top of page

Purchasers and pharmaceutical organizations

Will outcomes-based pricing arrangements between purchasers and pharmaceutical organizations become widespread, and will they have a material impact on prescription drug costs?

Outcomes-based contracting (OBC) is designed to bend the cost curve by putting the onus on drug manufacturers to provide rebates to payers and providers when outcomes from new medicines don’t match up with the results from clinical trials, or demonstrably improve patient outcomes. Despite the buzz, these new contracting models are complicated, making successful contracts difficult to achieve. The contracts require hard to collect patient-level outcomes data as opposed to sales or utilization data, and require collaboration/discussion between providers, payers, and manufacturers to determine whether the new medicine actually improves patient outcomes.

While outcomes-based contracting sounds enticing, their impact on prescriptions prices may be limited since only medicines with clearly defined outcomes that can be evaluated in a relatively short time frame(a year or less) are thought to be appropriate for contracting. This would rule out medicines used to treat chronic conditions such as MS or even some cancer treatments.

Finally, the degree that drug manufacturers can reduce drug prices below Medicaid’s “best price rule” or the average sales price reimbursement under Medicare Part B is questionable, making it unlikely these contracts will have broad impact on overall healthcare inflation, or what consumers pay for their medicines. Nevertheless, payers and providers may want to pursue these agreements where possible on a one off basis since they puts the onus on the manufacturers for drug performance, rather than having payers or providers bear all of the risks.

Download PDF • 168KB


bottom of page