Editor’s note: This story is based on discussions at Abarca Forward, a conference in San Juan, Puerto Rico, hosted by Abarca, a pharmacy benefit manager. MedCity News’ Editor-in-Chief Arundhati Parmar and Senior Reporter Katie Adams were invited to attend and speak at the conference. All travel and related expenses for the team were covered by Abarca. However, company officials had no input in editorial coverage.
The U.S. healthcare systems spent a whopping $301 billion on specialty drugs in 2021, a 43% increase since 2016. These specialty drugs accounted for half of the year’s total drug spending, and the list prices for specialty drugs are only increasing — especially for novel cell and gene therapies. When it comes to exorbitant specialty drug costs, payers and patients alike are caught in the eye of the storm.
To address this issue, many experts believe payers must establish alternative payment models that reimburse expensive specialty drugs based on the benefits they provide to patients. That was the discussion topic at a panel held Thursday at Abarca Forward, a pharmacy conference held in San Juan, Puerto Rico.
During the discussion, panelists shared their predictions about what they think value-based drug pricing arrangement will look like by 2030.
Prediction #1: Healthcare will be close to establishing a value-based formulary.
Formularies for specialty drugs should be based on the value that these therapies provide both to patients and providers, declared Girisha Fernando, founder and CEO of Lyfegen, a company that provides software for value-based drug contracting. He said the industry will be close to establishing this formulary model by 2030.
When determining the prices for these formularies, Fernando recommended that health plans focus on two main questions: How do these drugs impact patients’ health outcomes? And how do these therapies reduce costs for health systems or allow them to create better, more holistic treatment plans for patients?
Prediction #2: Healthcare will start to apply value-based pharmacy contracting to more than just the oncology space.
Kali Panagos, executive vice president of pharmacy benefits consulting firm ARMSRx, agreed with Fernando’s prediction. She added that she’d like to see alternative pharmacy payment models applied to various conditions, not just cancer.
“We see it in the oncology space, but I’d really like to get to the point where we can begin to have those conversations around other areas such as autoimmune conditions — which on the pharmacy side are primary drivers of spend. How do you analyze data, establish pricing points and manage the rebate? Those are crucial conversations that help clients determine whether or not they can align with these types of methodologies going forward,” Panagos said.
Prediction #3: Longitudinal patient tracking will enter the drug pricing process.
The clinicians who run the trials for exciting (and expensive) new treatments like cell and gene therapies will be the first to tell you that they’re not quite sure how long these treatments will be effective or exactly how much they will be able to help patients, said David McLean, CEO of Emerging Therapy Solutions, a startup that helps payers manage patients with rare and complex conditions.
“When you tell payers ‘Hey, this costs $3 million and nobody can tell you how long it’s going to last,’ that’s true,” he said.
When it comes to cell and gene therapy, these treatments are so new that all the healthcare industry can presently do to understand the value for patients is to closely monitor the progression of their health, McLean explained. Having longitudinal data that demonstrates a drug’s benefit for a patient’s health over time will soon become an important part of the value-based contracting process, he predicted.
Prediction #4: Financial incentives will become more aligned among multiple stakeholders.
Value-based drug pricing requires stakeholders to consider population health as an investment, declared Rafa Chaves, executive director of global policy and environmental, social and corporate governance at Organon, Merck’s women’s health spinoff.
“To me, value-based finance is when health is considered an investment — an investment that will yield not only financial returns to the players that are playing that game, but will also yield a societal return. Because if you’re able to understand health as an investment — as a factor for economic growth or economic recovery — the incentives of our players might align,” he explained.
The way things stand in the U.S. right now, financial incentives are not aligned among the multiple stakeholders in the drug pricing and payment process. These incentives vary among payers, pharmacy benefit managers, providers, pharmacies and patients. This broken model not only creates excessive drug spending, but it also fails to optimize patient outcomes, Chaves pointed out.
Photo: cagkansayin, Getty Images
