NEHI: Seeking Action on Value-Based Contracting

As a national nonpartisan organization seeking to spur innovation in health care, NEHI always seeks to translate its thought leadership into action. That's why a NEHI team went to Capitol Hill in mid-December to discuss its work on value-based contracting with key U.S. Senate staff members.

Joining us was a vitally important group of stakeholders, and innovators and experts in their own right: Dr. Michael Sherman, Senior Vice President and Chief Medical Officer of Harvard Pilgrim Health Care; Kristin Wolff, Director of Government Affairs and Public Policy for Bluebird Bio; and Alan Balch, CEO of the National Patient Advocate Foundation. We called on staff for the U.S. Senate Health, Education, Labor and Pensions (HELP) Committee Chairman, Senator Lamar Alexander (R-TN); Ranking Member, Senator Patty Murray (D-WA); and a HELP committee member, Senator Elizabeth Warren (D-MA).

Days before our visit, bipartisan Senate hearings had focused on the issue of high drug prices, and a new National Academy of Sciences report on what to do about them. But we found staff members equally interested in the topic of innovative drugs and how to manage the forthcoming entry into the market of hundreds of high-cost, breakthrough treatments and cures.

Senate staffers were genuinely interested in ideas that NEHI advanced in two recent white papers, published in March and October 2017, for federal policy changes to encourage experimentation with value-based payment models for such drugs (see a shareable summary of our recommendations here). Our stakeholder members underscored the importance of such experiments. For example, Dr. Sherman pointed to payers' needs to understand whether the results seen with drugs in clinical trials are equally reflected in the "real world." Payers are willing to pay high prices for truly effective treatments, he said, and structuring value-based contracts that are predicated on obtaining results comparable to clinical trials are one way to make these arrangements viable.

We also discussed these key issues with the Senate staffers:

Will value-based contracting save money? A hypothesis is that treating or even curing a patient with a devastating illness, even with a high-cost drug, will save money down the line by avoiding other medical expenditures. Senate staffers expressed an interest in seeing value-based contracts that were predicated on achieving real medical cost "offsets."

How far can regulatory changes extend to make value-based contracting possible? As NEHI's white papers have pointed out, regulatory work-arounds needed for value-based contracting may need to carve out exemptions on Medicaid Best Price and other government pricing rules. But it isn't yet clear how much legal authority CMS or CMMI have to make such changes. NEHI highlighted this lingering uncertainty in its recent letter to CMS on "New Directions" for the Innovation Center. During our Hill visits, we underscored for the staff members that statutory changes to enable value-based contracting may be necessary.

What other practical concerns might pose obstacles to value-based contracting? To track patient outcomes in general - and particularly in the context of value-based contracts - patient registries will be critical. Federal policy may need to encourage actively the strengthening and broadening of such registries.

In sum, the Senate staff whom we met with welcomed our visit and asked us to keep them informed about important new developments and NEHI's thought leadership in this sphere. The NEHI team will resume its visits to other Congressional staff members soon.