By Jeremy Schafer, VP, specialty strategy at Precision for Value
Paying for performance rather than volume has been a long-sought-after goal of the healthcare system in the United States. Express Scripts recently announced plans to pursue contracts in the oncology space based on drug performance per indication.1 Similar statements and tools on cost and value for oncology medications have risen at hospitals and professional meetings.2-4
The concept of indication-based drug contracting could represent a new frontier of manufacturer-payer agreements. Indication-based contracting presents clinical and operational challenges, and it is important that pharmaceutical manufacturers be educated on the opportunity and risk of indication-based contracts.
Key Players And Barriers
The divided nature of the U.S. healthcare system remains a hurdle to implementing an indication-based drug contract. PBMs control the adjudication of prescription claims and rebate invoicing, but generally lack medical claims data or have only indirect access to limited medical sets. Without being able to match a medical claim diagnosis code to a specific prescription claim, the PBM may not know what disease a drug is treating. The fragmented nature of the patient data means that partnerships may be necessary for contract fulfillment.
Data sources must be reliable and consistent for an indication-based drug contract. Medical claims data tends to lag, and if a patient is diagnosed and prescribed therapy on the same visit, the medical claim may lag behind the pharmacy claim by months. More intricate diagnoses may require additional diagnostic information not easily pulled from medical claims data. Finally, inaccurate coding is a common problem.5
Once data sources are mapped, individual parties must agree on data rights and ownership. Different entities may be reluctant to share sensitive information with each other, particularly when the parties are indirect competitors. Sharing patient-specific data is a concern unless appropriate safeguards are in place. Contract value must also benefit all parties.
Finally, indication-based drug contracting represents a departure from a long- running model. An indication-based drug contract would require new processes to be set up by both the manufacturer and the payer. Payers would need to collect and report clinical data to manufacturers, and manufacturers would need to receive the clinical data and potentially rebate at different rates depending on the indication. Coupled with the challenges discussed previously, the financial incentive may not be enough for either side to advance the opportunity.
Evaluating The Opportunity
Prior to considering an indication-based drug contract, a pharmaceutical manufacturer should complete several steps.
Rising healthcare costs will continue to drive payers and PBMs to create new strategies for cost savings. An indication-based drug contract would be more complex and requires collaboration across multiple stakeholders, but offers a unique opportunity to create a deeper relationship with the payer. A manufacturer should assess the risks and opportunity of any indication-based contract proposal prior to engaging.