Outcomes-Based Contracts Peak Health Plan Interest

As drug prices continue to increase, payers have been searching for innovative ways to control costs. One measure to achieve cost control is to implement innovative contracting agreements with manufacturers.

Outcomes-based contracts are a novel type of agreement between health plans and manufacturers that links reimbursement to patient outcomes. If a patient does not achieve a specific goal set by the parties involved, the manufacturer will receive a lower payment, depending on the exact terms of the contract.

A new survey conducted by Avalere suggests that a majority of health plans have a positive view of outcomes-based contracts and many already have these agreements in place. Importantly, these stakeholders are actively pursuing new contracts for various therapeutic areas.

The health plans included in the survey understand the significant operational challenges that must be addressed, but they also have a generally positive opinion about the value outcomes-based contracts can provide their company, according to Avalere.

Included in the survey were responses from 50 representatives of 45 health plans that represent 183 million Americans. Respondents were required to be a medical or pharmacy director or have a similar role to participate in the survey.

The investigators found that 70% of health plans reported a positive opinion towards the contracts, while one-quarter already have at least 1 in place. In fact, 12% reported that they have more than 5 in place, Avalere reported.

Approximately 30% of health plans reported that they are in the midst of negotiating at least 1 outcomes-based contract, according to the survey. However, 29% of respondents did not indicate they were planning to pursue the contracts.

Among payers with outcomes-based contracts in place, a majority reported they are planning to implement additional agreements in the future.

“Health plans, providers, and patients demand innovative, data-based methods to improve outcomes and manage cost,” said Dan Mendelson, president of Avalere. “Outcomes-based contracts offer the opportunity to deploy data, analytics, and interventions to deliver on these goals for pharmaceuticals — particularly to better integrate therapy into medical management.”

According to the survey, a majority of respondents had outcomes-based contracts related to endocrine, infectious disease, cardiovascular, and respiratory conditions. The health plans also expressed interest in expanding the contracts to other areas, including immune and inflammatory conditions.

Since the shift towards value-based care is relatively new and there are still significant barriers to overcome, it is likely that more payers will implement new contracts in the future given their positive opinions.

“While some plans have experienced administrative and operational challenges in implementing outcomes-based contracts, most are figuring out ways to benefit from these types of contracts in multiple therapeutic areas,” said Kathy Hughes, vice president at Avalere. “Solutions in data connectivity, contract monitoring, and direct clinician intervention streamline the administrative burden and enable transparency for all parties.”