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Value-Based Arrangements

We are living in a Golden Age of medicines and discovering more drugs that help people live longer, healthier, more active lives. However, rising costs and chronic disease rates place significant pressure on patients and the health care system.

We know we need a solution to this problem, and we're working with other health care stakeholders to explore new ways to ease cost burdens and to deliver better health outcomes for patients.

One of these solutions is implementing value-based payment arrangements. Value-based arrangements ultimately aim to help patients get affordable access to the medicines they need. Unlike the traditional fee-for-service model, which bases payment strictly on the number of products sold, value-based arrangements link reimbursement to specific health outcomes.

For example, if a medicine shows certain clinical results, such as a specific measure via a lab test or a decrease in symptoms, then the biopharmaceutical company pays a smaller rebate, or discount, to health insurers. If the medicine doesn't work as effectively as the biopharmaceutical company believed it would, then they pay more money to the health insurer.

Value-based arrangements provide a number of benefits:

  • Patients get the medicines that deliver the best outcomes for their specific health needs. Medicines in value-based arrangements are generally made available based on how well they work in specific patient subpopulations. So patients can get care that is more personalized and, possibly, enjoy reduced cost-sharing.
  • Pharmaceutical innovators learn how medicines work in real-world patient experiences, which helps them develop future treatments for breakthrough discoveries.
  • When patients take the most effective medicines, it keeps them healthier and out of the hospital, which saves health insurers money.

Value-based arrangements for medicines are still relatively new, but in order to better facilitate these arrangements, we need to update and improve outdated and unclear laws and regulations. Lilly is dedicated to helping address these barriers and champion more value-based arrangements.

FAQ: Value-Based Arrangements

We often hear that value-based health care is the future. But what are value-based payment arrangements? Why do we need them? What benefits do they provide? Let’s explore through top frequently asked questions.

What are value-based arrangements?

Value-based arrangements link reimbursement for health care services and products to specific outcomes. These outcomes, which can include measurements (e.g., lab test results) or milestones (e.g., completing a full treatment regimen), vary based on the specific product or service.

For example, in an arrangement between a health insurer and a pharmaceutical manufacturer, the insurer would reimburse the manufacturer based on how well patients met the predetermined outcomes. If patients did not meet the predetermined outcome(s) (e.g., did not achieve certain levels in a lab test), then the manufacturer gets reimbursed less than if patients did meet the outcome(s).

Why am I hearing more about these arrangements?

Traditionally, health care services and products, like medicines, have been paid for based on the volume sold, also known as “fee for service.” However, as health care costs and rates of chronic disease continue to rise, there has been increased urgency to deliver care that emphasizes outcomes over volume. That’s how the need for value-based payment arrangements emerged.

How might I benefit from value-based arrangements?

In many cases, value-based payment arrangements improve access to a drug for eligible patients. And given medicines in these arrangements are generally made available based on how well they work in specific sub-populations, patients can get care that is more personalized. Sometimes, patients enjoy reduced cost-sharing in these arrangements as well. And over the long term, the results innovators learn from these arrangements can help inform and improve future research and development efforts.

For more on Lilly’s solutions-driven work in this area, visit our Value-Based Arrangements sections on LillyPad and Lilly.com.