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Deloitte's Life Sciences & Health Care Blog

Moving value-based contracting from experimentation to common practice

As the health care world continues its shift from volume- to value-based reimbursement, value-based contracts (VBC) between life sciences companies and payers that tie the reimbursement of a product to the value it delivers are gaining traction.

The health care system is going through a volume-to-value transformation with the goal of controlling cost and improving patient outcomes. At the same time, we are seeing tremendous innovation in new therapies that are being developed to help dramatically improve patient outcomes. The health care system is challenged with how to provide sufficient access to these new therapies while controlling overall health care spending.

Rewarding value
Pressure to demonstrate value is increasingly intense on life sciences companies as more personalized therapies come to market. These therapies are changing how certain diseases are treated or even cured, but they come at a cost. As this innovation continues and competition increases, life sciences companies and payers are experimenting with value-based contracts that tie the reimbursement of a therapy to the value that it delivers.

The hope is that these VBCs will help improve patient access to these new innovative therapies and control costs–ultimately getting the right patient on the right therapy at the right time.

Barriers to making VBCs mainstream
While the number of publicly announced value-based contracts between life sciences companies and payers has increased over the past few years, there continues to be barriers preventing wider spread adoption. According to Deloitte’s 2018 Real-World Evidence (RWE) Benchmarking Survey, 14 out of 15 biopharma companies who had knowledge of their contracting strategy said their companies were implementing, piloting, or actively discussing value-based contracts.

Despite this level of interest and activity, barriers exist to prevent widespread adoption of these contracts in the market. Survey participants in the Real-World Evidence Benchmarking Survey were asked to rank the top three barriers to VBCs:

Challenges with collecting, linking and analyzing the necessary data were cited as the top barrier to VBCs. This is not surprising as having access to the right health care data will be foundational to designing and administering VBCs in the future. With advances in the health care information technology, overcoming this hurdle should not be insurmountable.

Overcoming today’s challenges
Even though value-based contracting faces growing pains, respondents in Deloitte’s RWE Benchmarking Survey seem confident that the industry will overcome the challenges. All survey participants who had knowledge of their organization’s contracting strategy believed their use of value-based contracts will increase over the next two to three years. To move the contracts beyond the experimental stage, stakeholders must come together around specific goals and objectives, develop standardized definitions for outcomes measurement, and invest in the technology needed to capture patient data in an efficient and sustainable manner.

Without a concerted effort from all parties, VBCs may continue to have slower than desired adoption. Collaborating across the health care ecosystem will be critical to realizing the true value of VBCs.

Author bio

Jeff Morgan is a managing director in Deloitte Consulting LLP and a member of the leadership team of ConvergeHEALTH by Deloitte. Jeff develops and delivers solutions to the life science industry, focusing on helping life sciences companies to effectively leverage real-world data broadly across their enterprises, from R&D through commercialization.