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Payers, providers push manufacturers toward value-based deals

Drug and device makers respond by sharing cost of poor product performance

By Annette M. Boyle

As the healthcare industry continues to transition to value-based payment models, insurers and hospital groups increasingly want drug and device manufacturers to link their prices to results.

UnitedHealth Group's drug benefits business Optum Rx, for instance, has negotiated performanced-based deals to mitigate the high cost of hepatitis C treatments, which can run $1,000 per pill.

Humana has struck similar arrangements with 13 companies covering treatments for a range of diseases, including cancer, multiple sclerosis and diabetes, and it wants to negotiate a pay-for-performance deal with the manufacturers of pricey new cholesterol drugs, according to Bloomberg. These new treatments cost $14,100 to $14,600 per year in the U.S., a high pricetag for ongoing treatment of a chronic disease.

Across the board, specialty drug costs are expected to rise 23 percent this year, driven largely by increases in prices for cancer and cholesterol therapies.

Premier, a major hospital alliance, has also started negotiating with drug and device companies to tie payments to results. Premier Chairman Susan DeVore tells Bloomberg that she thinks the concept is "a little bit scary" for the pharmaceutical industry, but notes the pressure to pay based on quality and outcomes isn't going away anytime soon. "Health systems and physicians are more interested in it today than they've ever been," she says.

Device manufacturers also are responding, according to Bloomberg. St. Jude Medical, for example, offers a 45 percent refund on the price of its Quadra CRT implantable cardiac resynchronization device if a patient needs corrective surgery within a year. ICU Medical, meanwhile, offers to pay back hospitals if its connectors for central-line catheters do not reduce occlusions. Other companies are also in negotiation with Premier, the article notes.

Outcomes-based payments can help foster the mentality of "defined payment for defined outcomes" among drug and device manufacturers, as the concept requires them to share the cost of a product's failure, FierceHealthPayer has reported. And using bundled payments for breakthrough therapies also has the potential to create a workable framework for adopting expensive new treatments.

For more:
- read the article

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