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Value-based pharmacy benefit management: New models for balancing care and cost

In the age of value-based care, pharmacy benefits embrace new thinking to balance sustainable costs with patient outcomes.

7 min read


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As value-based care gains prominence, payers are developing new models for paying for medical services, but pharmacy benefits often rely on dated approaches that need an upgrade. Escalating drug prices have exacerbated this need. SmartBrief spoke with DST’s Argus Health President Marc Palmer about these issues, and in this Q&A he shares insights for integrating value into pharmacy benefit management, ways of balancing care with costs and his predictions for the future of specialty pharmaceuticals.

The era of value-based care has clearly arrived. How has this affected the role of pharmacy benefit management in delivering value-based care? How does this change help health plans meet the Triple Aim?

Consider two drugs that have the same compounding agents and indications, but one costs twice as much as the other. Every dollar spent without an equal return in better care is considered wasted. “Generic first” was an example of creating better value for money spent, a concept that then evolved and was applied to brand-name drugs. Even as we see generics evolve into higher cost and lower cost versions, drug manufacturers have tried to apply this same logic to specialty drugs, but these drugs are used to treat highly complex disease states with outcomes that are difficult to achieve; improving these outcomes requires a different approach.

Marc Palmer, Argus Health Systems

While the era of value-based care has indeed arrived, we as a thinking population have not. We still consider cost first. The question we should be asking ourselves is: “What is the value I expect to derive for that cost, and how will I measure that value?” I believe pharmacy is the front line of defense for virtually every non-trauma medical event. In five years, approximately one-third of all health care spending will go to drugs. How we approach the evolution of care is critical. It is imperative that we as an industry consider not only how the drug works, but also consider behavioral economics, care management and a multitude of other factors.

In what key ways do value-based pharmacy models differ from models that no longer work?

The old models were price based, or fee-for-service, derived to take advantage of buying drugs in large quantities, lowering the acquisition cost and allowing a portion of those discounts to be shared with various parties involved in the distribution channel. The challenge now is that this model is no longer good enough. Value is dependent on many factors beyond price point, including patient understanding at the physician’s office, communication between the physician and pharmacy regarding treatment strategy, reinforcement post treatment and patient adherence. Combined, these factors maximize the value per dollar spent, ensuring the patient receives the drug at the right time in the right configuration, providing a better experience and clinical outcome.

As pharmacy benefit management models expand beyond their primary business interest (the distribution channel), their own model has become conflicted. I believe having a model that allows us to sit down with any of our clients and understand the role they want to play in this industry allows us to configure a more holistic solution that should provide the health plan and the member more value over time.

What is the role of data in improving value in outcomes?

Data helps inform the types of decisions required, the potential impact of those decisions and the associated outcomes. Health plans must be able to access necessary health-related data when they need it, understand it in the context of the individual and the population, and then use those insights to derive smarter health management strategies for a specific individual or a population. Data can provide insight into the utilization of medications, adherence to prescribed regimens and the clinical outcome associated with the treatment. It can also show waste and dollars lost due to non-adherence or because a better, more personalized treatment would have yielded a better clinical outcome for the patient.

Documenting and addressing waste is particularly important when trying to combat the high cost of specialty drugs, as well as in situations where cure is possible. If the drug is not taken as prescribed, or what has been prescribed is not the most appropriate drug for that individual, the value of the drug in bringing about a cure has been wasted.

Specialty drugs have gotten a lot of attention recently, particularly for their high costs. How can health plans strike a balance between facilitating treatment and managing spending?

Specialty drugs are very costly, and that isn’t likely to change, so we need to make certain that the drugs are being used in the most appropriate way. For example, an estimated 2.7 million to 3.9 million people in the United States are chronically infected with the hepatitis C virus. There are multiple treatment options available, but they are extremely expensive. We have to determine what the right treatment for each individual is, what is the indicator that the treatment is working vs. not, and what factors can change those indicators? The ability to strike a balance and really keep that discipline offers the opportunity to get far greater clinical outcomes for far more complicated diseases. It’s possible that the introduction of biosimilars may help lower costs, but the appropriateness of the drug and measuring its impact will still be important.

Another issue of concern is the opioid addiction epidemic. What is the role of pharmacy solutions in getting people the medication they need while helping fight addiction?

The old system involved drugs as a first line to treat complaints, without looking deeper into the cause of the pain. We saw increased availability of prescription drug discounts, which lowered the price point and created a complex scenario of overuse of highly addictive drugs, great expense to the health care system and no evidence that the use of these drugs actually improved clinical outcomes.

This issue must be managed as a whole, across the entire system: prescribing habits, patient utilization, case management, point-of-sale edits, etc. Doing so enhances our ability to determine the most appropriate care, at the most appropriate price, at the most appropriate place to get the best clinical outcome possible for the patient.

Looking ahead, what emerging treatments are you most excited about and what pharmacy management challenges do you see on the horizon?

I’m most excited about the value specialty drugs offer as they become increasingly sophisticated, as well as the opportunity to utilize treatment outcome data to inform drug manufacturers in ways that may improve the next generation of specialty drugs. This could include data specific to a patient demographic, adherence data, response data — insights that offer more effective utilization now and inform research for the future. We can work with payers to help them better understand member populations using data to define which patients will benefit most, and drive up the value for the cost of the drugs.

The paradigm is shifting. Value has been redefined, and the benefit of it will now be more equally distributed across all stakeholders.

Marc Palmer is President of Argus Health Systems, Inc, leading organizational strategy and execution across all areas of the company, including Business Development, Product Innovation, Client Services Operations, Pharmacy Operations, Clinical Operations, and Information Technology.