Beyond borders 2016

It's time for biopharma to embrace risk sharing

  • Share

Michael Sherman,
Harvard Pilgrim Health Care

It’s broadly recognized that the US is shifting from a fee-for service reimbursement model to one based on health outcomes. This change affects both physician and biopharmaceutical product reimbursement.

On the physician side, the shift to outcomes-based reimbursement has happened faster than many realize. At Harvard Pilgrim, for instance, 85% of the doctors in our network are already reimbursed based on “at risk” arrangements that, at least partially, link payment to patient outcomes.

The specific payment model adopted depends on the provider group and its willingness to take on financial risk. Some groups are interested in capitation models in which they bear full financial risk; others prefer shared-savings models that reward physicians for reducing the total cost of patient care.

Offering different options has been critical to our ability to reward physicians for delivering improved outcomes. This has proven to be a far better approach than trying to force-fit physician groups into a one-size-fits-all model that requires them to take on more risk than they are ready to own.

In contrast to physician reimbursement, biopharma product reimbursement is not nearly as advanced. As an ecosystem, we primarily still pay for pills, not better health solutions.

The good news is that more biopharma companies are interested in finding opportunities to align with payers around outcomes. The bad news is that most drugmakers still view risk sharing as a defensive strategy, reserved for competitive indications where traditional market access methods have failed. Instead, drug companies need to view the changing payment paradigm as an opportunity that enables greater patient access to their products.

Moving from fee-for-service to fee-for-value is not easy. It requires a spirit of trust. Historically, payer-pharma contracting has been viewed as a win-lose transaction. Insurers and pharmacy benefits managers want to pay less for drugs; manufacturers want us to pay more.

But if we look at payer-provider collaborations as a proxy, our relationship with drugmakers doesn’t have to be adversarial. I believe payers and pharma can work together to eliminate unnecessary portions of the care delivery pathway and create a framework that is mutually beneficial. Moreover, the drugmakers that embrace novel payment models now will have an important first-mover advantage as paying for outcomes becomes institutionalized across the country.

Creating a model for the future

Our recent partnership with Amgen around the PCSK9 inhibitor Repatha, a new biologic that lowers cholesterol, is a good example of how payers and drug companies can find common ground. In exchange for a price rebate, we restricted access to a competing product, making Amgen’s drug the preferred product for our members. In addition, Amgen has agreed to offer price protections based on real-world evidence: if treatment with Repatha doesn’t result in the same cholesterol lowering shown in its clinical trial, Amgen will owe us an additional rebate.

My hope is that other pharma companies will look at our collaboration with Amgen and be more open to similar risk sharing arrangements. It’s true that cholesterol is an easy metric to track via claims data. It’s a little more complicated to track cost offsets linked to the avoidance of hospital admissions or other services. But if the up-front drug cost is sufficiently high, I’m willing to dedicate internal resources to manually collect the data to determine if the success criteria have been met.

What I want to emphasize is that risk sharing with pharma shouldn’t be viewed as an all or none approach. As has been true on the provider side, it is reasonable to expect that we will need to deploy a range of payment models.

In the future, we’ll be able to create even more sophisticated risk-sharing arrangements based on prescription adherence or other patient data. But for now, even straightforward arrangements, such as our partnership with Amgen, aren’t trivial to set up. Not only do both parties have to agree on the outcome to be measured, but they must also have the necessary data collection and analytic capabilities. In some cases, that may require additional investment.

Still, we can’t let the perfect be the enemy of the good. As with any other initiative, risk sharing with pharma will only gain traction if there are some wins. That means taking small steps with the right partners. On the payer side, a number of us have embraced the concept and want to partner with counterparts in pharma. The question remains: Which drug companies are proactively willing to partner with us?