Healthcare’s emerging trend focuses on rewarding value than volume. Doctors and hospitals are gradually being paid not for the quantity of the care being provided, but rather the quality of care the patient receive and its outcome. The future of healthcare is shifting its focus on whether the patient’s health is improving, and away from the number of tests or treatment they receive.

Expanding the value-based approach to prescription drugs has been restricted by outdated federal rules. There has also been critics that labels such an innovative approach as a failure already even before it has been given a fair chance.

Considering breakthrough cures and therapies expected in the coming years, ensuring prescription drugs are not only accessible but also affordable will remain an important concern for drugmakers, policymakers, and the public. As the drug pricing debate continues, it is important to keep in mind the key facts about value-based model and why it is crucial for patients and the future of biomedical innovation.

Outcomes-based pricing already exists

It may be new to the scope of prescription drugs, but this approach is far from being considered as new. Current value-based agreements cover patients with rheumatoid arthritis, hep C, diabetes, congestive heart failure, and even some form of cancer in children and young adults.

Roughly 20 agreements were announced in recent months, and each is developed with differing details(1). For example, some result in larger rebates or lower prices if a drug does not lead to its intended results. Other arrangements let patients “try before you buy” and only require payment if the therapy works. Still others promote “pay for performance” in which a drug cost is tied to its effectiveness.

These efforts are providing the much-needed insights that will help the expansion of this approach to more patients in the future.

Future treatments will be more accessible and affordable

Although majority (90%) of all drugs out in the market are low-cost generic drugs(2), roughly 5% of patients take “specialty” drugs that treat life-threatening diseases. These drugs represent a third of all drug spending, and this trend is expected to continue with the discovery of new treatments for rare diseases.

Since drugmakers are accountable for patient outcomes, a value based approach encourages insurers to ease coverage restriction on more costly, innovative medicines. This occurs when an insurer places a drug on a lower cost-sharing tier, which reduces a patient’s out-of-pocket costs and encourages better medication adherence.

This will bend the cost curve in healthcare

Biomedical innovation not only saves and improves the lives of patients, it also reduces other forms of healthcare spending. For example, every $1 spent on medicine for congestive heart failure for adherent patients saves an estimated $8 in other health services(3).

Facts have shown that prescription medicines – when taken as prescribed – reduce the need for more costly health services such as hospital stays and doctor visits. By ensuring the accessibility of future cures and patients adhere to their medications, value-based pricing will lower the trajectory of health care spending.