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Pharma, Payers, and Providers All Looking To Each Other To Stay Afloat

Krishna R. Patel, PharmD
MediMedia Managed Markets

The aggressive shift from volume to value has all stakeholders—payers, providers, and pharma—considering what they can do to stay relevant.

McKesson recently commissioned a national survey to assess the volume-to-value progress of hospitals and payers. It’s looking pretty good, according to the results of the survey that included 350 hospitals and 115 payers. The payers reported that they were 58% along the continuum toward full value-based reimbursement, a 10% increase since 2014. Hospitals weren’t far behind, reporting that they were 50% along the value continuum, up 4% in the past 2 years. As they experiment with different ways to shift risk to providers, payers estimate that nearly 60% of payments will be a mix of various payment strategies including capitation/global payment, pay for performance, and bundled payment in 5 years. Despite such lofty numbers, only a quarter currently have the tools in place to automate these complex models.

Although providers are more pressured today than ever before to reduce cost, operationalizing alternative payment models at scale remains a daunting challenge for payers and providers alike. The solution? Look at those who have succeeded and borrow their ideas. For example, care coordination is probably the most important capability for providers and the best metric to gauge success is improvement in patient outcome.

Pharma is not spared in this paradigm shift. As payers and providers are becoming more sophisticated buyers and focusing on total cost of care and quality outcomes, pharma must demonstrate a significant clinical benefit compared with current branded and generic treatments to be considered for formulary inclusion. A clear cost-savings argument is necessary. The answer may be to provide more real-world evidence. However, that notion is followed by a bolded asterisk as there is a sense of mistrust of pharma-provided economic data. Pharma must address this by becoming more transparent about their calculations.

Pharma can offer a second solution, which is also gaining traction. As payers and providers want to see how drugs reduce total cost of care and reduce unnecessary or ineffective treatments, pharma can offer value-based contracting. Novel payment and contracting models, such as those based on patient outcomes, are becoming more common. They represent a way forward. Lack of data infrastructure and concern about increased negotiating complexities are common barriers holding payers and providers back from implementing novel contracting strategies.

Payer and provider efforts to deliver better outcomes for patients are accelerating. The way drugs are researched, marketed, manufactured, and priced must keep pace or risk falling behind these fast-changing times.

Krishna R. Patel, PharmD, is a senior medical writer at MediMedia Managed Markets. She is also an adjunct faculty member at the Philadelphia College of Pharmacy and Temple University.