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Outcome-Based Contracting Means for Drug Development and Pricing

Posted by Doctor Dan on Jul 25, 2017 2:44:18 PM

The pharmaceutical industry is facing intense pressure to lower drug prices and curtail the price increase in the recent years. This has been due to a dramatic increase in the cost for some high-profile and certain life-saving drugs. The high cost of drugs makes it difficult for patients who are in need of medicines on the regular basis. The increasing cost is a source of stress to the patient and his family.

Outcomes -based contracting is a term that is highly discussed and debated in the recent times. Government regulations and employer groups are shifting the focus of healthcare and putting pressure on drug manufacturers to provide value to the patients. To achieve this objective manufacturer and payers are getting into structured contracts based on a drug's performance and the resulting patient outcomes. These contracts help to safeguard patient interests and keep drug prices in control.

“The growth of outcomes-based contracts between plans and manufacturers is a clear response to the health system’s call for cost-containment without restricting patients’ access to new, breakthrough therapies,” Dan Mendelson, president at Avalere, said in a company statement about the report.

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Importance of an Outcome Based Contracting Agreement

Outcome- based contracting help in creating trust and understanding. An ideal contracting arrangement establishes a productive dialogue about the true efficiency of drug, bases on patient outcomes and provides concrete data that helps in correct comprehension.

In the past, the payer carried the responsibility for positive outcomes of drugs. The case is different at present.

Today, an Outcome-based contract is an agreement between manufacturers, providers, and payers that place the responsibility on manufacturers to prove the value of any drug.

Benefits of Outcome-based Contracting
Here is a list of benefits

  • It helps to create quality and cost outcomes and increase accountability
  • Unique contracting models rely on patient-level data to measure success than on data pertaining to sales or utilization.
  • Requirements for Implementation of Outcome-based Contracts
  • Conduct a detailed Initial research and analysis of current patient-level data
  • Awareness of pharma manufacturers about the complexity and risk of by accurately evaluating the drug's outcome
  • Effective negotiations with manufacturer, payer, and provider (doctor, pharmacy)

Manufacturers should effectively collaborate with clinicians, who have a complete understanding of best treatments for patients. While managing these agreements they should create a system that helps them to view all of their rebates systematically in a single location. Revenue management technology can provide an effective solution in the form of an integrated system that allows comprehensive reporting, tracking and managing the contract processes

Challenges in Creating an Effective Contract Agreement
Measuring patient compliance is a complex process and many times very difficult. Availability of limited data to manufacturers from tracking prescriptions to either reward the provider with a rebate to find out why metrics have not been achieved.

Another problem is an evaluation of these contracts. It is difficult to assess these contracts in the absence of any automated technology solutions. Evaluation of the contracts is the time-consuming process that is handled manually. A lot of time is required to collect data and calculating success.

Some experienced manufacturers have established a systematic set of processes by bringing all data into a centralized application like revenue management systems. These manufacturers have access to comprehensive reports, analysis to track and compare customers and monitor trends. This helps them to know the effectiveness of the agreement.

Topics: Drug Safety