The pharma industry has been talking about the healthcare sector’s move to value-based care for some time. Even if they are not directly affected right now leading firms realise they need to put the tools and processes in place to deliver on the demands of value-based care, which will ultimately push them towards a medicine-as-a-service business model.
In November 2018, the UK government invested £10 million in the London Medical Imaging & Artificial Intelligence Centre for Value-Based Healthcare, to be led by King’s College London. It’s hardly a huge sum given the scale of UK health spending – set to rise to £127 billion by 2021 in the public sector alone – but it signifies a shift in thinking that will transform the modus operandi of all players in the health economy and the relationships between them.
Pharmaceutical firms, healthcare providers, medical professionals, chemists and payers – the public sector and insurers – will all need to shift so they are realigned around the concept of value-based care in 2019. It’s a worldwide phenomenon. US-based insurance firm UnitedHealth Group now pays almost half its reimbursements to doctors and hospitals, $69 billion, in value-based care models. At the same time, pay-for-services is on the decline. It now accounts for only 37.2% of reimbursement, and is projected to dip below 26% by 2021, according to a study by business intelligence firm ORC International.
A number of factors are driving the shift to the value-based model. Firstly, there are unsustainable costs to national economies. The US, for example, spent $2.8 trillion or 17% of GDP on healthcare in 2012. By 2026, it will spend 20% of GDP on healthcare, or around $5.7 trillion, according to forecasts.
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At the same time, the fee-for-service system, including drug prescriptions, does not foster effective healthcare. It encourages more services and treatment, as payments are dependent upon quantity, not quality. Value-based payment models, however, change incentives to focus on value by rewarding better outcomes and lower spending.
Meanwhile, healthcare economies based on private provision are seeing governments regulate in favour of value-based care, while public sector systems are witnessing the introduction of policy in favour of the model.
Behind these three macro drivers lurks the demographic makeup of most developed economies: populations skewed towards those in retirement, needing additional healthcare, with too few younger people able to pay for or provide it.
Of course, talk of value-based care has permeated the pharma industry in recent years. But practice has lagged behind. Buzzwords alone will not affect positive change.
Pharma firms leading the move to the value-based model know they must become patient-centric, eschewing the ingrained habit of focusing only on medical professional and health providers. By engaging with patients around management of their treatment, pharma firms can demonstrate their contribution to outcomes, not just the volume of pills provided. Leading firms have already started doing that by building patient support programmes and around-the-pill services that improve treatment management, support and adherence. Extending ATP services is the Beyond-The-Pill approach which seeks to influence the patient’s overall health, typically where lifestyle choices may affect the progress of chronic conditions.
The basis for these investments is to capture real-world data, and monitor and demonstrate pharma’s impact on healthcare outcomes. Then the firm is able to enter into outcomes based contracts with payers and start to close the loop on value based care.
Some firms are already some way down this path. In June 2017 Roche acquired Austrian-based mySugr, a diabetes management service that includes coaching and automated data tracking.
The around-the-pill and beyond-the-pill concepts engage patients to improve overall condition management and achieve better healthcare outcomes. They enable pharma firms to capture real world data to implement value-based contracts and reimbursement, supporting the new model financially. In time, the firms leading the transition will no longer sell drug therapies and medicines as a product, but rather sell medicine-as-a-service, where drug therapies are provided alongside services to support patients’ management of conditions that demonstrate improvements in healthcare outcomes in collaboration with healthcare providers, and achieve sustained growth in a healthcare economy centred on value-based care.
Talking about medicine-as-a-service is one thing. Doing it is quite another. It means engaging patients and collaborating across the health sector en masse, which most pharma firms are not yet geared up to do. We’ll look at this challenge and what Medicine-as-a-Service looks like for pharma in our next feature.
Date: April 05, 2019