Value-based Payment Consortium Explores Novel Payment Arrangements for Transformative Therapies

News Update

Value-based Payment Consortium Explores Novel Payment Arrangements for Transformative Therapies


May 16, 2019

Washington, DC—Transformative therapies are one-time treatments with expected long-term, or even curative, effects. Despite their potential benefits, the high cost of transformative therapies presents a challenge within the current fee-for-service health care system. Value-based payment (VBP) arrangements could be part of the solution.

A new policy brief Advancing Value-Based Payment for Transformative Therapies, from the Duke-Margolis Center for Health Policy, in collaboration with members of its Value-based Payment Consortium, explores the transformative therapy environment and the potential role of VBP arrangements.

Continuing with traditional payment approaches may lead to limited reimbursement for the high upfront costs of transformative therapies; in turn, this may result in reduced investment and access to innovative therapies. These financial challenges not only cast doubt on the health system’s capacity to keep pace with technological change, but present tangible obstacles for patients who may struggle today to access life-altering treatments.

“To address the payment challenges surrounding transformative therapies, we need to move away from volume-based fee-for-service payments and create ways to make sure patients have access to these treatments,” said Gregory Daniel, PhD, MPH, Duke-Margolis Deputy Director, Policy, and Clinical Professor, Duke University Fuqua School of Business. “De-risking coverage and payment by tying payments to actual clinical outcomes can help with access to these therapies as well as provide the long-term durability data needed to evaluate their effectiveness.”

The policy brief reflects broad input from patient advocates, payers, manufacturers and providers, as well as experts on regulatory affairs, law and policy. In addition to examining barriers to the use of transformative therapies under current payment systems, the paper considers benefits and challenges of value-based payment approaches that have the potential to align incentives for payers, manufacturers, providers and patients.

Next steps recommended by the Consortium include:

  • Developing implementation strategies and pilots for the three models of transformative therapy VBP arrangements proposed in the policy brief;
  • Clarifying regulatory issues specific to transformative therapies, including the potential effects of price reporting obligations on the feasibility of VBP arrangements such as the Average Manufacturer Price (AMP), Average Sales Price (ASP), and Medicaid Best Price;
  • Identifying strategies for collecting data from outcome measures to validate the long-term effectiveness of transformative therapies
  • Enhancing the feasibility of longer-term, outcome-based contracts, including:
    • examining potential mechanisms for paying for outcomes in Medicare;
    • examining strategies to address patient portability;  
    • developing guidelines for applying accounting practices for pay-over-time models;
    • examining the potential of tying value to emerging financing mechanisms; and  
    • understanding the potential, cumulative financial impact of transformative therapies.


CONTACT: Patricia Green, Duke-Margolis

(202) 791-9561 (o); (301) 520-6482 (c)