The perils of outcomes based reimbursement
Theoretically outcomes based reimbursement makes perfect sense and creates a win win scenario. Yet as with almost everything in this rapidly changing world of healthcare there is a flip side to this argument. Recently UnitedHealth, now the third largest pharmacy benefit manager, worked out a deal with hep C drugmaker Gilead to link payments to the performance of its pricey treatments. The company is also in the process of negotiating similar deals for other drugs.
However not everyone in the PBM space is a fan of this type of deal. According to Steve Miller CMO for rival PBM Express Scripts there are mitigating factors which impact outcomes. As he stated to Bloomberg; “If patients on this new drug go out and have a salty pizza and end up in the emergency room, is that the drug’s fault or the patient’s fault. If the patient isn’t adherent with taking the drug, is it the drug’s fault or the patient’s fault?”
This is the conundrum for nearly every payor that moves towards outcomes based reimbursement, where does patient adherence fall into the equation? This is a particular pointed question for patients with diabetes as a multitude of factors, not just medication adherence, impact outcomes.
The move towards outcomes based reimbursement also poses several challenges to diabetes drug and device makers. As Mr. Miller correctly points out there is no easy way to account for the role a patient plays when it comes to managing their disease. As much as Diabetic Investor does not believe a patient should be penalized for not taking their meds in an outcomes based reimbursement environment where medication adherence can mean the difference between profit and loss this factor cannot be ignored.
Overall Diabetic Investor views this conundrum as a net positive for interconnected diabetes management (IDM) as both drug and device companies will use IDM as tool to improve medication adherence. IDM isn’t the lone answer and we can envision some patient pushback as there will be patients who view IDM as an intrusion into their lives. However a properly designed IDM system can be a valuable tool actually welcomed by patients and their physicians. The balancing act with IDM is how to help the patient without being overly intrusive.
Making this even more complex is how the diabetes patient population is divided, i.e. the needs of a patient with Type 2 diabetes are far different then the needs of a patient with Type 1 diabetes. Insulin using Type 2’s have different concerns than Type 2’s only taking oral medications. Insulin pump patients live much different lives than those following multiple daily injection (MDI) therapy.
Diabetic Investor has long believed that at some point physicians would no longer prescribe individual drugs or devices for their patients with diabetes. That in the future they would prescribe a diabetes management system that would contain everything the patient needs to manage their diabetes. It should go without saying that IDM will be an integral part of this system. IDM won’t solve every issue nor should it be viewed as some sort of silver bullet. Still we see IDM as a net positive that when used as intended can have a positive impact on outcomes.
The recent mega deals in the payor space and these moves towards pay for performance contracting are just one more reason we see IDM becoming the standard of care. Outcomes based reimbursement is coming and binging with it some unique challenges. Fasten your seat belts this is going to be one crazy ride.