Pay-for-Performance: when is a therapy successful?

Challenges in the negotiation of Pay-for-Performance contracts

Fri, 2021 / 04 / 23
Performance-based reimbursement models have long been discussed in health economics. With more and more cost-intensive gene therapies entering the market, these reimbursement models, often called pay-for-performance (P4P), are a potential option in Germany. The contracts are selectively agreed upon between the pharmaceutical company and an individual health insurance company or a service company.

The design of P4P contracts allows for considerable variation, but it usually includes an agreement for a proportional reimbursement of costs if the therapy was not or only partially successful within a given time period. The financial risk in the event of a therapy failure is thus shared between the pharmaceutical company and the health insurance fund. The exact procedures of the reimbursement are a matter of negotiation between the contracting parties and represent a major challenge in concluding this type of contract. Therefore, one of the core questions regarding P4P contracts is the operationalization of these factors:

  • When is a therapy successful and how can the success or failure of it be defined and distinguished from each other in a measurable way?

The German Bundestag dealt with pay-for-performance contracts in October 2020, and found that although the legal basis is in place for performance-based reimbursement models, measurements of the underlying factors can lead to considerable additional expenses. The reintroduction of the risk pool and its impact on instalment models has also been acknowledged. Future regulations should be made regarding the risk pool, which would make instalment payment models attractive again.

Regardless of the payment modalities, the pharmaceutical company faces several challenges. In a possible P4P contract, it must be determined by which criteria a therapeutic success can be objectively and unambiguously assessed, how this is to be measured and until which point in time a (partial) reimbursement of the initial costs occurs. For example, a possible factor could be 'survival', as in the case of Kymriah® from Novartis, a drug for the treatment of B-cell acute lymphoblastic leukemia. Here, Novartis has agreed to reimburse part of the costs of Kymriah® if the patient dies due to the underlying disease within a defined time period.

But every contractual agreement on the presumed success of a therapy also entails a business risk for the pharmaceutical company. How can it be estimated how often a reimbursement will occur, how much must be set aside in provisions for possible reimbursements and how does the definition of certain reimbursement intervals affect the business case?

As a leading consultancy in the field of market access for orphan drugs and gene therapies, we have developed a tool for pharmaceutical companies to assess the risk of different rebate and reimbursement scenarios using available evidence. Additionally, we support pharmaceutical companies in the entire process of strategy development for P4P contracts, as well as during negotiations with the individual health insurance funds.

Sources in German:

Author: Sebastian Marben, M.Sc. 


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