Value-Based Contracts Significantly Decrease Price of Co-Pays for Medications

Commercially insured individuals with health plans with value-based contracts for diabetes, high cholesterol, and HIV medicines had average co-pays that were 28% lower for those prescription medications compared with people on other plans, according to a report from the Pharmaceutical Research and Manufacturers of America (PhRMA).

Payers are exploring new contracts that connect reimbursement for medicines to the value for individual patients. Types of potential value-based contracts include performance-, outcomes-, indication-, and regimen-based contracts, among others.

“Results-based or value-based contracts can reduce healthcare system costs and can make medicines more affordable and accessible for patients,” Stephen J. Ubl, president and CEO of PhRMA, said in a press release. “The healthcare market is starting to move in this direction, but we need public policy reforms that allow greater flexibility for innovative payment arrangements that lower out-of-pocket costs and enable patients to access the right treatments the first time.”

The data found that value-based contracts improve patient outcomes by providing broader access to innovative medicines and supporting appropriate patient use of medicines. In addition, they reduce medical costs be preventing hospitalizations. For example, if value-based contracts decrease the burden of diabetes in the United States by 5%, the state could save more than $12 billion annually, prevent 365,000 emergency department visits, 390,000 hospital outpatient visits, and 1.3 million hospital inpatient days, annually.

The report cited an analysis conducted by Avalere, which found that 33% of payers saved on healthcare costs when using a results-based contract, while 38% witnessed improved patient outcomes. These types of contracts can also reduce the cost of medicines by moving away from unit-based approaches while aligning stakeholder incentives around value.

Value-based contracts result in life years gained, improved quality of life, increased productivity, reduced medical costs from hospitalization, and reduced medication costs. As a result, 70% of commercial health plans have a favorable attitude towards outcomes-based contracts, and almost one-fourth of these payers have already implemented such a plan.

Companies have identified many barriers that limit the scale and scope of value-based contracts in the healthcare market, including concerns about price reporting metrics, potentially implicating the federal anti-kickback statute, and the uncertainty of FDA rules regarding manufacturer communications.

While patients benefit tremendously from value-based plans, barriers of implementing this model approach limit their potential. Current policies must evolve and modernize to allow value-based plans to become more accepted and widely used by American patients.