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insights PHARMA BUSINESS LIFESCIENCELEADER.COM JUNE 2014 50 insights NAVIGATING THE NEW WORLD OF VALUE-BASED HEALTHCARE By M.B. Lewis, B. Griner, M. Malhotra Navigating The New World Of Value-Based Healthcare Demonstrating the value of therapies to the many healthcare stakeholders is an ongoing challenge for drugmakers. This involves complex analytics and requires developing appropriate evidence to meet stakeholder needs. T M A R Y B E T H L E W I S ; B R I A N G R I N E R , P h . D . ; & M R I D U L M A L H O T R A here are parallels between medicine and baseball in these efforts to use evidence in prac- tice, as described in the 2012 New England Journal of Medicine paper, Moneyball and Medicine. In his 2003 best- seller, Moneyball, Michael Lewis points out that the architects of evidence-based baseball have developed metrics to evalu- ate player performance in terms of the value they add to the team. "Similarly, architects of new value-based approaches to healthcare delivery have attempted to develop metrics to evaluate the perfor- mance of therapeutic strategies, individu- al practitioners, and organizations," states the NEJM paper. THE NEW WORLD OF VALUE-BASED HEALTHCARE Against a backdrop where healthcare costs have increased five times faster than the GDP in the United States since 1960, and despite the fact that services account for most healthcare spending, pharmaceuticals remain an easy target for criticism and pricing pressures. This applies particularly to high-priced drugs for cancer and rare diseases. These trends are driving a need for value-based pric- ing. In the U.S., the Patient Protection and Affordable Care Act (PPACA) of 2010 has far-reaching implications for the cost structure of the healthcare market. Other key trends include the rise of accountable care organizations (ACOs) and the link- ing of reimbursements to quality metrics and reductions in the total cost of care. In the EU, the fact that fewer players are involved in healthcare than in the U.S. means that cost containment efforts are highly sophisticated. Here, new pricing frameworks are being based on perceived value rather than cost plus a profit mar- gin, on evidence rather than historical experience, and on the perspectives of many stakeholders rather than just one. Levels of adoption of these frameworks vary by country and are supported by recent legislative changes. For biopharma companies, the implica- tions of value-based healthcare include the need to: change the focus of R&D; so that companies focus investment on treat- ments that make significant advances in clinical performance redefine pricing evaluations for new medicines so that pricing reflects true societal value and takes account of wider economic benefits of treatments beyond direct health gains improve patients' access to new therapies that their clinicians believe may provide benefits. Defining value remains a challenge, with no consensus among stakeholders. Physicians typically focus on evidence of a new product's effectiveness, while patients demand more assurance regard- ing a drug's safety, and payers require proof of a therapy's cost-effectiveness. Additionally, policy makers demand con- firmation of a product's real-world risk/ benefit profile in large populations. The 2011 New Health Report found that bio- pharma executives were the only group in which a majority included outcomes as part of their definition (Figure 1). For patients and physicians, the process (qual- ity of care) appeared to matter as much as the outcome when it came to value, although nearly one-third of patients did not feel they could define value. A VALUE-BASED FRAMEWORK Pressures to develop a value-based frame- work include: declining R&D; productivity despite increased investment, with the potential of proteomics so far not fulfilled, and significant funding gaps 0 6 1 4 _ P h a r m a _ B u s i n e s s _ v 3 . i n d d 1 0614_Pharma_Business_v3.indd 1 5 / 2 1 / 2 0 1 4 1 1 : 5 4 : 4 4 A M 5/21/2014 11:54:44 AM