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Value-Based Agreements

Value-based agreements require a different way of thinking and a different process from typical “customer-supplier” negotiation. Implementing a value-based agreement requires additional action and much broader stakeholder engagement. You can`t just negotiate the price and the sale; Instead, you need to discover interests and focus on a common desire to create value rather than just focusing on value allocation. Similarly, the parties must accept a common risk instead of trying to shift the risk to the other party. Details such as measurement and follow-up must be assessed and agreed upon. Value-based agreements also require a long vision of value – and emphasize successful implementation over time, rather than simply trying to “close the deal.” The health care system is being transformed into volume and value to control costs and improve patient outcomes through value-based contract services and health care reimbursement models. At the same time, we are witnessing huge innovations in new therapies in development. The health system is questioning how it can provide adequate access to these new therapies while controlling overall health spending. Internally, before sitting down with the payer to negotiate, manufacturers need to spend much more time assessing the therapeutic benefits and modelling the risk they take with different types of value-based models. Are we going to do better (for ourselves, for patients, for payers or providers) by using a VBA or a traditional reimbursement mechanism? Do the upward trend and the value generated justify the additional investment and complexity? Similarly, payers need to develop their own value-based models – and determine whether their systems can take therapies that may cost different on the 180th day than on the first day.

Similarly, health plans have generated a strong interest in value-based care. By the end of 2018, 50% of Cigna`s payments to healthcare providers in the top 40 markets had a value-based care component. In 2018, 53% of Aetna`s medical expenditure was spent on value suppliers, with a target of 75% by the end of 2020. Meanwhile, Anthem said it would have tied 58 percent of its medical expenses to value-based care by the end of 2019, and UnitedHealthcare expects it to have $75 billion in annual reimbursements for health care providers by the end of 2020, which are bound by value-based agreements. Medicaid`s state-owned agencies also include value-based components in their paid and managed care programs. Virtually every state has implemented at least one value-based model, and about two-thirds of countries using care management programs have imported the model into care management, requiring value-based plans of agreements with network providers. Value-based contracts (VBCs) and value-based care are promising ways to accelerate the transition from volume to value in the healthcare sector. These agreements between life sciences manufacturers (pharmaceuticals and medical technology) and payers and suppliers will play a key role in providing appropriate access to new innovations and value-based care tools. They can improve patient health by spreading risks among stakeholders and helping to control costs.

Drug pricing is likely to be a top priority for Congress 2019, increasing the need for companies to demonstrate value. More recently, a proposal by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) in October 2019 contained new safe ports of protection against Kickback, which covered value-based agreements with health care providers, but excluded biopharmaceutical manufacturers, medical device companies and laboratories. Alex Azar, Secretary of HHS, confirmed that the department was working on protective measures to enable VVs to

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