While the rest of the health care system is moving toward paying for value, payments for drugs largely continue to be stuck in a 20th century construct that focuses on price, regardless of the health outcomes of each patient. This lack of payment innovation is particularly damaging in an era where on the horizon new treatments and cures promise great benefit for consumers, but also bring great upfront costs for individuals, employers, and governments at every level. We must find a new path forward.

Paying for value requires evaluating new treatments in the context of total health costs for the patient. For example, value could be measured according to improvement in outcomes over a previous standard of care — pharmaceutical, surgical, or otherwise. Or value could recognize that certain individuals may experience better results than others. We know from experience that value-based payments are multidimensional and evolve with experience.

While there are no silver bullets, we believe it is possible to start breaking down some of the hurdles that stand in the way of a value-oriented system. Anthem and Lilly are working together to help drive policy changes that will facilitate the transition.

As a health benefits company and a biopharmaceutical company, we approach this problem from different perspectives but with common ground. We cherish the value of medical innovation — both in discovery and delivery. We believe that innovative medicines can be an incredibly powerful and cost-effective way to improve people’s lives.

Pharmaceutical treatments have turned dreaded diseases that were once death sentences—type 1 diabetes almost a century ago or HIV infection more recently are just two examples—into manageable chronic conditions. Appropriate use of medication has improved the lives of millions of individuals with chronic conditions and prevented hospitalization.

With the growing importance of pharmaceuticals, we’ve identified two areas that we believe must be addressed in order to unleash a new wave of innovative approaches to pharmaceutical pricing: 1) facilitating more robust communication between health plans and drug developers prior to drug approval and 2) addressing legal and regulatory barriers to value-based payment arrangements.

Improve Communication Of Information Needed To Price And Budget

Current regulations can have a chilling effect on pre-approval communications that might be perceived as making claims about the efficacy or safety of a new medicine. These rules have the important goal of preventing the kind of pre-approval marketing that might mislead consumers or physicians. However, questions regarding the interpretation of these regulations and the threat of enforcement under these regulations makes all pre-approval communications a risky proposition for drug developers.

As a result, they are often reluctant to actively help health plans understand the scope of the population that may be served by a drug or to discuss pharmacoeconomic studies that might help establish appropriate reimbursement. Consequently, it’s possible that health plans—which must price new drugs well in advance—may be surprised by and unprepared for unexpected cost surges and patient populations presented by the approval of a new drug. This surprise can send shockwaves through the system, with late-breaking, unexpected budget impacts for the government and employers.

Remove Regulatory Barriers To Value-Based Payment Arrangements

There are at least two areas that currently pose a challenge to more robust value-based payment arrangements: anti-kickback statutes and government best-price rules.

Anti-kickback statutes are in place to stem fraud and abuse by prohibiting arrangements where organizations or individuals could receive inappropriate incentives to use one product over another. This is a well-intended protection, but in the case of value-based payment, such statutes might discourage drug developers and health plans from working together to create incentives structured around adherence to and efficacy of a drug in certain patient populations. We need to create a pathway that preserves these rules but allows for innovative arrangements that clearly benefit the health care system and patients.

At the same time, drug developers are also required in some cases to offer Medicaid programs their “best” price — regardless of arrangements in other markets that may be structured very differently than a traditional price-per-dose. For example, a drug developer may have agreed to pay a rebate of 40 percent to a private health plan for every individual who does not respond to therapy, while charging full price for patients who did respond. That same drug company might then be required to offer certain government programs a 40 percent rebate across the board. This lack of flexibility makes it very difficult for drug developers to enter into more innovative partnerships focused on creating value.

These policy ideas are the beginning of a necessary partnership. Lilly and Anthem both want the same thing for patients — to have access to new, innovative medicines now and into the future. By bringing together best ideas from our organizations, we will be able to more successfully provide access to state-of-the-art treatments to improve health and cure illness.

To read the two detailed policy papers outlining these proposals, please visit www.ThinkAnthem.com and https://lillypad.lilly.com/.