Value-Based Patient Cost-Sharing for Rx Drugs Makes Sense, Needs Broader Implementation

Man reviews bills for prescription drugs he is taking. In the U. S.

patient out-of-pocket costs for prescription drugs are than all of its peers. Out-of-pocket costs include premiums, deductibles and co-payments. Multiple factors contribute to high patient cost-sharing, including prescription drug prices but also a complex drug supply chain in which pharmacy benefit managers and insurers often impose cost-sharing that isn’t value-based.

Payers have been dabbling with value-based systems of cost-sharing which lower out-of-pocket costs and improve outcomes. But broader implementation of value-based insurance design is essential. When patients pay a portion of the costs of the prescription medications drugs they’re taking they share in the costs.

Ostensibly, patients who have ” through cost-sharing motivates them to be good stewards of their pharmacy benefit. Health plans offer beneficiaries incentive-based formularies on which prescription drugs are assigned to one of several tiers (levels of cost-sharing) based on various factors, including the cost to the plan and the number of close substitutes. Ideally, formulary design is value-based in the sense that the most cost-effective products have the lowest cost-sharing and the fewest reimbursement restrictions.

However, there are many instances in which this doesn’t apply. In the Medicare program, outpatient (Part D) plans place generic drugs on tiers with high levels of cost-sharing, more consistent with branded products. Also, across public (Medicare and Medicaid) and commercial payers sometimes favor the higher over the lower list-priced version of the same biosimilar.

And the excluded or recommended status of prescription drugs on PBM formularies with their cost-effectiveness. Cost sharing shouldn’t be structured primarily to shift costs to patients, or to benefit health plans and PBMs garner greater rebates which they then don’t pass through to patients. On the other hand, value-based cost-sharing would alter the incentive structure so that patients and their doctors select higher-value treatment options.

There have been numerous legislative and regulatory efforts—some passed and enacted, others in the form of proposals—designed to lower patient out-of-pocket costs. These include promoting the use of generics and biosimilars, instituting annual caps on Medicare beneficiary out-of-pocket costs and forcing the pass-through of PBM rebates to patients. But one of the more interesting initiatives because of its tie-in to health outcomes is the Model, which the Centers for Medicare and Medicaid Services has been implementing since 2017.

MA plans may voluntarily choose to become part of the VBID Model. A Medicare Advantage entity is a type of health plan offered by a private company who contracts with Medicare to provide beneficiaries with an integrated package of services, including hospital, physician, outpatient and prescription drug benefits. MA has become increasingly popular among Medicare beneficiaries seeking all-under-one-roof coverage options.

About half of beneficiaries are enrolled in MA as opposed to traditional Medicare which divides up coverage into a hospital and physician benefit and a separate outpatient pharmacy benefit (Part D). Traditionally, refers to health insurers’ efforts to structure patient cost-sharing in such a way as to encourage enrollees to use the services that are most valuable to them through reduced cost-sharing. In this way, VBID evaluation balances the need to reward innovators for developing high-value products with financial accessibility to patients.

In contrast to a “one-size-fits-all” patient cost-sharing approach, VBID aligns cost-sharing with the clinical benefit of a drug or medical service. For instance, a high-value drug, such as an antiretroviral medication for HIV, would have a nominal out-of-pocket cost or no cost-sharing at all, whereas a comparatively low-value healthcare service of questionable benefit, such as prostate cancer screening for men older than age 70, would have higher patient cost-sharing. Professor Mark Fendrick, Director of the University of Michigan’s Center for Value-Based Insurance Design, is the founding father, if you will, of VBID.

Along with other original backers, Fendrick envisaged a method grounded in clinical evidence that would pave the way for widespread use of value-based formulary design in the health insurer space. The insurers Aetna and Highmark Health were early adopters of the VBID model for their Medicare Advantage offerings. Furthermore, Humana and UnitedHealth Group have participated in VBID since 2020.

And Cigna and Elevance Health joined in 2022. However, others, such as Independence Blue Cross, have left the program. The Medicare VBID Model represent Fendrick’s vision of how to modernize plan management of the pharmacy benefit.

While it doesn’t necessarily yield cost savings it does generally provide value for money. In other words, for each additional healthcare dollar spent in the system there’s more benefit than there would be without the program in place. For instance, by reducing financial barriers to high-value medical interventions can improve which leads to improved outcomes.

Further reinforcing experimentation already underway at CMS, last year President Biden issued an that stipulates the pilot testing of new value-driven payment and delivery models aimed at decreasing out-of-pocket prescription drug costs while promoting access to “innovative drug therapies” for beneficiaries enrolled in the Medicare and Medicaid programs. Housed within the Department of Health and Human Services, the Center for Medicare and Medicaid Innovation (“Innovation Center”) is tasked with carrying out the demonstration project. The Center has extensive experience piloting novel healthcare payment and delivery arrangements.

Together, the VBID Model and presidential executive order serve to stimulate the use of a variety of value-based payment arrangements. But there’s still a long way to go to fully integrate VBID into the healthcare system. There’s patchy use by public payers, and it’s even less commonplace among commercial insurers.

It would behoove payers to adopt the Institute for Clinical and Economic Review’s for cornerstones of “fair drug coverage. ” This includes appropriate patient cost-sharing policies, such as elimination of cost-sharing for high-value treatments. Other than the purely pecuniary rationale of offloading costs unto patients, it doesn’t make sense for payers to charge patients anything for highly cost-effective or cost-saving treatments.

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