The value proposition: Who holds the power?
By: John Doyle, DrPH, MPH | June 21, 2016
An exploration of how we define value in a value-driven healthcare economy.
In the current value-based healthcare environment, success is measured in the quality rather than quantity of healthcare. We are finding that valuating quality of care and outcomes is a lot more challenging than accounting for the volume of treatment, especially given the myriad stakeholders involved. A payer’s perspective on value will rightly differ from that of a physician, patient, policy-maker, or pharmaceutical company. Each of these perspectives is meaningful, yet as an industry we’ve yet to figure out how to fairly pull them all together into a harmonized equation, and that has created something of a power struggle.
Payers have begun asserting more control as they stipulate more formulary exclusions and alter reimbursement mechanisms to strive for value-based insurance design; manufacturers have been proactively seeking outcomes-based agreements taking on risk of success or financial loss if the technologies don’t measure up; and providers have been given the responsibility to “coordinate” care and become “accountable” for the collective care of various populations.
As the pressure to define value becomes more intense in the US, some stakeholders have begun to explore new models for recognizing and capturing value in healthcare. At the 2016 BIO International Convention in San Francisco, I moderated a panel of experts that included Robert Spurr US Country Head of Patient Access and Health Policy, US General Medicines for Novartis, Robert Azelby Chief Commercial Officer of Juno Therapeutics, and Dr. Jo Carol Hiatt, chair of the National Product Council for Kaiser Permanente. Together, we explored the new value proposition in healthcare, and how we need to be more collaborative in our approach to determining who is accountable for delivering and defining value, what that definition looks like, and how we can navigate the changing reimbursement landscape.
In the end, we determined that the question of value accountability comes down to the Three Ps:
Pricing: Pricing is obviously a core component of the value conversation, and in this case we focused how we can assign a price to a treatment that most fairly matches its long-term benefits. Many factors go into determining the fair price for a healthcare treatment, particularly when a product has substantial upfront costs that must be factored against improved outcomes, overall survival, and quality of life for a target population. On the front-end costs are readily quantifiable as a monetary figure, but the downstream benefits are more complicated to value. As such it is difficult to define a fair return on investments for the payer and the manufacturer. Value-based pricing appears promising but it will be imperative to incorporate multiple attributes, perspectives, and outcomes in an objective, unbiased, and transparent methodology.
Policy: One of the recent trends to emerge from the shift in focus on the healthcare environment are value frameworks. These tools are designed to appraise the value of a treatment by comparing data about its efficacy, adverse event profile, impact on quality of life, overall survival, and other criteria to generate a value score. The goal is to enable stakeholders to easily assess a treatment’s value and compare similar products to determine which provides the greatest value for them. The frameworks can also facilitate an evidence-based discussion of relative value when evaluating treatment options together.
The challenge is that each of these frameworks are heterogeneous, with their own methods of appraising value. In some cases the same drug may be ranked differently depending on which framework is used. As a result pharma companies, payers and other stakeholders and struggling to know which framework to solve for, and how to determine the outcomes that are most valuable to them. It is also pushing the industry to make hard decisions about whether to harmonize behind a single framework or to generate more of these frameworks in hopes of establishing more definitive calculations that the industry can rally behind.
Patient perspective. One of the most compelling conversations to come out of the BIO panel was around how early it makes sense to incorporate the patient’s perspective into the drug development process. The resounding answer from experts and participants was ‘as early as possible.’
Panelists and participants agreed that as soon as a developer begins to explore the epidemiology of a disease and to determine how they can change the trajectory of care to improve outcomes they need to incorporate the patient’s voice in this process. Capturing that patient perspective can come through focus groups, outreach to patient advocacy groups, and real-world data gathered from registries, social listening and other communication channels.
When developers take the time to consider the patients’ experience with their disease and what outcomes they value most, they can more closely align their development goals with the needs of their target population.
By the end of the session, it was apparent that no single stakeholder holds the power to define value. It’s a collaborative effort distributed across all of the stakeholders in the healthcare system, from developers and regulators to the patients themselves. In order to build an integrated value-based healthcare system we have to work together to find that balance of power that optimizes benefits to all stakeholders.