58% of Payers Use Outcomes-Based Contracts for Prescription Drugs

More than half of payers used an outcomes-based contract in 2022, with most preferring contracts with both claims-based and clinical outcomes, an Avalere survey found.

The online survey was conducted between February 14 and February 20, 2023, and includes responses from 46 US-based health plans.

Outcomes-based contracts are agreements between health plans and pharmacy benefit managers (PBMs) that tie prescription drug reimbursement to clinical quality or utilization outcomes. These agreements help move the industry away from fee-for-service models and toward value-based care.

Avalere found that 58 percent of respondents were in at least one outcomes-based contract in 2022. Around 10 percent of payers had between two and five contracts, another 10 percent had five to 10 contracts, and over 35 percent of payers had more than 10 outcomes-based contracts in place.

Meanwhile, 15 percent of payers said they had no outcomes-based contracts currently in place but were in negotiations for one or more.

Among payers who used outcomes-based contracts, oncology was the most common therapeutic area, with over 16 percent of payers using contracts for the specialty. Cardiology and endocrinology followed with around 12 percent and 11 percent of payers, respectively.

The majority of payers said they used outcomes-based contracts for mostly new products and some existing products. This reflects the growing interest in aligning payment with clinical outcomes, especially for new products that have limited real-world clinical benefit, Avalere researchers said.

Nearly three-quarters of respondents (74 percent) with at least one outcomes-based contract reported they prefer contracts with both claims-based and clinical outcomes. However, 53 percent of payers said they do not think claims-based outcomes accurately represent clinical benefit.

Clinical outcomes may better reflect clinical benefit, but tracking claims-based outcomes is more practical, the survey noted.

Claims-based measures use information that plans and PBMs are already gathering, making them easier to track. In contrast, clinical outcomes may have to be tracked specifically for an outcomes-based contract and could require new data infrastructure, increasing administrative burden on providers and stakeholders.

The survey findings reinforce previous claims from Avalere that a lack of agreement about which metrics determine value and clinical benefit is a key barrier to value-based care.

This is Avalere’s sixth survey on outcomes-based contract utilization among payers. Taken together, the past data shows how more payers are using the value-based method for prescription drug payments.

For example, the 2021 survey revealed that 12 percent of payers had 10 or more outcomes-based contracts in place. This share was twice as high in 2021 as it was in 2020, and as shown in the most recent survey, over 30 percent of payers had 10 or more contracts.