The term patient-centric pricing can be difficult to understand. After all, how is patient-centricity different from what was done before? Hasn’t medicine always been focused on patients, and improving care for them? The concept evolved from initiatives in the early 1980’s to measure the health-related quality of life (HRQoL) and quality of life (QoL) of patients through clinical trial and research. More recently, the US ACA established the Patient Outcomes Research Institute (PCORI) to measure these outcomes. PCORI’s goal is to improve the cost-effectiveness of healthcare by incorporating patient outcomes.
This work is designed to help ACA legislators meet the triple aim of outcomes improving: patient satisfaction with quality healthcare, the overall health of the US population, and affordability. With an eye on these goals, providers, payers, and manufacturers are encouraged to move from a fee-for-service to a fee-for-value based contract system.
Implications of Patient-Centricity for the Healthcare Industry
What does this mean for US Healthcare?
- Providers will need to deliver care that is accountable for the long-term health of patients
- Payers will set incentives against humanistic outcomes
- Manufacturers will need to demonstrate the value of their product against competitive alternatives, rather than placebo
At the 2016 ISPOR Conference, Emily Freeman, Senior Research Scientist at Eli Lilly provided some perspectives on how patient-centricity is being incorporated into product development. For the industry to make this shift three areas need to be addressed:
- Health Literacy – Understanding and acting on measured outcomes.
- Shared Decision Making – Working with healthcare providers to better select appropriate treatments.
- Quality Improvements – Improving patient-centric health outcomes.
Implications of Patient-Centricity for Pricing
Paul Hunt, President of Pricing Solutions, stated that price and value are inseparable – and that value-based drug pricing is where “pricing is based on the value of your products/services relative to other available, therapeutic options”. Healthcare is moving towards patient-centric metrics of value, thus pricing will also be dependent on these definitions of value. Here are a few examples of how a value-based drug pricing system would play out in the real world:
- Imagine that your drug reduces blackouts for your target hypotension patient population; thereby reducing the number of falls suffered by these patients. What is the financial value of a reduction in hospital and ER visits to payers?
- Imagine if epilepsy patients were monitored at home to measure the frequency of episodes. What is the financial value to payers in terms of optimizing medication usage and reduced hospital visits?
- Imagine that an airway device could maintain saturation levels during upper-endoscopy procedures. What is the financial value to providers in terms of minimizing procedures interruptions, and fewer return visits to hospital, due to hypoxia, amongst discharged patients?
Technology is Paving the Way
Patient-centric value models in healthcare are being enabled by advances in technology. Patient-reported outcomes can increasingly be done objectively, using sensors, rather than through subjective feedback. Payers and providers are increasingly using Population Health data management systems to guide medical interventions, patient-by-patient. And the digital revolution is enabling patients to take greater control over their own healthcare choices, and guide their relationships with providers and payers.
Defining Patient-Centric Pricing
Patient-centricity is about understanding the value that each patient would receive from a medical intervention and building data that measures that value relative to alternative courses of action. Life science companies need to think about how that value can be converted to financial value and to who that value would accrue. This would be the basis for setting the price of their new product.