The New Criteria For Choosing Medical Products: Outcomes

Joseph Miles

While it seems to be clear that life sciences models are changing, it’s not as clear what will replace them. The traditional “fee for service” reimbursement models are seen as too costly and ineffective at improving outcomes. Manufacturers are working with payers, providers, and physicians to create new models where the reimbursements for the drugs and devices is directly aligned with the anticipated health outcome. This is a difficult process that is just underway for a limited group of therapies, and the future of these types of outcome based models is still unclear.

What we do know is that the industry is moving steadily toward a new model in which patient outcomes will be the main criteria to primary criteria for reimbursement. The digital economy, combined with connected patients, enables advances that leverage the variety of real-world evidence (also known as patient-captured data) that provide a more precise view of the patient and their therapeutic condition. Cloud solutions are reducing the cost and complexity associated with setting up the infrastructure while the network-enabled value chain provides access to a broader group of participants who can collaborate more freely up and down the value chain.

Value creation will be accelerated as a result of the tighter collaboration between the health sciences players, including life sciences manufacturers, contract organizations, hospitals, physicians, research organizations, scientists, and patients.

Outcome-based pricing – shifting focus

New models will focus on improving patient outcomes as the primary metric for reimbursement. The higher the efficacy of the therapy (which in many instances will have a variety of non-drug- or product-related components like exercise, weight reduction, and/or data capture), the more effective it will be at improving the health of the patient.

This is a significant change from the traditional unit-based drug and product pricing, but resources need to be more focused on improving the health of the patient rather than simply paying for a drug or product where the reimbursement focus is on ensuring the health of the patient and generating revenue per prescription.

The new world of connected patients and extensive access to technology provide the landscape to conduct post-market studies to provide a higher degree of accuracy at a significantly reduced cost than previously possible. These types of studies will continue to validate the therapeutic improvements, and where necessary, allow for changes ,to ensure a positive outcome. Outcome-based approaches bring patient-centricity to the forefront by ensuring the therapies deliver the desired outcome to the patient in a cost-effective manner.

Let’s take a look at an example.

Amgen & Harvard Pilgrim

As explained by PharmaPro, “Amgen has a struck a deal with Harvard Pilgrim Health Care, through which it could pay rebates if its new cholesterol drug Repatha does not perform as well as it did in clinical trials.” This deal “is one of the first outcome-based agreements between drug makers and health insurance companies in the U.S.”

In one of the first outcome-based agreements to be announced, the payer, Pilgrim, is trying to ensure a baseline outcome that was demonstrated in the clinical trial. Based on that information, the payer should be able to more accurately predict the outcome while also understanding the reimbursement implications for that therapy.

Accelerators for patient-centric models

The hope of outcome-based pricing is that patients will benefit from an approach that focuses on a positive health outcome while payers will have reimbursements that improve the quality of a patient’s health. This seems obvious, but in the past it was not always the case.

Further, the rapid advance of sensor and device technology, combined with the decreasing cost of that technology, has rapidly accelerated the use of real-world data. Sensors and/or devices can be leveraged to improve the quality of life for patients suffering from a variety of chronic diseases like diabetes. Devices used to provide real-time updates on glucose levels, combined with additional information on exercise, weight loss, and caloric intake, can provide a much more holistic view of the patient. This information gives the physician and care providers a much improved view of the overall status of the patients’ health, which should help improve outcomes.

The bottom line

Outcome-based healthcare will be reality for most, if not all, healthcare systems going forward. Technologies that can accurately capture real-world evidence data in real time create value by simplifying and enabling the process.

Whether leveraging mobile apps, wearable technology, or other types of smart technology, healthcare personnel will be empowered to have a much more holistic view of their patients. This in turn should drive positive outcomes and further reinforce the use of the new business models. Hopefully, that is a win/win/win scenario for payers, manufacturers, and patients.

To learn more about how to harness the power of data at your life sciences organization, read the whitepaper “The Digital Health Sciences Network.”


Joseph Miles

About Joseph Miles

Joseph Miles is Global Vice President pf Life Sciences at SAP. He is passionate about helping organizations improve outcomes for their patients and enable innovation across the health sciences value chain.