Considering Health Spending

By Marianne Hamilton Lopez, Gregory W. Daniel, Nicholas C. Fiore, Aparna Higgins, and Mark B. McClellan doi: 10.1377/hlthaff.2019.00771 HEALTH AFFAIRS 39, NO. 6 (2020): 1018–1025 Policy Insight ©2020 Project HOPE— The People-to-People Health Foundation, Inc. Paying For Value From Costly Medical Technologies: A Framework For Applying Value- Based Payment Reforms

Marianne Hamilton Lopez is research director for value- ABSTRACT Innovative medical products offer significant and potentially based payment reform at the transformative impacts on health, but they create concerns about rising Duke-Margolis Center for Health Policy, Duke University, spending and whether this rise is translating into higher value. The in Washington, D.C. result is increasing pressure to pay for therapies in a way that is tied to Gregory W. Daniel is head, their value to stakeholders through improving outcomes, reducing U.S. Healthcare Policy, at Edwards Lifesciences in disease complications, and addressing concerns about affordability. Policy Washington,D.C.Hewasthe responses include the growing application of health technology deputy director of the Duke- Margolis Center for Health assessments based on available evidence to determine unit prices, as well Policy and a clinical professor as alternatives to volume-based payment that adjust product payments at the Fuqua School of Business, Duke University, in based on predictors or measures of value. Building on existing Durham, North Carolina, when frameworks for value-based payment for health care providers, we this work was performed. developed an analogous framework for medical products, including Nicholas C. Fiore is a research drugs, devices, and diagnostic tools. We illustrate each of these types of assistant at the Duke- Margolis Center for Health alternative payment mechanisms and describe the conditions under Policy. which each may be useful. We discuss how the use of this framework can

Aparna Higgins is a policy help track reforms, improve evidence, and advance policy analysis fellow at the Duke-Margolis involving medical product payment. Center for Health Policy.

Mark B. McClellan (Mark [email protected]) is director of and the Robert J. Margolis, MD, Professor of ith more biomedical advanc- ahead.3–6 The result is ongoing, intense public Business, Medicine, and Policy at the Duke-Margolis Center es and accelerated regulatory debate about how to improve access to these for Health Policy. processes, new medical prod- products and health care affordability, while also ucts are poised to substantial- supporting continued innovation. ly disrupt current treatment A wide range of value-based payment initia- Wmodels,1 with the potential to improve the lives tives are being implemented to address these of millions of patients. These new products in- challenges.7 A major area of activity is summa- clude pharmaceuticals that delay or halt major rizing existing evidence on the value of a drug— disease complications, transformational thera- generally defined as its impact on outcomes, pa- pies that correct cellular and genetic defects, tient experience, and the total cost of care— medical devices that can enable patients’ daily through health technology assessment. Payment functioning and experience, and advanced diag- models based on these assessments set the per nostic tests and tools that support more person- unit price based on the available evidence. Spe- alized and effective care decisions. At the same cific methods such as those employed by the time, out-of-pocket2 and total spending on phar- Institute for Clinical and Economic Review, a maceuticals and other products continue to rise, nonprofit cost-effectiveness evaluator in the and their growth may intensify in the years United States,8 are increasingly cited in payment

1018 Health Affairs June 2020 39:6 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org. negotiations between payers and manufac- buck” for medical technology spending, simply turers, based on the research and frameworks lumping all reform models into the category of for describing important aspects of value devel- value-based payment can create misunderstand- oped by expert groups such as the International ings about exactly what reforms are being con- Society for Pharmacoeconomics and Outcomes sidered, why they may or may not be helpful, and Research.9 whether they are achieving their desired effects. These reforms have generally been applied to The absence of a clear framework for value-based negotiations about the unit prices of medical payment reforms for medical products leads to products,10 with discounts or rebates driven by missed opportunities to clearly define these volume and not value. At the same time, value- models; increase their impact; and foster consis- based reforms for health care providers increas- tent analysis and assessment of how they can be ingly aim to generate more value for covered used most effectively, either alone or in combi- populations by shifting away from payments nation. based only or mainly on the volume of services. Consequently, we present a framework for de- These provider payment reforms attempt to en- scribing value-based payment for medical prod- courage the use of appropriate high-value com- ucts and illustrate its application using recent binations of products and services, such as clini- examples. It builds on the Health Care Payment cal pathway models (which tie payments to Learning and Action Network’s framework for following practice guidelines) and Medicare’s categorizing alternatives to fee-for-service pay- Oncology Care Model (which ties payment to ment for providers.20 As is the case with the reducing overall costs, including physician- Learning and Action Network categories, the in- administered drug spending, while improving tent is to describe how different kinds of value- performance on measures of quality or out- based payment could increase the value of care comes).11–13 The provider value-based payment involving medical products. Our framework ac- models aim to influence the use of drugs and commodates a variety of definitions and mea- devices, but they generally do not shift payment sures of value in particular contexts, including for medical products away from fee-for-service. the definitions of value used in health technology Alternatives to strictly volume-based payment assessments like those produced by the Institute for drugs and devices have been implemented on for Clinical and Economic Review and other a relatively modest basis (such as rebates with health technology assessments. Like the Learn- some links to quality or utilization measures), ing and Action Network value-based payment with limited consequences for actual payment framework for providers, our framework for for the product.14,15 However, there is increasing medical products describes the extent to which activity among payers and manufacturers in de- payment shifts away from volume, and it accom- signing and implementing such models. As ad- modates performance measures and supports ditional costly medical technologies reach the varying levels of sophistication. market with potentially large, long-term benefits To facilitate the use of the framework, we de- in preventing disease complications or the dis- scribe when payment models in each category eases themselves; as data systems improve; and are likely to be effective in creating value, reflect- as provider payments continue to shift toward ing prior reviews and recommendations for value, more opportunities are emerging for man- many kinds of value-based payment arrange- ufacturers to participate in value-based payment ments.21 Value-based payment models for medi- arrangements for potentially valuable new med- cal products can create more value not only ical treatments that increase patient access and through prices that better reflect value, but also improve outcomes and evidence, while sustain- through supporting better evidence, more ap- ing transformative innovation.16–19 propriate use, more valuable product refine- For example, indication-specific pricing meth- ments, and better mechanisms for promoting ods set per unit prices by clinical indication, if patient access—all of which lead to more value there is evidence that certain clinical subpopu- through better patient outcomes and fewer cost- lations differ substantially in expected value. ly disease complications. The framework can fa- Outcomes-based payment methods adjust pay- cilitate analyses of how much additional value is ment for a treatment based on observed out- created and how the risks and rewards related to comes over time. Subscription payments provide high-value performance can be shared among access for a covered population based on a per payers, patients, providers, and purchasers. In member per month subscription fee, which may addition, the framework describes how value- also be adjusted based on the outcomes observed based payment models can support the develop- in the population. ment of better evidence that will affect future While supporters of these reforms are motivat- negotiations about both price levels and pay- ed by the same goal of getting more “bang for the ment methods. The examples used to illustrate

June 2020 39:6 Health Affairs 1019 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org. Considering Health Spending

the framework underscore the urgent need for a viewed as valuable for resolving important evi- consistent value-based payment framework for dence questions to improve future use of the medical products and the best opportunities for products. In “adaptive” payment models, such adding value from alternatives to fee-for-service evidence could lead to future price increases or payment. reductions. Payments in categories 1 and 2 are clearly not independent of value. Rather, when health tech- The Spectrum Of Value-Based nology assessments such as those performed by Payment Arrangements For Medical the Institute for Clinical and Economic Review or Products the National Institute for Health and Care Excel- Exhibit 1 summarizes our framework of value- lence in the UK are used to guide negotiations or based payment arrangements for medical prod- set prices, the volume-based payment is intended ucts. As described more fully below, category 1 to reflect the existing evidence on value. The refers to the traditional fee-for-service approach price per unit is determined by expected perfor- to medical product reimbursement: Product rev- mance based on prior evidence about the value of enue is based on sales volume and volume-based the product, regardless of actual performance in rebates or discounts, and health technology as- the populations using it. sessments may be used to determine if the aver- Similar to Alternative Payment Models for pro- age price is value based. Category 2 is also fee- viders, categories 3 and 4 represent payments for-service payment, but with value-based price that are at least partially delinked from volume adjustments that are set prospectively, based on and tied to observed performance associated with factors besides volume that are expected to in- the use of the medical product in a covered pop- fluence how well the product is expected to work. ulation. Payment models in these categories are Category 2 includes indication-specific pricing, based, at least partially, on performance mea- in which unit prices vary based on existing evi- sured against specific benchmarks of effective- dence of significant differences in expected value ness (such as length of patient adherence to a across subpopulations. It also includes “cover- drug regimen or rates of hospitalization for a age with evidence” models, in which payment disease complication). Such benchmarks are in- occurs along with the collection and reporting tended to serve as a proxy for increased value of outcomes or other clinical data—which are realized in practice. Category 3 remains largely

Exhibit 1

Framework of value-based payment arrangements for medical products Volume-based price Alternative Payment Models Category 2: volume based with Category 3: volume based with Category 1: volume based value adjustment link to outcomes Category 4: population based Payment is based on sales volume Payment is based on sales volume, Payment is based on sales Payment is partially or fully delinked less any volume-based rebates or with ex ante adjustment related volume with an adjustment from sales volume and linked to discounts. Health technology to expected value. Category 2 based on outcomes in treated outcomes in the covered assessments may be used to includes indication-specific patients or population. population. negotiate a base or average price pricing, payment linked to data or 3A, Limited: Outcome 4A, Partially population based: A that reflects expected value. evidence development, and adjustment is based on a significant share of the payment adaptive licensing. There is no limited set of performance is population based (for example, shared risk or tie to observed measures and affects a per member per month plus patient or population outcomes. relatively small share of volume-based payment) and payment. linked to performance measures 3B, Substantial: Outcome in the covered population. adjustment involves a 4B, Fully population based: substantial share of payments Population-based payment (for linked to meaningful example, per member per month) performance measures. is linked to performance measures in the covered population. 4N, Population based, no linkage to outcomes: The population- based payment has no adjustment for performance.

SOURCE Authors’ analysis. NOTE In all models, negotiated payments may be linked to prior evidence on value.

1020 Health Affairs June 2020 39:6 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org. based on fee-for-service, but it has some share of results in the treated populations. Most out- its payment tied to results. Category 4 uses pay- comes-based contracts for drugs and devices im- ments that are largely or fully per person or plemented in the US are in category 3, with most “population based,” including a partially capitat- of the payment still tied to volume-based rebates ed payment or subscription payment for access or discounts. Our recent survey of outcomes- to a product for a population. based contracts found that volume rebates re- Category 1: Volume Based The price set for mained the main payment mechanism for ap- medical products may be influenced by evidence proximately 80 percent of the reported manufac- of value based on health technology assessments turer contracts and around 70 percent of or other approaches, but revenue for particular reported health plan and pharmacy benefit man- uses of the product is determined by volume agement contracts.14 and volume discounts. In this typical approach, ▸ CATEGORY 3A, LIMITED: In category 3A, payers use formulary tiers that include preferred payment is tied to a single performance measure placement of brand-name treatments in con- or a few performance measures that are proxies junction with manufacturer discounts that are for improved health status or cost outcomes, and based on sales volume. Preferred placement on only a small share of reimbursement is linked to the formulary can be accompanied by prior au- these outcome measures. For example, patient thorization requirements and utilization re- adherence to a medication, as measured through views. The wide use of such fee-for-service pay- prescription refills, could be used as a proxy for ment models reflects their utility in many cases. the medication’s effectiveness. If the patient dis- Category 2: Volume Based With Value Ad- continued use before a benchmark time, the justment Category 2 payments are also deter- manufacturer would give the payer as a rebate mined by volume. However, medical product a prespecified, limited portion of the total pay- prices are adjusted to reflect differences in ex- ment for the population. AstraZeneca’s agree- pected value across patient groups or settings. ment with Express Scripts25 allows a refund of Indication-specific pricing refers to the estab- the amount spent on Iressa if a patient stops lishment of prices that differ across subpopula- treatment before the third prescription refill (a tions of patients based on certain measurable proxy for patient response). As another example, characteristics (for example, people with a spe- Amgen’s agreement with Harvard Pilgrim ties cific biomarker or form of a disease), where evi- rebate payments to Repatha’s26 ability to lower dence shows that the group benefits more or less cholesterol (a surrogate for reducing the number than does the average patient in the population. of significant cardiovascular events) to the level Both CVS and Express Scripts have explored in- observed in clinical trials. In addition, Novartis dication-specific pricing tools for oncology.22 has a risk-sharing arrangement for payment for Another type of ex ante payment refinement in- Entresto in some contracts,27 based on whether tended to improve value is an adjustment (up the heart failure hospitalization rate of patients or down) for submitting additional data related taking the medication exceeds or falls below a to additional patient characteristics, quality, or prespecified threshold derived from the drug’s outcomes not captured in claims. Such “quality performance in clinical trials. These outcomes- reporting” adjustments are now used in many based contracts affect a minority of the total pay- provider payment systems, including more than ment for the treatment. 90 percent of Medicare payments.11 Similarly, in ▸ CATEGORY 3B, SUBSTANTIAL: In category coverage with evidence development,23 payment 3B, payments are still based on the volume of occurs in conjunction with participation in a patients treated, but payments are more substan- postmarket study or registry of patients using tially linked to important measures of value. the product. In an adaptive licensing model, so Such linkages could include improvements rela- far used only outside the US,24 the manufacturer tive to benchmarks that reflect key patient- accepts relatively low initial payment rates for reported outcome measures (for example, func- new indications or a new technology for initial tional status or pain), key clinical outcomes coverage, with the potential for a significantly (such as hospitalization with disease complica- higher payment rate when more robust evidence tions), or a reduction in the total cost of care. of value is developed. A significant proportion of manufacturer pay- Category 3: Volume Based With Link To ments would depend on these outcome mea- Outcomes Category 3 contracts are analogous sures. An example of the category 3B payment to provider Alternative Payment Models with model is the arrangement for Luxturna between shared savings or shared risk, with most pay- Spark Therapeutics and Harvard Pilgrim Health ments still determined by volume. Unlike pay- Care,28 according to which Harvard Pilgrim ments in category 1 or 2, these fee-for-service makes an up-front payment for the drug but payments include a component tied to actual may receive substantial rebates if it does not have

June 2020 39:6 Health Affairs 1021 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org. Considering Health Spending

a durable impact based on a patient’s prespeci- accountable for full population health and cost fied visual acuity measures over time. Another outcomes. example is bluebird bio’s proposed payment ▸ CATEGORY 4N, POPULATION BASED, NO model for the company’s forthcoming gene ther- LINKAGE TO OUTCOMES: In category 4N, pay- apy for transfusion-dependent beta thalassemia, ments are similarly based primarily or entirely a genetic hemoglobin disorder. Following an ini- on per person or per population prices, with no tial charge for the treatment, subsequent pay- adjustments for population-level results. Louisi- ments would occur over time only to the extent ana’s approach to providing hepatitis C drugs for that measures of effectiveness of the treatment its Medicaid beneficiaries and institutionalized (for example, avoiding the need for transfu- populations—a contract with a manufacturer for sions) are achieved. Substantial payments are unlimited drug access along with a cap on total at risk over both the short and long terms, rela- drug expenditures for the population—fits in tive to benchmarks on meaningful measures of this category.33 performance.29,30 Category 4: Population Based Category 4 payments represent a more substantial shift When Are Value-Based Payment away from fee-for-service and are analogous to Arrangements For Medical Products population-based Alternative Payment Models Likely To Have A Substantial Impact for health care providers (that is, models that On Value? pay providers per member per month). These Online appendix exhibit 1 summarizes key con- models aim to delink payment from volume by siderations for when different value-based pay- shifting to a partially or fully population-based ment arrangements are likely to be worthwhile.34 payment. As in the Learning and Action Network Fee-for-service payments with volume dis- payment framework for medical service pro- counts (category 1) are appropriate when evi- viders, we included a subcategory called 4N for dence on the product’s risks, benefits, and costs subscription models that pay for access to a treat- is reasonably well understood and does not differ ment at the population level but do not directly much across covered patients, which leads to tie these payments to outcomes. relative agreement in a health technology assess- ▸ CATEGORY 4A, PARTIALLY POPULATION ment. Such payment methods are well suited to BASED: In category 4A, payment for the product cases in which there is little potential for a man- is partially based on a capitation or monthly fee ufacturer to influence effective use—for exam- per person covered in the population and par- ple, through marketing that helps with adher- tially based on actual use. One proposed exam- ence, patient support resources, or analytics. ple31,32 (not yet implemented substantially) in- Category 1 models are also appropriate when the volves payment for antimicrobials for resistant treatment is straightforward (such as a small- organisms that pose a public health threat. In molecule drug) versus one that is more complex addition to fee-for-service payments for each and may improve significantly with experience use of such an antimicrobial, a manufacturer (for example, an implantable device or a gene might receive a market entry reward linked to therapy). In category 1, important tools related providing an adequate supply of the treatment to value include health technology assessments over time. and other considerations such as volume dis- ▸ CATEGORY 4B, FULLY POPULATION BASED: counts where competitive alternatives exist, In category 4B, payment is a fixed amount for a along with patient-appropriate coverage restric- covered population. The payment model would tions and utilization management. include unlimited access to the drug for covered Category 2 payments adjust fee-for-service populations, with accountability for improve- prices directly based on existing evidence, in- ments in performance measures, such as lower cluding evidence gaps. Indication-specific pric- rates of resistant infection in the population and ing may be beneficial when there is clear evi- lower rates of costly disease complications rela- dence of differential value across identifiable tive to a benchmark level. Population-based groups of patients or when the strength of evi- access to drugs for hepatitis C could be an exam- dence varies across identifiable patient groups— ple of this model, if payment were adjusted for for example, patients with different cancer pro- population-based results. This payment ap- files that lead to differential responses to a par- proach aims to achieve higher value through ticular drug. Differential pricing may enable broad access, combined with lower costs associ- greater access if the groups for which the product ated with adverse clinical and functional out- has lower evidence of value would otherwise face comes. The model also aligns the incentives of a single higher price. However, differential up- manufacturers and providers that participate in front prices may be difficult to implement and payment models in which they are increasingly could add to concerns about manufacturers’ cap-

1022 Health Affairs June 2020 39:6 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org. turing too much of the additional value.35 Pay- turer and the payer to use a population-based ments linked to additional data reporting and payment to increase overall value in a way that support for studies (for example, on drug cost- both find worthwhile. For example, such a re- effectiveness) can lead to better care decisions form for certain potent but costly cholesterol- and more informed negotiations. Most such pro- lowering agents could enable both better popu- grams have been implemented by public payers lation health outcomes and additional medical such as the Centers for Medicare and Medicaid cost savings as a result of fewer complications Services, but improving data infrastructure and from heart disease. multipayer collaborations may make such mod- As in other value-based payment models, ne- els more attractive. gotiations would influence how additional value Category 3 contracts are suited for medical is shared. For example, state Medicaid programs products for which there is significant uncertain- may recognize the downstream health benefits ty about benefits and risks coupled with high up- of broader access to a drug, but tight budget front costs—particularly when manufacturers constraints may nonetheless limit their ability have more confidence than payers do about ben- to pay more now—even if the up-front payments efits or have significant capacity to influence are linked to long-term reductions in Medicaid outcomes. As in coverage with evidence develop- costs from avoided complications. Louisiana’s ment, manufacturers can assist in tracking hepatitis C model does not link manufacturer value measures (for example, in conjunction payments to performance measures such as with postmarket study requirements of the Food higher hepatitis C detection and cure rates or and Drug Administration) and can help pro- lower long-term costs from reduced hepatitis viders identify and effectively treat patients who complication rates or avoided liver transplants. are likely to benefit from the product. For such Consequently, there is little manufacturer contracts to work, it must be feasible to reliably incentive to promote access through assisting measure treatment impact or markers of impact. with patient identification and adherence. The Category 3 contracts can encourage manufac- achievement of improved population hepatitis turers to improve complex treatments using evi- outcomes and fewer complications will conse- dence derived from real-world measurement. quently depend on enhanced screening and Examples include complex biologics that have management by providers and public health pro- more impact when better targeted to specific grams, rather than manufacturer incentives. subgroups of patients; advanced diagnostics that use artificial intelligence based on patient data to optimize algorithms; new medical devices that Conclusion can be modified over time based on patient ex- Value-based payment reforms for medical prod- perience, such as robotics with artificial intelli- ucts are understandably gaining attention, but gence features; and gene and cell therapies that they are diverse and differ in terms of their suit- may be modified to become more potent and ability for the range of challenges in medical safer over time.36 product innovation, access, and affordability. Category 4 payment models based partially Our framework aims to provide structure to this (category 4A) or primarily (category 4B) on diversity; enable tracking of the prevalence and per person payments for a covered population growth of value-based payment models; and fa- may be useful when evidence shows that volume- cilitate more rigorous evaluation of their impact based payments are not leading to satisfactory on access, outcomes, and costs. outcomes for a population. Many proposed Such rigorous assessment is needed to help payment reforms for antimicrobials include de- guide related policy reforms. Manufacturers, linking payment from volume by shifting to a payers, and others have cited policies such as partially or fully population-based payment. off-label communication restrictions at the Food This approach discourages overuse while still and Drug Administration, anti-kickback regula- recognizing the social value of an antibiotic to tions, and Medicaid best price requirements as protect a population against contagion involving barriers to implementing value-based payment broadly resistant organisms. Category 4 models models for medical products.37 These policies may also be useful when both the marginal serve critical roles in fee-for-service payment en- manufacturing cost of a product is low relative vironments, preventing inappropriate financial to its volume-based price and a large potential relationships between health care entities while population is untreated. Examples could include ensuring that government programs can receive a small-molecule drug or a one-time therapy ex- substantial discounts. In contrast, such regula- pected to have high value relative to production tory restrictions are less likely to be beneficial in cost. If fee-for-service access is very restricted at a value-based payment reforms that shift pay- high price, it may be possible for the manufac- ments substantially away from fee-for-service.

June 2020 39:6 Health Affairs 1023 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org. Considering Health Spending

Indeed, communicating about spending and out- as the reliable and routine conduct of postmarket come evidence and sharing resources to improve studies of medical products that receive acceler- performance may be critical to the success of ated approval from the Food and Drug Adminis- value-based payment reforms. tration. More clarity on the opportunities for Finally, our framework can help align medical medical product payment to help advance val- product payment with broader shifts in health ue-based care and the evidence needed to sup- care toward a focus on demonstrated value for port it could accelerate the adoption of new pay- individual patients. Currently, the operational ment models for medical products. Given the capacity for all types of value-based care reforms increasing concerns about the affordability of is limited by the availability of longitudinal data new treatments and the potential for innovation on patient experience and analytic infrastruc- in medicines and how they are used to address ture.14 This technological capacity is increasing unmet medical needs, it’s time for a systematic but still is typically not readily available for as- and comprehensive approach to medical product sessing product performance on outcomes, such payment reform. ▪

This work was supported by the Duke- including Allergan, Amgen, BioMarin, & Johnson, Cigna, Alignment Healthcare, Margolis Center for Health Policy’s bluebird bio, Boston Scientific, Editas and Seer; as cochair of the Accountable Value-Based Payment for Medical Medicine, Edwards Lifesciences, Gilead, Care Learning Collaborative and the Products Consortium. The consortium— GlaxoSmithKline, Medtronic, Novartis, GuidingCommitteefortheHealthCare composed of patient advocates, payers, Pfizer,REGENXBIO,Sarepta,Spark Payment Learning and Action Network; manufacturers, and providers, as well as Therapeutics, and Verastem Oncology. and as an adviser for Cota and the experts on regulatory affairs, law, and Gregory Daniel received consulting fees Mitre Corporation. The authors thank policy—is developing approaches to from AbbVie, Genentech, and the the member organizations of the Duke- payment reform that support better Reagan-Udall Foundation. His Duke- Margolis Center for Health Policy’s outcomes for patients and better value Margolis affiliation ended on August 2, Value-Based Payment for Medical across the system. The consortium is 2019. Aparna Higgins is founder and Products Consortium for their guidance made possible through the generosity of CEO of Ananya Health Innovations Inc. and subject matter expertise. The the Margolis Family Foundation, which and previously served on the Guiding authors also thank Christina Silcox, provides core resources for the Duke- Committee for the Health Care Payment Monika Schneider, Katie Greene, and Margolis Center, as well as a Learning and Action Network. Mark B. Patty Green of the Duke-Margolis combination of financial and in-kind McClellan received fees as an Center for providing expertise and contributions from consortium members, independent board member for Johnson editorial support.

NOTES

1 EvaluatePharma. World preview media/iqvia/pdfs/institute-reports/ value-assessment-framework-2/ 2017, outlook to 2022 [Internet]. lifetime-trends-in- 9 International Society for Pharmaco- London: Evaluate; 2017 Jun [cited biopharmaceutical-innovation.pdf economics and Outcomes Research. 2020 Mar 18]. Available from: 5 Kamal R, Cox C, McDermott D. What Value Assessment Frameworks [In- https://info.evaluategroup.com/rs/ are the recent and forecasted trends ternet]. Lawrenceville (NJ): ISPOR 607-YGS-364/images/WP17.pdf in prescription drug spending? [In- c 2020 [cited 2020 Mar 18]. Avail- 2 Sawyer B, Cox C, Claxton G. An ternet]. New York (NY): Peterson- able from: https://www.ispor.org/ analysis of who is most at risk for KFF Health System Tracker; 2019 strategic-initiatives/value- high out-of-pocket health spending Feb 20 [cited 2020 Mar 18]. Avail- assessment-frameworks [Internet]. New York (NY): able from: https://www.health 10 Carlson JJ, Gries KS, Yeung K, Peterson-KFF Health System Track- systemtracker.org/chart-collection/ Sullivan SD, Garrison LP Jr. Current er; 2017 Oct 4 [cited 2020 Mar 18]. recent-forecasted-trends- status and trends in performance- Available from: https://www.health prescription-drug-spending/ based risk-sharing arrangements systemtracker.org/brief/who-is- 6 Donahoe G, King G. Estimates of between healthcare payers and most-at-risk-for-high-out-of-pocket- medical device spending in the medical product manufacturers. health-spending/ United States [Internet]. Washing- Appl Health Econ Health Policy. 3 NEWDIGS. FoCUS Project: financing ton (DC): Advanced Medical Tech- 2014;12(3):231–8. cures in the US [Internet]. nology Association; 2015 Jun [cited 11 CMS.gov. Oncology Care Model Cambridge (MA): Massachusetts In- 2020 Mar 18]. Available from: [Internet]. Baltimore (MD): Centers stitute of Technology; 2017 Nov 13 http://www.advamed.org/sites/ for Medicare and Medicaid Services; [cited 2020 Mar 18]. (Research Brief default/files/resource/ [last updated 2020 Feb 4; cited 2020 No. 2017F211.v011). Available from: 994_100515_guy_king_report_ Apr 21]. Available from: https:// https://newdigs.mit.edu/sites/ 2015_final.pdf innovation.cms.gov/initiatives/ default/files/FoCUS_Research_ 7 Bach PB, Pearson SD. Payer and oncology-care/ Brief_2017F211v011.pdf policy maker steps to support value- 12 Center for Medicare and Medicaid 4 IQVIA Institute. Lifetime trends in based pricing for drugs. JAMA. Innovation. OCM Performance- biopharmaceutical innovation: re- 2015;314(23):2503–4. Based Payment Methodology cent evidence and implications [In- 8 Institute for Clinical and Economic Webinar [Internet]. Baltimore (MD): ternet]. Durham (NC): IQVIA; [2017 Review. ICER value assessment CMMI; 2016 Apr 20 [cited 2020 Apr Jan 10; cited 2020 Mar 18]. (Insti- framework [Internet]. Boston (MA): 21]. Available from: https:// tute Report). Available for download ICER; [cited 2020 Mar 18]. Available innovation.cms.gov/files/slides/ (subscription or opting in required) from: https://icer-review.org/ ocm-performancemethod-slides.pdf from: https://www.iqvia.com/-/ methodology/icers-methods/icer- 13 Managed Healthcare Executive. On-

1024 Health Affairs June 2020 39:6 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org. cology ACOs offer innovation for for-outcomes-research/article/ therapy. Biopharma Dive [serial on high-cost populations. Managed performance-based-risk-sharing- the Internet]. 2019 Jan 9 [cited 2020 Healthcare Executive [serial on the arrangements---good-practices-for- Mar 19]. Available from: https:// Internet]. 2014 Jan 1 [cited 2020 design-implementation-and- www.biopharmadive.com/news/ Mar 18]. Available from: https:// evaluation jpm19-bluebird-proposes- www.managedhealthcareexecutive 22 Kwon S. Indication-specific drug installment-plan-for-lentiglobin- .com/article/oncology-acos-offer- pricing—simple in theory, complex gene-therapy/545646/ innovation-high-cost-populations in reality. Managed Care [serial on 30 Terry M.With likely approvals on the 14 Mailankody S, Bach PB. Money-back the Internet]. 2018 May 6 [cited way, bluebird bio offers up pricing guarantees for expensive drugs: 2020 Mar 18]. Available from: strategy for gene therapy. BioSpace wolf’s clothing but a sheep under- https://www.managedcaremag [serial on the Internet]. 2019 Jan 9 neath. Ann Intern Med. 2018; .com/archives/2018/5/indication- [cited 2020 Mar 19]. Available from: 168(12):888–9. specific-drug-pricing-simple-theory- https://www.biospace.com/article/ 15 Mahendraratnam N, Sorenson C, complex-reality bluebird-bio-floats-possible- Richardson E, Daniel GW, Buelt L, 23 CMS.gov. Guidance for the public, payment-plan-for-pricey-gene- Westrich K, et al. Value-based ar- industry, and CMS staff: coverage therapy/ rangements may be more prevalent with evidence development [Inter- 31 Daniel GW, McClellan MB, than assumed. Am J Manag Care. net]. Baltimore (MD): Centers for Schneider M, Qian J, Lavezzari G, de 2019;25(2):70–6. Medicare and Medicaid Services; Graffenreid E. Value-based strategies 16 IQVIA Institute. 2018 and beyond: 2014 Nov 20 [cited 2020 Mar 18]. for encouraging new development of outlook and turning points [Inter- Available from: https://www.cms antimicrobial drugs [Internet]. net]. Durham (NC): IQVIA; 2018 .gov/medicare-coverage-database/ Washington (DC): Duke-Margolis Mar 13 [cited 2020 Mar 18]. (Insti- details/medicare-coverage- Center for Health Policy; [cited 2020 tute Report). Available for download document-details.aspx?MCDId=27 Mar 19]. Available from: https:// (subscription or opting in required) 24 European Medicines Agency. Final healthpolicy.duke.edu/sites/ from: https://www.iqvia.com/ report on the adaptive pathways pi- default/files/atoms/files/value- insights/the-iqvia-institute/reports/ lot [Internet]. London: The Agency; based_strategies_for_ 2018-and-beyond-outlook-and- 2016 Jul 28 [cited 2020 Mar 18]. encouraging_new_development_ turning-points Available from: https://www of_antimicrobial_drugs.pdf 17 Modern Healthcare. CVS, Aetna .ema.europa.eu/en/documents/ 32 Daniel GW, Schneider M, McClellan shareholders greenlight merger. report/final-report-adaptive- MB. Addressing antimicrobial resis- Modern Healthcare [serial on the pathways-pilot_en.pdf tance and stewardship: the Priority Internet]. 2018 [cited 2020 Mar 13]. 25 Loftus P, Mathews AW. Health in- Antimicrobial Value and Entry Available from: https://www surers push to tie drug prices to (PAVE) Award. JAMA. 2017;318(12): .modernhealthcare.com/article/ outcomes. Wall Street Journal [serial 1103–4. 20180313/NEWS/180319968/cvs- on the Internet]. [Updated 2016 May 33 Louisiana Department of Health. aetna-shareholders-greenlight- 11; cited 2020 Mar 18]. Available Request for information on sub- merger from: https://www.wsj.com/ scription payment models [Inter- 18 Coombs B. UnitedHealth to buy articles/health-insurers-push-to-tie- net]. Baton Rouge (LA): The De- DaVita clinics for $4.9 billion. CNBC drug-prices-to-outcomes- partment; [cited 2020 Mar 19]. [serial on the Internet]. 2017 Dec 6 1462939262 Available from: http://www.ldh.la [cited 2020 Mar 18]. Available from: 26 Sagonowsky E. Amgen puts Repatha .gov/assets/docs/SPM_RFI.pdf https://www.cnbc.com/2017/12/ outcomes data to work in refund deal 34 To access the appendix, click on the 06/unitedhealth-to-buy-davita- with Harvard Pilgrim. FiercePharma Details tab of the article online. clinics-for-4-point-9-billion.html [serial on the Internet]. 2017 May 3 35 Chandra A, Garthwaite C. The eco- 19 Modern Healthcare. Rumored [cited 2020 Mar 19]. Available from: nomics of indication-based drug Walmart-Humana merger could re- https://www.fiercepharma.com/ pricing. N Engl J Med. 2017;377(2): define healthcare for seniors. Mod- pharma/amgen-inks-repatha- 103–6. ern Healthcare [serial on the Inter- refund-arrangement-harvard- 36 Duke-Margolis Center for Health net]. 2018 [cited 2020 Mar 18]. pilgrim Policy. Breakthroughs and barriers: Available from: https://www 27 Staton T. Novartis defies naysayers advancing value-based payment for .modernhealthcare.com/article/ with newfangled pay-for-perfor- transformative therapies [Internet]. 20180330/NEWS/180339982/ mance deals on Entresto. Washington (DC): The Center; 2019 rumored-walmart-humana-merger- FiercePharma [serial on the Inter- May [cited 2020 Mar 19]. Available could-redefine-healthcare-for- net]. 2016 Feb 10 [cited 2020 Mar from: https://healthpolicy.duke seniors 19]. Available from: https://www .edu/sites/default/files/u31/ 20 Health Care Payment Learning and .fiercepharma.com/sales-and- advancing_vbp_for_ Action Network. Alternative Pay- marketing/novartis-defies- transformative_therapies.pdf ment Model: APM framework [In- naysayers-newfangled-pay-for- 37 Daniel GW, Barker T, Rai A, Springer ternet]. McLean (VA): Mitre Corpo- performance-deals-on-entresto C, Lopez MH, Kalinina J, et al. ration; c 2017 [cited 2020 Mar 18]. 28 Harvard Pilgrim Health Care. Overcoming the legal and regulatory Available from: http://hcp-lan.org/ Harvard Pilgrim is first health plan hurdles to value-based payment ar- workproducts/apm-refresh-white to directly negotiate outcomes-based rangements for medical products paper-final.pdf agreement for groundbreaking gene [Internet]. Washington (DC): Duke- 21 Garrison LP Jr, Towse A, Briggs A, de therapy [Internet]. Wellesley (MA): Margolis Center for Health Policy; Pouvourville G, Grueger J, Mohr PE, Harvard Pilgrim Health Care; 2018 2017 Dec [cited 2020 Mar 19]. et al. Performance-based risk- Jan 3 [cited 2020 Mar 19]. (News Available from: https://healthpolicy sharing arrangements—good prac- Detail). Available from: https:// .duke.edu/sites/default/files/ tices for design, implementation, www.harvardpilgrim.org/public/ atoms/files/overcoming_legal_ and evaluation [Internet]. ISPOR; news-detail?nt=HPH_News_C& and_regulatory_hurdles_to_value- 2013 Aug [cited 2020 Apr 21]. nid=1471914707173 based_payment_arrangements_ Available from: https://www.ispor 29 Jensen K. Bluebird proposes in- for_medical_products.pdf .org/heor-resources/good-practices- stallment plan for LentiGlobin gene

June 2020 39:6 Health Affairs 1025 Downloaded from HealthAffairs.org on June 29, 2020. Copyright Project HOPE—The People-to-People Health Foundation, Inc. For personal use only. All rights reserved. Reuse permissions at HealthAffairs.org.