The unsustainable rise of healthcare costs is paving the way for new systems including value-based healthcare (VBHC). Big pharma must find its way in these new models, or risk being left behind. We have five tips for a successful transition.
Value rather than volume – but at what costs?
The rising costs of healthcare is a clear signal that the current healthcare systems are doomed to fail. On the one hand, in countries with socialised medicine, where everybody has access to basic care, innovation is hindered by the inability of governments to pay. On the other hand, in countries with private health insurance, the disparity between the rich and the poor threatens to support a two-tier system in which only the wealthy can afford the latest treatments.
Value-based healthcare (VBHC) provides some light for the falling age of traditional health systems. Yet, reforms are happening slower than anticipated. An important challenge is the current fee-for-service incentive model, in which reducing volume, even if it means providing more value to patients, decreases short-term profits. So how can companies provide innovative approaches to the healthcare system for long-term success, despite short-term financial pain?
From a one-sided market to an integrated ecosystem
In an ever more connected world, data is gold. The spread of electronic health records, digital devices including smartphones and wearables, and tools to unlock the power of genomics provide avenues for moving from reactive to preventative and personalised care. This shift is essential for VBHC’s success, given that the insurance industry is based on modelling and predicting the future – which is a risky business. But that’s not all.
In today’s one-sided health insurance industry, patients are not rewarded for staying healthy. Instead, people pay their premiums and expect their insurance to cover the best possible care in the case of an emergency. This transactional mindset needs to change by incentivising individuals to live healthier lives, empowering them to own their health, and making them true partners of the system. The revolution has already begun. Oscar Health for example, a pioneer in the field of VBHC based in the USA, is sending Amazon gift cards to the customers who achieve their daily goals based on connected digital devices including Fitbit trackers. In addition, as mentioned by a biotech pricing director, “the goodwill of the people is not enough – the legal framework needs to be adapted”.
Beyond words – our tips to succeed on your VBHC journey
Nicolás Vacarezza, Market Access Manager at Abbvie, believes piloting in distinct areas can help the industry adapt. “The transition to VBHC requires a change in mindset – on this journey, short pilots with tangible outcomes are your best bet,” he says. However, while VBHC seems like a win-win-win, it remains daunting for many pharmacos, especially because it is mostly untapped territory and requires skills that remain scarce. Here are five tips to help you succeed on your VBHC journey.
1. Define what value is – and how you will measure it
In the context of VBHC, value is defined as the ratio between outcomes that matter to patients, and costs to deliver these across the entire care pathway. Many current systems support accurate tracking of direct costs. However, measuring indirect costs such as market failures, as well as outcomes, is not as trivial. Before initiating VBHC programmes, it is therefore essential to clearly define which outcomes you want to achieve, and make sure all costs are considered, both direct and indirect, across the entire stakeholder map.
2. Decide which payment system is best
With the longer timeframes of VBHC, exploring innovative payment arrangements is essential. Capitation models, which are based on a pay-per-person approach, is a first step in this direction. Bundle payments, however, take it to the next level by covering the costs of treating a condition across the entire care cycle, and thereby truly providing value to individuals, rather than populations.
3. Shift from products to solutions
With value measured and defined across the entire cycle of care, pharma companies need to shift from products to solutions by reaching outside their comfort zone. A strong, coordinated and transparent ecosystem built around integrated practice units (IPU) or accountable care organisations (ACO) will help big pharma be closer to their patients and caregivers, allowing them to define what value they provide and what solutions may look like.
4. Pilot in supportive markets
Patient engagement and HCP’s willingness to innovate are the two single most important human aspects for a successful VBHC programme. Beyond those, digital enablement, infrastructure and a supportive regulatory framework are essential to efficiently measure costs and effectively quantify outcomes. Estonia, the Netherlands and the Nordics – Denmark and Sweden – are at the forefront, with several successful pilots in joint replacement and diabetes. The Martini clinic is yet another prime example, where a supportive setting enabled prostate cancer patients to be provided with outcomes that matter to them.
5. Partner with innovative players
In recent years, the advent of digital has provided the necessary tools to enable VBHC to move from concept to reality. However, big pharma’s legacy systems and processes – tailored to the strict regulatory environment of the industry – is an additional toll when it comes to implementation. Partnering with more nimbler players including tech companies and start-ups is thus an opportunity for moving beyond this toll – and for learning along the way.
New paradigms never fit into old systems, and one should not expect VBHC to be any different. Patients, payers and providers – including big pharma – will have to adapt the way they work, operate and add value. The good news is: those who explore, pave the way.
How does your organisation adapt to #VBHC? Post your comments below.