The Lynx Group

Experts Discuss Current and Future State of Value-Based Agreements

December 2022, Vol 13, No 6

At the 12th Annual Summit of the Association for Value-Based Cancer Care (AVBCC) in 2022, held October 19-21, 2022, in New York City, a panel of experts from Upstream Partners discussed the current state of value-based agreements (VBAs) in pharma and what lies ahead. The session was moderated by Burt Zweigenhaft, PhD, DLitt, Executive Director and Co-Founder of AVBCC.

Recent Progress and Current Challenges

Linde Finsrud Wilson, MBA, Founder and Executive Director, Alliance for Innovation in Integrated Healthcare, and Managing Partner, Upstream Partners, asserted that more of these types of contracts will be “triangulated,” meaning they will consider payers, pharma, and providers together. “Now pharma and providers can enter into partnerships that are truly innovative and serendipitously valuable to them,” she said.

Ms Wilson noted, however, that agreement adoption challenges persist. “As we see additional regulation, we have even more challenges, or so we believe,” she said.

“Regulators are certainly opening the door to VBAs, whether it is multiple best prices, or the IRA [Inflation Reduction Act], so they are at least trying to encourage these types of agreements, which is positive in terms of momentum for the industry,” said Christopher Warren, MBA, CFA, Senior Associate, Upstream Partners.

Data acquisition is the real challenge, said Ms Wilson, “and we need the data to be able to prove the end points.” Third-party adjudicators are emerging to address this data challenge.

Since last year’s AVBCC Summit, there have been 6 new VBA contracts, but only 1 in oncology, and 2 between 2020 and 2022. “I expect, and my prediction is, that next year it will be 10,” said Ms Wilson.

“In the oncology space, many of the agreements have been through risk-averse products. We’re seeing that as companies get more comfortable instituting VBAs for their risk-averse products—they’re starting to get really excited about VBAs and maintain that excitement,” said Michael Muldoon, MS, Senior Director, Upstream Partners. “A lot of these stakeholders are saying that these VBAs will not be their last ones.”

Ms Wilson pointed to Bluebird Bio’s implementation of an outcomes-based agreement, which reduces the risk associated with an upfront payment. The biotechnology company, which develops gene therapies for severe genetic disorders and cancer, will reimburse both commercial and government payers up to 80% of the total cost of therapy when treatment failure occurs, with treatment failure defined as failure to maintain transfusion independence for up to 2 years following infusion.

“The interesting thing about Bluebird Bio is that they tapped ICER [Institute for Clinical and Economic Review] and worked with them from a cost containment and quality standpoint,” she said. “Once they got the okay from ICER, that greased the skids for this particular contract.”

Ms Wilson noted that the company based the contract on its phase 3 data, in which a 100% complete response rate was achieved.

In reimbursing for these types of expensive therapies, payers are seeking proof of an end point. Launch prices may escalate as a result, with the justification that the product is curative. “So, if you look over the long haul, the value is pretty significant,” Ms Wilson said.

The panel agreed that pharma manufacturers must initially consider several internal and external factors in the planning stage of VBA development. Creating the infrastructure can be challenging because pieces may be outsourced. A secure neutral environment must be created to serve as a data engine, specifically capturing medical claims for patients on treatment tied to a VBA and patient medical records. From an external perspective, these multiple partner relationships must be managed.

“Partnership with VBA should be a true partnership, with neither side looking to win the negotiation, but with the goal of creating value for patients,” said Mr Warren.

Emerging Trends and New Legislation

Recent experimentation into broader applications for VBAs offers a promising outlook for expansion of outcomes-based agreements in new areas.

“Our advice is to start to look at your portfolio products and determine if there’s one in particular that you might want to test,” Ms Wilson said.

Another anticipated trend is the increase in reliance on data and analytics.

“Data will get easier,” said Mr Warren. “As we saw on the provider side, when they started dealing with these types of arrangements, you often saw a flood of digital health companies coming to solve some of these problems, and we’ll see that in this space as well.”

Recent legislation has included targeted directives (eg, the new Centers for Medicare & Medicaid Services’ Best Price Rule) aimed at lowering key barriers to VBA espousal, indicative of a larger regulatory push towards a modulated VBA landscape in the long term.

“We’re looking at how we examine the effects of the Inflation Reduction Act on specific products,” said Mr Warren.

In addition to the Best Price Rule, bundled sales mitigate the effect of lowering the price of a single product through a VBA by spreading a rebate across an entire population, making VBAs more accessible, particularly for treatments with a high sales volume, noted Mr Muldoon.

“In order to qualify for the multiple best prices, VBAs have to be available to Medicaid as well,” said Ms Wilson.

The Inflation Reduction Act is associated with several potential impacts for VBA implementation. For example, manufacturers are likely to offer higher launch prices based on the likelihood of negotiation, along with other development and competitive factors, which could cause a reactionary response of more restrictive payer policies for the drug. In addition, applications for orphan drugs may be on the rise because under this new legislation, these drugs are exempt from the maximum payer price ruling, which in turn “might negatively impact VBA interest for those products,” said Mr Muldoon.

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