Q&A: Duke's Daniel on the challenges of moving pharma, device companies toward value-based payment

Finding a practical path for pharmaceutical and medical device manufacturers to enter value-based payment arrangements is the goal of a new policy consortium formed at the Robert J. Margolis, MD, Center for Health Policy at Duke University.

“We have the technical and methodological tools to incorporate real-world evidence into measures of value, but need to advance the discussion about how and where it is used and address its application to emerging biomedical products,” said the center’s deputy director, Greg Daniel, PhD, MPH.

The consortium will include Duke professors, including Margolis Center Director and former CMS Administrator and Food and Drug Administration Commissioner Mark McClellan, MD, PhD. Its advisory board features executives from companies such as Cigna, Kaiser Permanente, Express Scripts and the Hospital Corporation of America.

With the first research from the consortium expected as early as fall 2017, Daniel spoke with HealthExec on the priorities and aspirations for the project, and whether the technology exists to achieve its goals.

HealthExec: What’s missing from conversations about value-based care that this consortium is hoping to add?

Greg Daniel, PhD, MPH: Most often, those discussions haven’t included drugs and devices. Because of the way our insurance system, both on the private side and the public side, reimburses drugs and devices, they’re usually outside the traditional forms of payment to providers. What’s new to the discussion is figuring out how we can better set up these kind of more value and outcome-based ways of paying for high-cost specialty drugs, medical devices and even new, innovative therapies, like gene therapies, that are potentially curative, are really high-cost and really do set up the question of whether we’re getting value from these drugs and these technologies.

There are some examples where payors have entered into innovative contracts with manufacturers around their products. There are couple in the area around diabetes and heart failure. There are handful couple that are publicly known and that are in existence, but they’re really challenging to do, and there have been some more recent policy discussions about what those challenges are.

The other thing that’s new with our consortium is that we’ve built it with an eye towards making practical progress and towards implementation. So while we’re discussing some of the challenges, we’re really working on those challenges. How can we encourage and lay the roadway for having providers, payors and manufacturers enter into these value-based arrangements in more of a systematic and comprehensive way, by going beyond just talking about the challenges, but identifying ways that are actually feasible to implementing these approaches.

How do you assess the willingness of pharma and device companies to take on these arrangements?

Daniel: I think there’s a high degree of variability, but generally speaking, I think most manufacturers know the healthcare system is moving more towards a value-based approach. Then there’s the public sentiment towards high-priced drugs—drug prices are in the news, they’re in the political debates, it’s all over the place. I think manufacturers realize that and realize one of the best ways to address these rising prices is look at the value that these products bring.

Manufacturers that are more involved in specialty care and are coming up with highly innovative therapies that are also high-cost are the ones who are really looking at these value-based approaches. They see that providers are going after risk now for chronic diseases, and their technologies can have a real impact. Innovative risk-sharing agreements between providers and manufacturers are of interest, as well as with payors as a way to make sure as we do pay more for these technologies, they’re actually paid based on their outcomes, not just their sticker price.

With those few value-based agreements you mentioned, how much farther would these healthcare sectors need to go to really transition away from fee-for-service?

On the technology side, there are a few examples of where these arrangements are in place, but they’re often not truly risk-sharing between manufacturers and payors and in some cases, they’re not really tied to value, they’re tied to clinical outcomes. Part of that is there are a lot of regulatory barriers still in place for fee-for-service, like the Anti-Kickback Statute or Medicare best price, so the contracts that we see today are an attempt at value-based approaches, but still with workarounds.

I think we’ve come a long way, but there’s still a ways to go. It’s not necessarily just about payment but it’s about how these reforms actually transform care. So, if the payment reforms don’t change the way that drug innovators innovate or they don’t change the way healthcare systems or providers are delivery care, then we’re not really going to see the improved value and outcomes on the backend.

What about the technology—is it where it needs to be to support this broader value-based care between providers, payors, drug and device makers?

That’s another area where more progress needs to be made. There are pockets of areas where we’ve seen more integrated data and data-sharing. To make these arrangements successful, data has to be shared among payors, providers and manufacturers, and that includes bringing in pharmacy data with medical data to get a better assessment of how these drugs are being used and the outcomes these drugs are having on total cost of care.

You need integrated data and you also need to be able to share that data. Those are the two aspects which get really challenging to do. There are examples of systems that are developing the data and collecting it more in real-time, like the Sentinel System and other large data systems, that are making more efficient the process of standardizing data and using the data for outcome assessments.

But they’re not currently being used for payment decisions. To do value-based payments more systematically, figuring out how to leverage those data systems and using them to track clinical outcomes and link them to payment an important next step.

So, I think we have the technology to do that. A lot of the problems come with data privacy concerns, like HIPAA. A lot of clarity needs to happen there and then there are the business decisions on data-sharing as well.