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Health Plans See Opportunity in Outcomes-Based Contracts

by Caroline Pearson, Senior Vice President of Policy and Strategy, Avalere Health, on November 6, 2017

A version of this article was originally published by Health IT Outcomes on October 19.

Escalating drug costs are compelling many states to develop and implement policy solutions to stem its rise. In fact, earlier this year, New York became the first state to place a cap on drug spending growth in its Medicaid program. Drug costs are also putting pressure on private health plans, which are looking to outcomes-based contracts as a possible solution, according to a survey by Avalere.

Outcomes-based contracts are agreements between health plans and drug manufacturers that tie product reimbursement to patient outcomes. They are becoming more common in the United States as plans and drug manufacturers seek to manage costs while preserving patient access to new therapies.

Public discussion around outcomes-based contracting as a means to drive value in healthcare has been increasing, yet emphasis continues to be placed on how challenging it is to implement. However, according to the Avalere survey, 70% of health plans report they have favorable attitudes toward outcomes-based contracts. One-quarter of the health plans surveyed say they have at least one outcome-based contract in place. Another 30% report they are negotiating an outcomes-based contract today. Plans with experience in outcomes-based contracts indicate they plan to pursue more.

While growing, the adoption of outcomes-based contracts is relatively limited in the United States. One reason is because plans and manufacturers can have trouble coming to agreement on the contract terms, specifically on the data sources that will be used and how patient outcomes will be measured.

To help bridge this gap, new data platforms and solutions are coming online. Inovalon and Avalere are partnering with drug manufacturers to deploy our data analytics capabilities and subject matter expertise to support the development of outcomes-based contracts.

With drug costs in focus, health plans will continue to look for ways to improve outcomes and manage costs, with outcomes-based contracts being one data-based solution. Avalere’s recent survey clearly supports this.

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