While simple in theory, value-based contracts are complex in practice covering everything from the quality outcomes to be measured to whether certain patients should be excluded, said Chance Scott, a director in the life sciences practice at Washington, D.C.-based consulting firm Guidehouse.
If a cardiac-drug patient suffers a heart attack, for example, the medication could have failed or there could be another contributing factor, Scott said. “That’s where it just becomes really tricky.”
Payment terms also may vary. Some contracts call for rebates, while others might require payers to make a large upfront payment followed by smaller payments at regular intervals as long as the drugs keep working, Scott said.
Regardless of the complexity, value-based contracts are likely to become more common as payers seek to control costs, Scott said. Pharma companies go along or risk seeing payers reduce or restrict use of their therapies.
“The payer demand is what is going to push this forward,” Scott said, noting that cardiology and oncology are among the areas where value-based contracts will become most prevalent.