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Today, medical breakthroughs are occurring at rapid speed with the power to change and save lives. At the same time the demand for new medicines to immediately prove their value has never been stronger. To support access to new medicines while addressing cost concerns, we need a payment system as innovative as these medicines.

How do we get there? The private market is already beginning to develop payment models that link reimbursement to clinical results achieved.  In recent years, we’ve witnessed a steady increase in the number of innovative payment arrangements, or value-based contracts, that tie payment for medicines to patient outcomes or otherwise reduce payer risk.

However, despite this important progress, regulations developed for a volume-based payment system limit the number and scope of these new payment approaches. That has to change, and fast, according to a recent survey of biopharmaceutical companies commissioned by the Pharmaceutical Research and Manufacturers of America (PhRMA), which echoed earlier findings of a payer survey on the same topic.

PhRMA’s survey found progress was being impeded by outdated rules in three key areas, government price reporting, Anti-Kickback Statute, and FDA rules on communications with payers.

Government price reporting rules require companies to report certain net prices for medicines in the private market as a condition of participation in Medicaid. Under these rules, how a medicine performs under a value-based contract with one payer has potential to lower the price of that medicine in all state Medicaid programs nationwide. Concern about this large penalty can limit companies’ ability to share greater risk with private payers for a medicine’s performance.

Lack of clear guidance under the Anti-Kickback Statute (AKS) specifically addressing value-based contracts was also found to limit expansion of value-based contracts. Preventing fraud and abuse is critical, and must be done in a way that allows beneficial programs to proceed.  Finally, FDA regulations limiting communications with payers were noted as a key challenge hindering innovative contracts. While recent FDA guidance is a step in the right direction, it’s clear more work must be done in this area

Biopharmaceutical companies surveyed also noted several significant operational barriers to innovative payment arrangements — particularly when it comes to paying for outcomes based on patients’ real-world experiences with a particular medicine. In fact, companies cited inability to measure and/or track such real-world outcomes as leading barriers to implementation of new approaches to paying for medicines.

Stakeholders from across the continuum have begun to coalesce around certain common-sense solutions to allow more innovative payment arrangements, including the need to:

  1. Modernize price reporting requirements so that stakeholders can explore larger scale contracts that increase competition.
  2. Create a new safe harbor to the AKS to protect value-based arrangements and provide clarity for companies.
  3. Allow a full range of truthful and non-misleading communications between innovators and payers for all medically accepted uses of medicines.
  4. Improve capability for measurement through initiatives that make it easier for stakeholders to track outcomes across the health system, prioritizing measurement of factors that matter most to patients.

Addressing barriers that limit the number and scale value-based payment arrangements can help spur new approaches to contracting and offers a key solution to ensure value and affordability for patients and the system overall.

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