeing it from the other side: How do these read out? How do those discussions happen with a payor when you have that information? And once you start to engage with a payor on the results, it starts to change your strategy. You start to think about what more should we look at? Do we want to do these going forward? What other outcomes could we look at? How willing are we to put the value behind the product?
Deb Curry: I would say the key takeaway for a life science company that wants to do a value-based contract is to ensure that you are driving to a meaningful outcome that's actually achievable.
How to develop a successful value-based strategy
Lisa Carman: Life science companies, I think, need to be really thoughtful on the partnerships that they explore in value-based contracting. I think they need to think about who is the right partner? Who is the right payor? And which is the right type of product?
Deb Curry: Value-based contracting is relatively complicated because it requires data; it requires analysis and understanding of the disease state. Therefore it's often important to bring in a consultant or another organization that has expertise in that area in order to make sure they're marrying the life science goals with the payor goals.
Lisa Carman: There’s a lot of different consultants and areas of expertise around value-based contracting. I think the important thing that a life science company needs to think about is have they actually done one? I think it's not just about the concept. It's really about how do you take it from A to Z. And once you've had to really adjudicate one, process the data, and report it out to a payor, do you really kind of understand the implications of the whole process.
Deb Curry: A company that's looking to do a value-based contract should make sure that any partner that they choose has the skillset necessary in order to address the disease state, they have access to data, understand the data, as well as experience designing and implementing a value-based contract.
Lisa Carman: Something to consider when you're looking for a partner on helping to design a value-based contract, I think having that payor experience and being able to think like a payor and really think about the end result is how this is going to look to a payor when those results read out in terms of real-world evidence. I think it's really important to think about the latter implications than just about the design of the value-based contract.
Choosing the right partner in value-based contracting
Lisa Carman: Optum Life Sciences can help a manufacturer with value-based contracting from a front-end design consulting perspective, but also from adjudication and working with the payors.
Deb Curry: Optum Life Sciences has the experience, the payor perspective, the data and analytics and the relationships in the health care industry in order to help life science companies build a meaningful value-based contract.
Lisa Carman: Optum can be your end-to-end partner on value-based services. We have internal resources from our state-of-the-art data and technologies, our HUR department that helps support that real-world evidence and understanding the real-world evidence. We have actuary services, being able to look at the payor burden as an example and also the Lewin Group, which an important component. They work with the regulatory and, as we know, that determines what we can do for value-based contracting.
Deb Curry: We can help develop strategies, support implementation, and determine viability of value-based contracts.
Lisa Carman: So, the fundamental piece to value-based contracting is the data. Here at Optum Life Sciences, we can take the real-world evidence and understand how that particular drug performs for that competitive class. And we can run that real-world evidence through a contract simulation model. We do a fair amount of testing, looking at it from the manufacturer as well as the payor perspectives.
Deb Curry: We can help life sciences companies succeed in their value-based contracting by ensuring that we've fully vetted the contract before bringing it to a payor.
Lisa Carman: We really take value-based contracting from A to Z. It's not just about the design work, it's really about pulling it through with the payor and I think it's that payor experience that really brings the differentiator for us to the table. We are uniquely positioned to help both the payor and the manufacturer to build what is that win-win for both sides.