Posted on March 23, 2017

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Sarah Carroll, NEHI




NEHI releases new white paper on one promising approach to managing biopharmaceutical costs

WASHINGTON, DC (March 23, 2017) – Amid national debate over biopharmaceutical prices, the Network for Excellence in Health Innovation (NEHI) today released a report on one approach to managing drug costs and obtaining better value for the money spent. Called “value based contracting,” these new arrangements between biopharmaceutical manufacturers and payers or purchasers aim to reward successful outcomes of medication use in patients, rather than paying manufacturers based on the volume of drugs sold.

In its white paper, Rewarding Results: Moving Forward On Value-Based Contracting, NEHI outlines theopportunities for, and obstacles to, these new value-based arrangements between manufacturers and payers, including private health insurers today and potentially government purchasers tomorrow.  The report points out that achieving the full potential of these contracts will necessitate regulatory and other changes, including provisions to permit these contracts without triggering “Best Price” drug regulations in government programs such as Medicaid.

                “There’s broad recognition that many effective biopharmaceutical treatments, and even cures, are coming onto the market, and that most will be high cost,” says Susan Dentzer, NEHI’s President and CEO.  “Payers of all sorts, whether private insurers or the government, need a way to manage these costs, and pay biopharmaceutical manufacturers for securing the best outcomes for patients, and not on the volume of drugs sold as is typically the case today.”   

NEHI’s recommendations to encourage value-based contracting for biopharmaceuticals include the following:

  • All stakeholders should reach consensus on a definition of value-based contracts that would be eligible for granting limited exceptions to certain government regulations. Paramount in this definition of eligible contracts should be emphasis on improving the health outcomes of patients.
  • The federal government should then create appropriate flexibility within federal pricing regulations to support value-based contracting.  It should also grant certain exceptions to anti-kickback laws that would allow manufacturers to undertake steps in fulfillment of value-based contracts, such as making sure that patients are adherent to their medication.
  • The U.S. Food and Drug Administration should finalize guidance on communications between biopharmaceutical manufacturers and payers about economic information on approved drugs, and work with stakeholders to consider allowing some protections for communication about off-label drug uses.

As the health care system overall moves away from volume-based to value-based payment, biopharmaceuticals also must be paid for under value-based arrangements. This paper and reccomendations aim tohelp create an environment in which these value-based agreements could be executed, and help to achieve better results for patients and a more sustainable rate of spending on health care.

NEHI’s white paper is available on NEHI's website: click here


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