Value-based healthcare is here to stay – Pharma needs to embrace it, or risk getting cut out of the conversation
Global healthcare spending rates are increasing rapidly year on year. In the US, 90% of the nation’s $3.8 trillion in annual healthcare expenditure are for people with chronic and mental health conditions. The increasing demand for healthcare services is placing the sustainability of our healthcare systems under pressure. As a solution, policymakers and providers are focussing on value. Enter VBHC. Value-based healthcare reflects the evolutionary shift of our healthcare systems away from fee-for-service (volume-based) models to ones that focus on delivering the best possible health outcomes at the lowest possible cost (value-based), and the benefits for patients and payers are clear.
Pharma companies are now expected to offer more (value) for less (upfront)
Pharma companies are under constant pressure to differentiate their offerings from those of their competitors, exacerbated by the increasing number of competition and new product launches each year. Well, the move towards VBHC delivery models has raised the bar further. It is no longer enough for pharma companies to simply make a good drug; Pharma must now develop new and innovative approaches which foster value and get creative in the implementation of ways to measure it. In effect, completely overhaul and reshape its basic business model.
At first glance, this sounds like a transformational nightmare, right? And not least, an expensive endeavour. At a time when the cost of drug development is at an all-time high, payers no longer want to pay the cost of goods upfront for a new product, but instead, to pay based on patient outcomes, with suppliers being paid in full only if patients demonstrate predetermined outcomes. Furthermore, if the outcome is not met, companies may have to refund some of the original cost to the payer.
So, pharma companies are now expected to invest an average cost of $1.3bn for the development of a new drug, only to risk not recouping the costs? What about the Yescartas and Zolgensmas of the world, that cost significantly more? An increasing number of innovative speciality drugs with novel mechanisms of action are receiving regulatory approval, many of which target small patient populations, and come with big price tags. A move toward outcomes-based reimbursement models presents a clear threat to pharma companies in that cost recuperation will be delayed or worse, may not come at all. The return on investment is anything but guaranteed, and the risk is much higher; not only for pharma, but for patients, should Pharma be deterred from developing high-cost therapies.
With survival or domination in mind, some companies are breathing happily under VBHC waters, having incorporated value-based strategies early on, from brand to corporate level, whilst others continue to test the waters with siloed, product-focussed initiatives
Pharma companies have an opportunity to really benefit from this macrotrend. Never before have drug suppliers had such an opportunity to truly ingrain themselves within healthcare systems and take a broader role in the care pathway. The tricky part is deciding exactly who you want to be in VBHC and how you plan to get there, and it’s unlikely you’ll do it alone. Do you want to focus efforts on engaging with policy makers and payers to drive uptake of innovative value-based payment models, such as AstraZeneca? Or maybe you want to partner with biotech and go big on digital, and integrate advanced real-world data analytics to inform better decision-making in early R&D, or to cut costs and streamline process during clinical development, like Novartis? Or perhaps you want to focus on the provision of digital disease management solutions, such as the Roche Diabetes Care Platform, that complement existing products whilst empowering patients and generating real-world evidence to support access? Maybe you’re looking to rebuild from the ground up and build VBHC practices into the DNA of your company and its future leaders, as Pfizer is? Perhaps you’ll be like Amgen, who have been busy forging 150+ value-based partnerships, across all of their main TAs, in 38 countries worldwide. Or go really big and partner with national authorities for industry-led healthcare reform (AstraZeneca, Amgen)? There is no one-size-fits-all when it comes to VBHC, though it is key that companies think holistically and long-term and think past the single-product focus.
The VBHC train has arrived, but does Pharma have to get on board?
In short, yes. The emergence of value-based strategies such as outcomes-based contracting and the collection and use of RWE in access negotiations, leave no doubt that VBHC is here to stay. While challenges remain, VBHC presents a tangible opportunity for Pharma to strengthen its value proposition, far beyond the product supplier-level. There will be failures, and learnings, along the way, but companies must remain focussed on collaboration and partnership to succeed in this new age of healthcare.