The notion of tying drug payments to results, called "pay-for-performance pricing" or "value-based pricing," already is being tested by some health insurance companies, some pharmaceutical companies and
If states are able to adopt a workable performance- or value-based pricing system on drugs, they may be able to hold down spiraling
And there's every reason to think the increase in spending will continue as drugmakers prepare to introduce dozens more "specialty drugs," high-priced, complex medications developed from living cells to treat chronic conditions such as hepatitis C, HIV, cancer, rheumatoid arthritis and multiple sclerosis.
Although they barely existed a decade ago, last year specialty drugs accounted for nearly a third of
Specialty drugs make up just 1.5 percent of claims, but they could play a big role in the rise of
Something has to give, said
Pharmaceutical companies enter into agreements with the federal
But those prices are set by the manufacturers, and the manufacturers are not governed by any price ceilings, nor are the prices based on the drugs' success, such as whether they control or cure a patient's disease.
Pay-for-performance or value-based pricing would change that. It would tie payments for prescription drugs to their effectiveness, whether they did what they were designed to do.
How well do medications for high blood pressure or cholesterol, for example, keep patients in healthy ranges for each? How well do medications control symptoms of autoimmune diseases? How much do cancer drugs extend life? And how much do the drugs save the health care system by enabling patients to avoid medical treatments they no longer need?
The concept is being tried in other parts of health care. Under the Affordable Care Act, for example, hospitals face financial penalties if too many previously hospitalized patients are readmitted, a provision intended to encourage hospitals to provide better follow-up medical care.
The law also promotes the creation of new types of physician practices, called accountable care organizations. They would pay financial rewards to practitioners who reach certain clinical targets, such as maintaining healthy blood pressure levels for stroke patients or counseling smokers about cessation programs.
Value-based pricing in drugs is the norm in many industrialized nations, including in most of
This week, the Center for Evidence-based Policy, at
How to Price
Evaluating the effectiveness of a drug will be essential to pricing under the concept.
One tool health plans could use for evaluating cancer drugs to establish a price has been developed by the
Called the "DrugAbacus," the tool creates a price for cancer drugs based on how many years of additional life they provide, the severity of their side effects, the rarity of the disease and the novelty of their chemistry.
For example, how do you determine the effectiveness of a drug in patients who take more than one? If a drug improves the condition of leukemia patients enough for them to have a costly bone marrow transplant, shouldn't the drugmaker be rewarded despite the higher costs?
And unlike most of
But Bach is convinced these are problems that can be solved. Continuing the same system, he said, is what makes no sense.
"The question," he said, "is how much can we tolerate a system that has no relation between price and benefit."
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