Risk-sharing contracts could reduce U.S. drug prices

Public outrage over rising drug prices is leading pharmaceutical manufacturers, health insurers and patients to join forces in sharing the financial risks involved with unproven, expensive new medications.

University of Florida College of Pharmacy researchers found performance-based risk-sharing arrangements between pharmaceutical manufacturers and health insurance providers are common in Europe and predict they are likely to become more popular in the United States. These contracts help pharmaceutical manufacturers share the financial risks associated with new drugs when marketed after FDA approval. Manufacturers benefit from gaining sales and collecting outcome data available for newly approved pharmaceuticals. Health plans benefit by only paying for successful drug outcomes, and patients benefit by gaining earlier access to new drugs with potentially lower copays.

Robert Navarro, Pharm D
Robert Navarro, Pharm D

“The impact of these risk-sharing arrangements is that drug companies share financial risks with plans and patients, and the contracts help plans make value-based drug coverage decisions,” said Robert Navarro, Pharm.D., a clinical professor of pharmaceutical outcomes and policy at the UF College of Pharmacy, part of UF Health. “While drug prices may increase, these shared-risk contracts help reduce the net cost of providing expensive new drugs to patients.”

Navarro and colleagues recently published two research studies in the Journal of Managed Care and Specialty Pharmacy that examined perceptions and barriers of performance-based risk sharing arrangements, including outcomes-based contracting experiences. These practices link net drug cost for expensive pharmaceutical products to patient outcomes. Health insurance providers will pay for drug successes, but manufacturers refund some of the cost of drugs that fail to achieve specified outcomes.

UF College of Pharmacy researchers found that successful arrangements occur when manufacturers and insurers agree upon common performance metrics for measuring drug outcomes associated with many high-cost medical conditions. Diseases with subjective outcomes measurements or outcomes where data are difficult to obtain may not be candidates for such arrangements. In addition, drafting arrangements is complicated, which is why researchers identified a need for developing standardized contract templates.

In interviews with 27 manufacturer and health plan executives and experts associated with performance based, risk-sharing arrangements and outcomes-based contracting, UF researchers determined implementation of these arrangements have been more successful in Europe than in the United States. The fragmented and complex U.S. health care system likely contributed to this trend. Most insurers and manufacturers interviewed concur risk-sharing arrangements offered positive value to their organizations and patients. With economic and governmental pressures to link medicines to effective patient outcomes, the expectation is that these arrangements will gain popularity.

“Drug manufacturers, health insurance providers and patients share a mutual interest in the success of performance-based, risk-sharing arrangements,” Navarro said. “Developing trust among these groups and standardizing contracts are critical for the continued growth of these arrangements and outcomes-based contracting in the United States.”

For an additional research perspective on the topic, please review Joshua Brown’s, Pharm.D., Ph.D., M.S., an assistant professor of pharmaceutical outcomes and policy, study published in the January 2018 Value in Health Journal.