Risk Sharing Agreements in Healthcare – the role of Real World Evidence, actuarial analytics and risk management principles
Introduction:
Outcomes-based care and contracting or Value-based pricing or Performance-based risk sharing agreements are intuitive concepts which have been talked about for some time, have been applied in select situations by manufacturers, payers and providers with mixed results, but whose time has now clearly arrived.
Recent Developments:
In Italy, drug-pricing negotiations based on cost effectiveness evaluations have been mandatory since 2001. Starting 2006, the country introduced performance-based risk-sharing arrangements. Has the Italian approach led to a better alignment of prices and value? A recent study by Trotta et. al.(https://bmjopen.bmj.com/content/bmjopen/9/12/e033728.full.pdf) observed no correlation between improvement in (any) clinical outcomes and negotiated prices across any of the 30 reimbursed products. All new anti-cancer drugs approved by the EMA between 2010 to 2016 and reimbursed in Italy were included in the analysis: 30 new anticancer drugs (with 35 indications). Clinical outcomes were defined as median overall survival, median progression-free survival and objective response rate. It appears there is little-to-no relationship between the cost of cancer drugs and their respective therapeutic benefits in Italy. More importantly, the country’s mandatory pricing negotiations – a strategy that has been followed in Italy for years – has offered little success.
In April 2020, the National Association of ACOs (NAACOS) in the US surveyed risk-based ACO Model providers on the effects of COVID-19. Almost 60 percent of respondents reported they are likely to quit the ACO program to avoid financial losses stemming from the pandemic. Further, 90 percent of ACOs reported that the COVID-19 pandemic would have a significant effect on their ACO’s ability to earn shared savings. In a letter to the Centers for Medicare & Medicaid Services (CMS), NAACOS and other practitioner organizations asked for relief. In response to this input, CMS published an interim final rule in May 2020, with a comment period in the Federal Register, making changes to the Medicare Shared Savings Program regarding financial methodologies as well as application and risk assumption deadlines for ACOs, among other changes. (https://www.lexology.com/library/detail.aspx?g=303ccdfd-f899-4a51-a1af-e0307939a95b)
In June 2020, the Centers for Medicare & Medicaid Services released a major proposed rule in a bid to update and expand key regulations governing the Medicaid Drug Rebate Program. Value-Based Purchasing, Multiple Best Prices, Expanded Alternative URA, and other MDRP Drug Pricing Changes were included as proposed changes. These changes may impact manufacturers’ commercial strategies, government payer program liabilities, lifecycle management plans, patient assistance regimes, and other important considerations. (https://www.jdsupra.com/legalnews/new-risks-new-rewards-new-exposure-95006/)
How real-world evidence supports outcomes-based care and contracting/value-based pricing:
With real-world data (integrating claims data with the available electronic health records and pharmacy data), payers can look at their own population to identify high-risk members who would benefit from a specific intervention. Real-time, ongoing monitoring of their population with RWD, analyzing comorbidities and risk factors, can help generate actionable insights. These can be shared with providers at regular intervals to improve, for example, adherence/ access to specific drugs.
Currently payers evaluate drugs for their formulary based on the clinical literature. The risk sharing model that’s defined in the early marketing stage of a new therapy has to be refined based on real world data. At times payers may collect drug utilization data, but it takes time to carry out such a study and it is a manual process. It doesn’t offer the required transparency to the pharma cos around the payer’s drug evaluation process for patient access, for value-based contracting or a risk-sharing arrangement.
Initial risk-sharing model is designed to allocate financial risk more efficiently among stakeholders, while the payers ultimately need downside risk protection. There is a need to identify specific interventions for high-risk populations on an ongoing basis using utilization and other real-world data, employ predictive modelling, update clinical algorithms, ensure implementation, and track the outcomes in real-time. But it is challenging without investments in real-time analytics and a robust process driven by risk management and actuarial principles.
Real-world evidence enables understanding of outcomes for multiple drugs and multiple endpoints, and if certain drugs have better outcomes in certain sub-populations, enabling population-wide and cohort-specific risk-sharing models. Most importantly, appropriate use of RWE helps payers identify outcomes of their interest and value, and use these in contracting discussions with pharma. Risk-sharing agreements stratified by population subgroups can optimize the financial impact. A good risk metric can inform the risk/return relationship and can be used in an actuarial cost model to monitor resource implications and budget impact of access to a new therapy, and to compare outcomes under various scenarios.
Key messages:
- RWD analytics on payer’s own data can prospectively identify patients that don’t have desired outcomes.
- RWE can form the basis of risk-sharing agreements (RSA) for health outcomes that matter.
- Customized risk sharing models need to address patient cohort-specific requirements.
- A well-structured RSA based on RWE, can incentivize right health outcomes, manage budgetary risk for payers and ensure preferred formulary access for manufacturers.
- Actuarial analytics can help identify, quantify and manage risk for all stakeholders involved.
- Real time/ Low latency data analytics and monitoring of health outcomes requires dedicated infrastructure and methodological rigor.
VBP/RSA workflow example:
President and Founder
30+ years in industry and academia; 24 years in Pharma & CRO in Clinical research, post-marketing and safety; cancer epidemiology; Entrepreneurial experience; Statistics and Actuarial qualification.