Environmental change: Healthcare delivery’s metamorphosis
Last month, in the January issue of Pf Magazine, I discussed evolving accountable care systems and organisations. The key features in these evolving systems are outcome focus, long-term approach, integration of services and delivery at scale.
One of the questions I posed, following the piece, was: can both pharma and healthcare providers enter into meaningful yet pragmatic, outcome-based commercial relationships or will it be business as usual?
So, let’s deconstruct what outcome-based deals might look like. On first examination, it could be conceded that they are not altogether new; stakeholders have explored the concepts of ‘value based pricing’ and ‘outcome guarantees’ for years. The former is a general term which is used to describe pricing based on specific cost-effectiveness thresholds, rather than arbitrary pricing. The latter provides money back if the product doesn’t perform to an agreed standard.
These can operate as separate concepts or could go hand in hand; value-based pricing with an outcome guarantee could be used when benefits are uncertain, due to immature evidence perhaps, and the resulting risks for the payer are high.
The NHS has dabbled with this approach through early ‘patient access schemes’, which facilitated cost-effective pricing when the NICE TA submissions looked shaky. Initial schemes managed risks associated with uncertainty around parameters, such as initial response rates, duration of treatment or size and number of doses. Indeed, the NHS struggled with completing the onerous paperwork, while companies confused even themselves with the complex deals they created. Patient access schemes have now reverted to simple discounts or rebates as the administrative burden was simply too high.
These old schemes are even less likely to work in the new world where there is less interest in whether ‘drug A achieves outcome B in patient C’, and more focus is given to outcomes achieved across patient populations defined by a specific condition. Successful achievement will be down to the combined efforts of care systems, professionals, patients and their families, as well as broader population health promotion measures.
The critical factors that will be addressed include treatment pathways and algorithms, decision support measures, adherence to treatment, self-care and a whole raft of other small, but helpful stuff. The outcomes focus will be driven by quality improvement methods where systems are tweaked to achieve proxy outcomes in the short-term, with the expectation that these will lead to improvements in health status downstream.
Cultural shifts: Changing the habits of a life time
So, back to you! Can you create a commercial opportunity in an environment where your product is not the sole focus? Where the combined efforts of many stakeholders – including you and other commercial partners – achieve the outcomes? Where the financial incentive, or penalty, may be shared across several stakeholders? Where it may take a number of years to achieve these outcomes?
What might your role be? It could be education, provision of niche services, such as patient helplines or adherence packages or providing intelligence and wisdom. And what will the contract look like? Medicines with a price based on what the system achieves? Will it specify services alongside, will there be a minimum contribution and how will this be defined in a quality improvement environment?
The other dimension to this is whether the NHS has the capability and maturity to hold the ring in these potentially complex systems. Currently, relationships between NHS and pharma feel like they are in an odd place, perhaps stifled by the focus on conflicts of interest and the whole issue of disclosure.
While commercial deals are a different matter, will the NHS be able to welcome familiar stakeholders into an unfamiliar system of mutual benefit? Predictably, there will be concerns to ensure that commercial activities and competition don’t impinge on progress, yet pharma will need to ensure a minimum return through volume of sales, even if the final or total price paid is determined by outcomes.
And what compliance arrangements will be needed on the part of pharma, and the governance and contractual arrangements on the part of the NHS?
Putting the two halves of this equation together, we require two or more parties to provide a collective effort towards achieving things outside of each individual’s control, where the outcomes can’t easily be apportioned and in an environment of trust. Sounds like a partnership to me.
The remaining question is whether there is sufficient financial headroom in the system to allow such relationships to deliver financial benefits. Stay tuned and we’ll discuss this next time.