Why We Need a Shift from Volume-Based to Value-Based Payments

Today’s guest blog comes from Enrique Conterno, President of Lilly Diabetes and Lilly USA, and Senior Vice President at Eli Lilly and Company.

In today’s health care system, most medicines are still reimbursed based on traditional outcomes – specifically, the amount purchased.

The old model is no longer sufficient as we seek ways to trim costs from the system. A shift from volume-based to value-based reimbursement would benefit providers, payers, and patients.

As I mentioned during a panel discussion at the World Healthcare Congress this week, value-based arrangements link reimbursement for health care services and medicines to specific outcomes. These outcomes, such as measurements (e.g., lab test results) or milestones (e.g., completing a full treatment regimen), vary based on the specific medicine or service used.

Lilly has been at the forefront of developing value-based arrangements in our industry. We signed our first such arrangement in October 2014. Since then, we’ve signed 11 more, with five completed and seven ongoing. Several of these agreements are in the diabetes space, where multiple treatments are available and real-world evidence can help sort through the options.

We believe value-based arrangements help people get more value for their medicine because their own health outcomes are prioritized over the volume of product purchased. These agreements also ensure payers - and the overall health care system - win with improved outcomes and associated savings.

Unfortunately, lack of regulatory clarity has limited the number of contracts being executed. By establishing clearer regulations, safe harbors and guidance – such as how manufacturers should incorporate VBA prices into their price-reporting calculations – Congress can trigger a new wave of these agreements. The chairs of the Diabetes Caucus, U.S. Rep. Tom Reed (R-NY) and U.S. Rep. Diana DeGette (D-CO), recently said the removal of these regulatory barriers is worth exploring.

By taking steps to advance more value-based arrangements and an infrastructure that encourages them, we can modernize our health care system and improve the health of millions of people.