As drugmakers continue to experiment with novel pricing models for expensive new specialty drugs, MM&M asked a trio of industry insiders whether outcomes-based pricing should become standard.

Jillian Godfrey Scaife, 
Principal, Trinity Partners

Many manufacturers have been experimenting with outcomes-based pricing. These arrangements are appealing as the risk is shared by manufacturer and payer. If certain pre-specified patient outcomes are not met, the manufacturer provides a payment to the payer to cover all or a portion of the drug. 

In theory, this makes a lot of sense. But as the saying goes, “The devil is in the details.” Both need to agree on many details: What outcome(s) will be measured? How do you define the outcome? What data source will be used to measure this outcome? What evaluation time period is appropriate? 

Depending on the type of therapy under consideration, the answers may be fairly straightforward or quite complex. If manufacturer and payer decide to move forward, the contract needs to be thoughtfully designed to clearly answer these questions in a manner that is deemed fair and reasonable to both parties.

Raffi Siyahian, 
Principal, president of healthcare, Scout

In grade school most of us learned if the word “all” appears in a true/false test question, the answer is most likely false. While outcomes-based pricing hypotheses are being evaluated with select therapies, the prospect that all specialty therapies be subjected to this model is dangerous. 

The process of determining what is truly a meaningful response to therapy, especially in rare, multi-symptom disorders, can be highly subjective and difficult to measure beyond what might be reported in claims data. Beyond this, the cost of implementing and managing a universally recognized outcomes-based pricing system for each drug could outweigh the intended cost savings. 

So, to implement this system for all specialty drugs is likely not a healthy prospect for many patients who suffer from rare disorders and who may benefit in ways beyond the predetermined outcomes metrics. If you disagree, please take this up with Mr. Masuda, my third grade teacher. 

Jeremy Schafer, PharmD,
SVP, director – payer access solutions, Precision for Value

Not universally. Outcomes-based pricing is optimal under a few conditions, including a high chance of therapeutic success, a well-defined patient population, and a non-nebulous therapeutic outcome. For certain specialty drugs, especially gene therapies, an outcomes arrangement works and can enhance market access. 

However, for specialty drugs that treat broader populations and have outcome measures that are difficult to track, such as in immunology or many cancers, an outcomes-based pricing arrangement may carry too much risk for the manufacturer and be too difficult for the payer to implement. 

For specialty drugs where an outcomes arrangement is not feasible, manufacturers may instead base pricing on the overall value the product brings to the market, including how the drug impacts an unmet need or how it improves disease treatment over existing options.