Clarkston Consulting
Skip to content

Building A Value-Based Care Model in Life Sciences

Value-based care models are the future of pharmaceuticals but several obstacles exist slowing the transition from volume selling to value selling. More and more, companies in this space are realizing that a traditional “pharma-first” approach is no longer enough to be successful in the future, even more so for organizations exploring personalized medicine opportunities. Instead, they must evolve to adopt a more patient-centric approach designed around building trust with partners.

According to a 2015 study published in JAMA, only 148 risk-sharing agreements were established by life sciences companies between 1990 and 2013, and only 12% of those were in the US. Since 2013, the growth rate of risk-sharing, value-based, and outcomes-based models has begun to slowly accelerate.

In working on several elements of new value-based care models with companies at various points in their evolution, we recognize that this journey is very difficult. But it is a journey that is required to realize the promise of patient-centric care and to truly begin to rebuild trust in healthcare. Below are three insights to integrate into your planning and execution, designed to be usable by any company regardless of where you are in the evolution of your value-based care model.

The way you frame your challenges is critical

Einstein once said, “if I had one hour to solve a problem, I would spend 55 minutes making sure I am solving the right problem and 5 minutes solving it”. Many business challenges seem insurmountable because we’re not framing the challenge in a way that lends itself to an innovative solution. The way you frame the challenge, which should be based on a deep understanding of the drivers at the heart of the issue, will lead you down a specific path towards a solution – but often not the best one.

Using an example popularized in Harvard Business Review, imagine that you own an apartment building with an elevator. You frequently get complaints from your residents that the elevator is very slow. After several dozen complaints, you ask what to do about it. If you frame the challenge as “elevator is too slow” it will lead you to obvious solution options such as updating the drive motor of the elevator, lubricating or replacing the cables, or replacing the elevator entirely!

If instead, you dug to the heart of the issue and framed the challenge as “the perceived wait time is too long”, it will lead you down an entirely different path. To fix a perceived wait, you might install mirrors next to the elevator, add a TV next to the door, or even install a coffee spot in the lobby. Both challenge framings will lead you to a solution, but one leads you to a solution that is equitable for both parties and gets at the heart of the issue.

For the life sciences industry, one of the challenges on the road to value-based care is consensus on price and rebate terms. The way you think about this challenge will shape the path you go down, and as a result, your ability to solve it. Instead of approaching it from a pharma-first mindset, imagine alternative framings within the context of the network of stakeholders that surround your organization. For example, instead of asking, “How can I get payers to agree with my price and terms so I can maximize my return in the first year”, ask yourself, “How can I use my data and resources to solve the challenges of my partners, and then parlay the trust I build into a return?”

Learning from others outside of the life sciences is required for an effective value-based care model

The companies that choose to develop value-based and outcomes-based care models are pioneering this new approach in the life sciences. While many of us were taught to benchmark by looking for as close of an analog as possible, there is much to learn if we have the humbleness and hunger to look for insights and learnings beyond our industry.

Some elements of value-based care models – such as rebate negotiations with payers or pre-launch sales forecasting – are the next evolution of an existing commercial activity. Other elements – such as identifying, agreeing upon, and collecting meaningful outcomes measures within a population – pose entirely new challenges.

In both cases, life sciences companies should be looking both inside and outside their industry for lessons. Some lessons can be found in industry, for example looking to Spark’s recent successes with LUXTURNA. Yet too often, life sciences companies take a stance of exceptionalism – stating that their industry is inherently unique – and as a result limit their learnings to what can be extracted from their own industry.

To be successful in the early days of value-based care, companies must learn to look outside their own industry to better understand how others have dealt with elements of their challenges. Think of the lessons learned that industries like banking, insurance, energy, or commodities can teach about dealing with price uncertainty, creating risk-adjusted agreements, and forecasting with highly variable assumptions.

Overcoming common sticking points requires a boldness to act

The journey towards value-based care is riddled with sticking points. In a less difficult transformation, a company would be able to look at how other companies did it, or hire employees from a competitor to get it done. With the transformation from volume to value, there are very few in-industry insights to rely on – and many of those are just accumulated conjecture or educated guesses.

To be successful in this transformation, your organization must have a greater risk-tolerance than before and be willing to be entrepreneurial and act in new, creative ways to get it done. Your overarching objectives around value-based care need to be unwavering, and you must be willing to look to innovative solutions for your challenges.

Recent value-based developments have exemplified this point. Spark is taking it upon itself to remove the barrier of treatment cost to providers by flipping the book and bill model. The company is partnering with ExpressScripts on a program that would allow them to buy LUXTURNA instead of specialized treatment centers. This would help the provider organization overcome the big purchase costs of bulk treatment and would save the insurers from paying the markup added by the hospitals.

Another example is Novartis’ KYMIRAH team as they have engaged in talks with CMS [7] to negotiate new pricing models that maintains compliance with AMP best price requirements. Boldness to engage in conversations of this nature while keeping the patient at the center of those conversations will yield results. Everyone in healthcare has the shared objective of greater patient care – use that to your advantage to overcome sticking points that require external collaboration.

Value-based care represents a re-aligning of incentives across the system back to the patient. Achieving the promise of value-based care is not just required for success in the coming years for life sciences companies, but it also represents the key to rebuilding trust in an industry where partnership is key and failure is no longer an option.

If you would like to discuss your evolution on the pathway to value-based care and discuss strategic, operational, and enablement challenges, we would be happy to connect. Together we can design and bring to bear a better healthcare environment for patients around the world.

Subscribe to Clarkston's Insights

  • I'm interested in...
  • Clarkston Consulting requests your information to share our research and content with you.

    You may unsubscribe from these communications at any time.

  • This field is for validation purposes and should be left unchanged.
Tags: Life Sciences Trends, Personalized Medicine