Value-based care: four questions for life sciences companies to consider

As the healthcare industry shifts from volume to value, value and risk management strategies are converging, creating opportunities for payers, providers and life sciences companies to collaborate and integrate capabilities. Although each party has a unique role and perspective in the healthcare ecosystem, the importance of collaboration to decrease costs, improve patient outcomes and increase access to beneficial treatments is becoming the new normal. [1]

The emergence of value-based contracts (VBC) ― a system where reimbursement for a medical product or technology is based on its value provided ― offers the ideal stage on which to test this new way of doing business. Through the provision of real world evidence (RWE), life sciences companies are being asked by payers and providers to demonstrate with data that their product is contributing a documented clinical benefit without increasing healthcare utilization or risks from a cost and/or patient safety perspective. As the shift to a pay for value paradigm becomes more prevalent, payers, providers and life sciences companies will be required to think and behave differently and should proactively implement strategies that foster collaboration through mutually beneficial relationships across the healthcare ecosystem.

In the evolving healthcare market, payers, providers and life sciences organizations are now cautiously embracing VBC arrangements as a means to ensure the most desirable patient and financial outcomes are achieved. While the original aim of VBCs is to redistribute risks among all parties, life sciences companies typically have the most to lose and consequently carry most of risk in these agreements. Given payers and providers can control access to a product or technology, life sciences companies face the burden of having to demonstrate the value of their product in order to obtain favorable coverage decisions. In this new way of doing business, if the product does not have the data to support a strong value story, the life sciences company runs the risk of losing access to a significant number of patients in a plan or hospital system. Despite this imbalance in risk, the upward potential for all parties taking part in VBC, especially life sciences companies, remains.

As more payers, providers and life sciences organizations embark on the VBC journey, it’s essential for organizations to understand the individual levers of success for each entity in order to put their organization in the strongest position possible. Organizations can bolster their chances for VBC success by addressing the following fundamental questions when first considering whether to enter into a VBC agreement:

Is a value-based contract a feasible strategy for my business?