Outcomes Based Agreements (OBAs)

Through value-based drug contracts, payments for medications are based on the value they provide to patients. Value-based contracts can include indication-based pricing, outcomes-based agreements (OBAs), and cost cap-based contracting. OBAs have gained publicity for their innovative approach to pharmaceutical contracting. OBAs tie the compensation for a medication with the clinical performance/outcome in a specific patient population. Manufacturers are motivated to participate in OBAs by increased market access for their products, while payers are motivated by risk sharing with the manufacturer.

The biggest challenge for both manufacturers and payers is identifying and measuring outcomes. The outcome measurement must accurately reflect the drug’s intended effect and be readily available. Surrogate markers such as LDL and A1C may be used as they are more easily measured and tracked. Once manufacturers and payers agree on an outcome measure, they must determine how the metric will be monitored. The operating cost to monitor the outcomes must be evaluated. Because of these constraints, the number of OBAs currently implemented in the U.S. are limited. Products that have established OBAs include Harvoni, Repatha, Kymriah, Luxturna, and Entresto.

OBAs are expected to grow and their use will likely be restricted to high cost, brand drugs with specific and measurable outcomes. Further use of OBAs can help to assess the economic impact of costly new therapies on patient outcomes and overall health spending with a focus on pharmaceuticals.

Do you think that OBAs will decrease spending on prescription drugs or healthcare as a whole? What drugs do you think would be ideal candidates for OBAs? What other benefits do OBA’s provide for payers?

 

Published February 2018

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