How Real World Evidence and Value-Based Contracts Can Help Payers and Manufacturers Find Common Ground in Rare Disease

To an impartial observer, conflicts over the prices of rare disease medicines may seem intractable. As more such treatments come on stream, payers say escalating costs in rare diseases will overwhelm their ability to cover patients with other illnesses. Biopharmaceutical companies, for their part, believe the challenges in developing such medicines — as well as downstream cost offsets such as reduced hospitalizations — justify the real (post-discount) prices payers are asked to cover.

The gaps between these points of view are significant. Yet, when payers and manufacturers talk about emerging trends in data science and technological innovation, the tenor of the conversation shifts and at least a few swaths of common ground come into view.

To gain a better understanding of how payers regard rare disease medicines, INC Research/inVentiv Health conducted in-depth interviews with pharmacy and medical directors at managed care organizations representing 47.2 million covered lives. Virtually all participants said they worried about a “tidal wave” of expensive treatments in the drug pipeline and a paucity of long-term data showing cost offsets. They wished to see more evidence the drugs performed as billed in real world settings. Furthermore, many payers seemed unpersuaded by health economics outcomes research (HEOR) supplied solely by the manufacturer without third-party corroboration.

Real World Evidence

The good news is, both payers and manufacturers expressed a high level of confidence in technological advancement. For example, the healthcare industry is growing more adept at harvesting and analyzing Real World Evidence (RWE), which is especially critical in accelerated trials for rare disease treatments with a minuscule number of enrollees. RWE makes it easier for researchers to design the trial around the patients, rather than forcing patients to fit the protocol.

Whether the data are pulled from electronic medical records and insurance claims or from health apps on an iPhone, RWE yield a more durable window onto the health status of patients before, during, and after a course of treatment and a more robust measure of the drug’s value. That’s why RWE are becoming a precious resource for companies running trials or monitoring commercial products. Importantly, they are of equal interest to insurers making reimbursement and formulary decisions. In other words, they’re a trend that cuts straight across the fraught no man’s land of pharmaceutical pricing in rare diseases.

RWE’s growing viability is fueling a parallel trend affecting both manufacturers and payers: value-based contracts. Such agreements may specify that a portion of the payment for a drug gets rebated to the insurer if the medicine doesn’t meet certain benchmarks. Or the contract may govern a range of prices, depending on the disease indication. Either way, value-based contracts will make it easier for insurers to manage risk when expensive new treatments come to market, and safer for manufacturers to assign price tags that accurately reflect the breakthrough value of a product.

Value-Based Contracts

With or without support from RWE, value-based contracts face a variety of hurdles — operational, regulatory and legal. Documenting patient outcomes requires meticulous data collection. Who pays for that and who ensures that patient “failures” aren’t the result of poor care in a clinic? Many manufacturers also worry that a heavily rebated price they promise to a private insurer will become the mandatory price for all Medicaid programs under a rule known as Best Price.

Progress on both the technology and policy fronts will doubtless address many of these concerns. In the meantime, widening use of RWE and growing enthusiasm for value-based contracts together represent a tantalizing opportunity to resolve conflict and ease market access for patients with rare diseases. To learn more about how payers and manufacturers think about areas of contention, as well as their shared opportunities, please download the full report here.

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