Outcomes-Based Pharmaceutical Contracts: An Answer to High U.S. Drug Spending?

• Published in: Policy File 2017
• Main Authors: Seeley, Elizabeth, Kesselheim, Aaron S
• Format: Report
• Language: English
• Subjects: Budgets/Expenditures; Drugs; Government; Health care policy; The Commonwealth Fund

Brand-name prescription drug prices are increasing in the United States, putting pressure on payers and patients. Some manufacturers have responded by offering outcomes-based contracts, in which rebate levels are tied to a specified outcome in the target population. This report attempts to assess the expected benefits and limitations of outcomes-based pharmaceutical contracts in the U.S., including their potential impact on prescription drug spending. Pharmaceutical manufacturers and some private payers are increasingly interested in outcomes-based contracts for high-cost brand-name drugs. But the power of these contracts to curb spending is questionable, largely because their applicability is restricted to a small subset of drugs and meaningful metrics to evaluate their impact are limited. There is no evidence that these contracts have resulted in less spending or better quality. Outcomes-based contracts are intended to shift pharmaceutical spending toward more effective drugs, but their impact is unclear. Voluntary testing and rigorous evaluation of such contracts in the Medicare and Medicaid programs could increase understanding of this new model.