Featured Health Business Daily Story, June 29, 2017

Most Plans Have — or Are Negotiating — Outcomes-based Contracts

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Subscribe today!

By Judy Packer Tursman, Senior Reporter
June 12, 2017Volume 27Issue 20

Health plans’ interest in outcomes-based contracting (OBC) has never been higher, industry consultants at Avalere Health told a June 7 webinar. Nationwide, 24% of plans have one or more OBC in place and another 30% are currently negotiating for one or more such agreement. That’s according to the firm’s survey, released in late May, of 45 plans covering 183 million lives.

The survey found that seven in 10 plans report favorable attitudes toward OBCs and fully 96% are familiar with OBCs for drugs. It also found that sometimes plans are proactive on the matter, with 11% of plans initiating discussions with drugmakers about OBCs.

Under the agreements, the product’s performance is tracked in a defined patient population over a specified period of time and reimbursement is based on the health and cost outcomes that are achieved, explains Avalere, which has launched its own OBC technology platform.

Health Plan Week

According to Avalere, payers are seeking to expand OBCs in therapeutic areas where agreements already are common: 55% have such contracts for diabetes, 45% for infectious diseases, 42% for cardiovascular issues, and 41% for respiratory problems such as chronic obstructive pulmonary disease (COPD) and asthma.

Avalere Vice President Kathy Hughes told the webinar this represents a change. “Years ago, therapeutic areas for these agreements were in high drug cost areas applicable to small populations,” she said. “Now, you’re seeing many more contracts in primary care areas.”

Hughes points out that plans’ top advantage to date in having OBCs is better patient management. She describes plans as being in an “intermediate period, just getting into these contracts…and we still haven’t achieved cost savings and other things,” such as patient outcome improvement. Still, she says, “plans are heading in the right direction and making contracts better than they were previously.”

The first thing that comes to mind in terms of plans’ key concerns about OBCs is the pricing impact and achieving critical mass, says Avalere Vice President Ken Ehresmann. He explains the idea isn’t to look for the pricing impact on a particular drug; instead, the plan’s medical cost management team might include OBCs with other methods to figure out how to achieve savings. Plans also must consider whether they want to explore OBCs’ impact internally or against their competitors, he notes.

Among insurers active in OBCs cited by Avalere are Cigna Corp., which is working with several pharmaceutical companies, including Merck for its diabetes drugs Januvia and Janumet, and Novartis for Entresto, its heart failure drug. Aetna Inc. has OBCs with Merck and Novartis for the same Merck and Novartis drugs; and Harvard Pilgrim Health Care, Inc. is working with Novartis on Entresto; with Amgen on its heart drug, Repatha, and Enbrel, its biological therapy for rheumatoid arthritis; and with Lilly on its diabetes drug Trulicity.

Avalere cites three broad categories of plan challenges related to this type of contracting: scalability and trust between plans and drug manufacturers; infrastructure and capabilities to manage data, reporting and contract adjudications; and legal and regulatory issues, including anti-kickback statute violations, FDA’s regulation of drugmakers’ off-label communications, and Medicare and Medicaid pricing laws.

Find Avalere’s OBC survey results at http://tinyurl.com/y8udz7c7.


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