Value-based health care: issues for pharmaceutical companies

by Ropes & Gray LLP
Michael Lampert, Ropes & Gray health care partner, discusses issues facing pharmaceutical companies with the move towards value-based health care models.


When I think about developing a value-based program for pharmaceuticals it’s necessary first, I think, to look at what they need practically to do to make that work. Number one, they need to make sure that there is agreement on what outcomes are going to be measured – you can’t be paid on an outcome unless you know See more +

Michael Lampert, Ropes & Gray health care partner, discusses issues facing pharmaceutical companies with the move towards value-based health care models.


When I think about developing a value-based program for pharmaceuticals it’s necessary first, I think, to look at what they need practically to do to make that work. Number one, they need to make sure that there is agreement on what outcomes are going to be measured – you can’t be paid on an outcome unless you know what the outcome is. Number two, you need to have an agreement on the metrics within those outcomes that are going to be measured – by how much does what needle need to move in order to justify a deeper discount or higher reimbursement. Third, they need to figure out what touch points with patients are possible, what touch points with patients are practical and what can be done, because if I am going to be paid based on the efficacy of my drug, but if I don’t have the ability to make sure that patients take my drug regularly, then I am going to be gambling with something that I can’t control.

So in doing a value-based program, a pharmaceutical company after it identifies the operational issues, is of course going to have to work through the legal issues. One of the first ones that comes up whenever any pharmaceutical company is adjusting its pricing, is going to be fraud & abuse. Now the fraud and abuse analyses that pharmaceutical companies historically do around reimbursement aren’t new, but they’re newly applied when the change in pricing is based on outcomes rather than on something else. The second is Medicaid best pricing. Now Medicaid generally requires that pharmaceutical companies sell their drugs to the Medicaid programs – state Medicaid programs – at the best price made generally available. Now that is easy on an apples to apples basis, when a pharmaceutical company sells just a pill to buyer one, and it sells another pill to a Medicaid agency, we can compare those prices very easily. When it sells however, a pill to commercial buyer one under a value-based reimbursement contract and then it sells the same pill to a Medicaid state agency on a pure traditional contract, we are no longer comparing apples to apples, it’s apples to oranges – and figuring out how to work around the Medicaid best price in compliance with the requirements is going to be the second issue.

And number three is Food, Drug and Cosmetic Act compliance, and specifically compliance with off-label promotion. If a pharmaceutical company offers its drug on a performance metric, with reimbursement tied to a particular performance metric, and if that metric doesn’t align with the labeling that’s been approved for that drug, the company is going to face a question about whether its reimbursement arrangement is promotional speech fundamentally, that is outside the approved labeling – and so there needs to be a comparison of the performance standard that will underlie the value-based reimbursement approach with the approved labeling.

The forth is data, of course. A pharmaceutical company will need to be able to access data or have someone it trusts access data over the course of a value-based arrangement, both to see how its product is preforming and if it’s been able to develop arrangements in order to be able to interface with patients in use of the drug, it needs to make sure that it can get those data, and so the forth issue really is access to data.

What I foresee looking ahead is number one, if the Affordable Care Act is repealed or changed in some way, shape or form, revenue is going to be drawn out of the system, resources are going to be drawn out of the system and organizations are going to have to in some cases do more with less – and a way to do more with less is to deliver on value. If I am a pharmaceutical manufacturer, I want to know whether perhaps I can be at the forefront of developing value-based reimbursement that will distinguish frankly me from others with whom I might be competing on a formulary. See less -


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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