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medicines are still relatively new, but in order to better facilitate these arrangements, we need to update and improve outdated and unclear laws and regulations.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.

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.