CBI: Outcomes-Based Contracting, October 17-18, 2016
Manage the Regulatory and Legal Risks in
Outcomes-Based Contracting
Moderator:
Neena Patil
Assistant General Counsel
Novo Nordisk
Panelists:
Christina M. Frangos
Commercial Counsel
EMD Serono, Inc.
David Jacobs
Assistant General Counsel, Commercial Brands
Daiichi Sankyo, Inc.
William Asbury
Executive Business Director, National Accounts
Daiichi Sankyo, Inc.
Disclaimer
The information contained in this presentation is for the
general education and knowledge of the attendees. The
opinions expressed herein are personal to the presenters and
may not be understood or quoted as being made or on behalf
of the organizations that the presenters work for. None of the
information or analyses is intended to be legal advice, and
should not be relied upon as legal advice.
Volume Based v. Value Based Pricing

Volume-Based or “Price-per-pill” means Payment linked to Volume/Quantity.
 Rebate: Specific amount manufacturer pays based on volume purchased over a given
period. Rebate can increase or decrease based upon volume or market share
 Volume-Based Agreements not going away
 Despite great attention for value-based purchasing, volume-based is still a vast
majority

Value-Based means that pharmaceutical manufacturers and payers link payment to a
value achieved. Sometimes thought of as a performance-based rebate model.
 Establish a Base price
 Higher price if the performance metric is achieved
 Lower price if the performance metric is not achieved
Reasons for Outcomes-Based Pricing
 Payers trying to control Cost by using bargaining power for
better price
 formulary coverage, step therapy, prior authorization,
physician contracting, copay tiers, quantity limits
 But can compromise patient access/care
 Manufacturers want access and Outcomes-Based
Agreements are a way to substantiate product value
propositions
 Value-driven payment can promote efficiency, affordability
by encouraging access to helpful medicines and ensuring
that patients are getting the most value for their healthcare
dollars
So why are Outcomes-Based Contracts not more widespread?
 They are more difficult to implement than volume-
based rebate agreements

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Contract complexity
Data limitations
Monitoring issues
Legal considerations
All takes resources
What is needed?
 The right Product
Value propositions that lend themselves to S.M.A.R.T. performance
measures
 Example: Short-term performance measure that enables the party paying
for the product to realize the medical benefit.
 The right Customer


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Responsible for the pharmacy benefit and also the medical benefit (i.e. less “transition risk”)
Has the resources and capabilities to evaluate the risk exposure (modeling, analyzing data),
evaluate different proposed terms
Has access to the necessary data under one system (i.e. has access to pharmacy records, lab
records, patient-level medical records)
 The right Performance Measure

That is relevant to both parties, foreseeable, reliable, easily measurable, can be independently
evaluated (e.g. lab results, ICD-9 codes)
Legal Considerations


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Federal Food Drug and Cosmetic Act
 Prohibits “off-label” marketing
 Outcomes and Comparators
Government Price Reporting
 Best Price (BP)
 Medicaid
 340B
 Bundled Arrangements
 Average Manufacturer Price (AMP)
 Standard AMP
 5i AMP
 Average Sales Price (ASP)
State Insurance Laws
 Risk-based agreements means manufacturer bears financial risk. Could be viewed as insurer.
State fee splitting Laws
 Providers not allowed to split reimbursement. Shared-savings pricing model
Legal Considerations, cont.
Fraud and Abuse – The Anti-kickback Statute
 Prohibits any person from


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Knowingly and willfully
Offering, paying soliciting or receiving
Remuneration
Directly or indirectly
With the intent to induce or reward business reimbursable under federal healthcare
programs
 No guidance from OIG on whether value-based arrangements fall within a
safe harbor
 Privacy Laws


Who will collect the data?
HIPAA, patient consents and the importance of de-identified data
 Theories of Liability
Objective of Claims Data Analysis
•
Gain scientific insights on outcomes among Medicare Advantage members to inform
decision on the following regarding proposed outcomes-based contract:

What is the appropriate patient population for an outcomes-based contract?

Which outcome should be considered?

What would be an appropriate baseline reference/comparator?
Study Design
Eligible patients to have at least 2 Rxs within
12 months of each other during this period
RX1
1/1/2013
RX2
6/30/2014
Index XXX claim
•
Patients required to have 2 medical
claims in the 12 months prior to
index XXX claim
•
Medical claims data in the 12 months
prior to index XXX Rx examined to
determine baseline characteristics
and prior XXX use
Medical claims data in the 12 months after
index XXX Rx used to assess patient
outcomes
Proposed Structure of Outcomes-Based Contract
 Patient Population


Diagnosed with condition
Consistent patient characteristics for patients receiving Target Brand
and those receiving the comparator


e.g., newly initiating XXX treatment
Adequately sized and with sufficient length of follow-up to make a
valid comparison
 Outcome

Net clinical benefit as identified on inpatient hospital claims
 Comparator

Brand A
Proposed Structure of Outcomes-Based Contract
 Financial Structure



Base rebate with parity access to Brand A
Additional rebate if performance measure is not met
Lower rebate if performance measure is exceeded
 Target Brand Access

Preferred access needed for rapid uptake (sample size) and to limit
selection bias
 Timing

Analyses to begin in 2017, assuming needed sample size is met in
2016
Summary
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Good information sharing between plan and manufacturer
Good internal manufacturer teamwork and collaboration
The right rigor on the analysis
Challenge in the timing of outcomes measurements
Questions?