Research Published in AJMC Shows Value-Based Agreements May Be More Prevalent Than Assumed

[February 13, 2019, Washington, DC]—A recent survey of U.S. payers and biopharmaceutical manufacturers found that consideration of value-based agreements (VBAs) as a coverage and payment tool is increasing and the prevalence of VBAs is far greater than previously thought. Study participants—biopharmaceutical manufacturers and payers—reported entering into more than 100 VBAs between 2014 and 2017. However, only one in four were publicly announced. The study, believed to the first of its kind, focused on exploring the prevalence and characteristics of both public and non-public VBAs in order to better understand current activity in value-based contracting. The research was conducted by the Duke University, Robert J. Margolis, MD Center for Health Policy and the National Pharmaceutical Council (NPC); the findings were published in the February 2019 edition of The American Journal of Managed Care.  

“If we focus solely on the publicly known VBAs, we greatly underestimate the prevalence and potential impact of these arrangements in the market, and the progress being made to transition from volume to value more generally,” said Robert Dubois, MD, PhD, chief science officer, National Pharmaceutical Council.

In the current environment in which the United States health system faces increasing pressure to improve patient access to highly effective, yet costly, therapies, VBAs are a potential, novel method to align pricing or payments with observed or expected value. Successful VBAs to date involve outcomes that are easily measurable and patients that can be clearly identified via diagnostic tools. VBAs can be especially useful for high-cost products with uncertain value.

The study also explored the contract development process to better understand where negotiations between payers and manufacturers break down. For the purposes of this research study, the lifecycle of these agreements was divided into four phases: 1) internal assessment and information gathering; 2) early dialogue; 3) formal negotiation; and 4) contract implementation. There is significant attrition between the first and last phases: Common reasons include lack of data, legal concerns (particularly Medicaid Best Price), financial terms, and lack of outcome measures. Overall, this study highlights the significant effort required by both parties to successfully negotiate and implement VBAs.

Recent developments, such as new FDA guidance around the exchange of health care economic information, and the Request for Information issued by the U.S. Department of Health and Human Services on the Anti-Kickback statute, indicate that interest is building to remove long-standing barriers to value-based contracting.

“Our study illustrates the significant interest and activity in value-based contracting,” said Gregory Daniel, PhD, MPH, Deputy Director, Policy for Duke-Margolis Center for Health Policy. “To support the continued advancement and implementation of innovative contracting arrangements that tie actual payments to measures of value, it will be important to address the legal, regulatory and operational barriers to implementing these contracts to make them worthwhile.”

The study was conducted in two phases. First, an online survey was sent to senior representatives from 38 payer organizations and 37 drug manufacturing companies; ultimately, 9 payer representatives and 11 manufacturer representatives completed the survey. Of these, one manufacturer and four payers reported not having explored or negotiated any VBAs. In the second phase, researchers conducted qualitative interviews with a sub-sample of survey respondents (three payers and five manufacturers).

The study’s authors include Nirosha Mahendraratnam, PhD; Corinna Sorenson, PhD; Elizabeth Richardson, MSc; Gregory Daniel, PhD; Juan Qian, MPP; Hilary Campbell, PharmD, JD; and Mark McClellan, MD, PhD, from Duke-Margolis and Lisabeth Buelt, MPH; Kimberly Westrich, MA; and Robert Dubois, MD, PhD, from NPC.

About the National Pharmaceutical Council
The National Pharmaceutical Council is a health policy research organization dedicated to the advancement of good evidence and science, and to fostering an environment in the United States that supports medical innovation. Founded in 1953 and supported by the nation's major research-based biopharmaceutical companies, NPC focuses on research development, information dissemination and education on the critical issues of evidence, innovation and the value of medicines for patients. For more information, visit and follow NPC on Twitter @npcnow.