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PhRMA: Copays 'cheaper on health plans with value-based contracts'

Patients with health plans with value-based contracts for diabetes, high cholesterol, and HIV medication benefited from significantly cheaper co-pays than patients on other plans, according to new data from the Pharmaceutical Research and Manufacturers of America (PhRMA). On average, these medicines were 28 percent cheaper on health plans with value-based contracts over the last two years.

Value-based health plans are a relatively recent development in the healthcare market, tieing healthcare payments to their value and efficacy rather than the volume of services provided. On a basic level, all value-based contracts work by charging insurers based on how effective a drug is rather than the quantity of medication the patient needs. 

This approach to healthcare puts more of the financial risk in the hands of biopharmaceutical companies, potentially enabling insurers to offer lower copays and coinsurance. Value-based pricing is an umbrella term for several different forms of these types of health plan, including outcomes-based contracts, conditional treatment continuation, and indication-based pricing. 

Indication-based pricing allows pharmaceutical firms to charge different prices for the same drugs depending on which disease they are prescribed to treat. Outcome-based pricing focuses on the efficacy of the drug, allowing insurers and patients to claim rebates from pharmaceutical firms if drugs fail to work. 

“Results-based or value-based contracts can reduce healthcare system costs and can make medicines more affordable and accessible for patients,” said PhRMA president and chief executive officer Stephen J Ubl. 

“The healthcare market is starting to move in this direction, but we need public policy reforms that allow greater flexibility for innovative payment arrangements that lower out-of-pocket costs and enable patients to access the right treatments the first time,” he added. 

A recent survey people who worked for payers or healthcare providers found 36 percent said some of their revenue was generated by value-based payments. More than one-quarter of respondents to the KPMG survey revealed their company or employer planned to implement value-based payment arrangements within the next three years. 

PhRMA’s analysis suggests that if results-based contracts can lower the cost of diabetes to the United States healthcare system by just five percent, the country could save more than $12 billion annually. Diabetes affects nearly one in ten Americans, according to the latest National Diabetes Statistics Report from the Centers for Disease Control and Prevention. The same report estimated the total direct and indirect cost of diagnosed diabetes in the United States as $245 billion in 2012 alone.