Beyond the Pills: When Value Meets Pharma


How pharmaceutical companies can better define, measure, and deliver value to patients.

John Rudoy, PHD and Zhe Yu, MD, MPH

5 min read

A move toward value-based arrangements in pharmaceuticals is a positive step toward creating a more sustainable healthcare system. But this will require broader changes in pharmaceutical business models than many anticipate. Ensuring a medication’s maximal value is delivered requires interaction with a complex side of the healthcare system most pharma companies are unfamiliar with.

Pharmaceutical cost volatility and growth are major concerns for healthcare stakeholders, from the government down to the general public. Drug manufacturers face increasing pressure to address this issue. But simple answers or scapegoats are hard to come by, as there is a perceived mismatch between drugs’ cost and value.

The current administration seems to recognize this by focusing on value-based arrangements and acknowledging the need to promote these arrangements in its blueprint to lower drug prices. More specifically, The Food and Drug Administration (FDA) recently released regulatory guidance clarifying rules around payer-pharma company information sharing to try and facilitate value-based pricing structures.

This is good news in the long run. An approach assuring better alignment between drug costs and well-defined value is more likely to achieve buy-in and drive a sustainable marketplace than approaches that either punish certain stakeholders or further decouple the price certain stakeholders pay from the value they receive. However, in the short run, this signifies significant disruption and new complexity.

How do you measure the value of a drug? Not easily.

If pharmaceutical companies soon find a significant portion of their revenue tied to the value patients realize from their drugs, these companies will need to ensure that value is recognized. But, as we discussed in two older articles – Measuring the Value of a Drug and Will Identifying Clinically Unproven Drugs Curb Pharma Costs? – there’s tremendous complexity in defining and measuring “value,” and delivering that value. For one thing, the greater healthcare industry has yet to develop a consistent drug pricing method; each transaction side considers value from a different lens.

But, are pharmaceutical companies prepared to do that? At first, the right answer may seem to be “of course.” The act of providing the drug at all is highly valuable – drugs that improve patient health reduce costs by eliminating healthcare utilization driven by unmanaged conditions or older therapies’ side effects. Manufacturers have well developed medical economics departments dedicated to demonstrating the value associated with these factors. Indeed, the recent FDA guidance, for instance, was targeted around allowing the information these departments produce to be more widely shared with payers to fuel value based arrangements. These data points include but are not limited to: information about the time of onset of action of a product, or about patient compliance or adherence.

Some may note the concept of going “beyond the pill” has bounced around in the pharmaceutical industry for a while, as companies looked to differentiate themselves and build consumer relationships. However, these efforts often just amounted to bulked up marketing campaigns.

But imagine the following scenarios in which a patient takes a drug to improve health and reduce medical costs in the long run (including through reduced emergency room visits, hospitalizations, or readmissions):

  1. The patient is taking another drug with a dangerous interaction, resulting in a costly hospital stay. In the short term, the patient’s health is severely negatively impacted.
  2. The patient reacts adversely to a drug’s side effects and stops taking it regularly, unable to reap its benefits.
  3. The patient cannot afford co-pays, and stops taking a drug.
  4. The patient takes a drug incorrectly.
  5. The patient becomes dependent on a drug, begins to abuse it, and ultimately experiences a reduction in wellbeing and an increase in healthcare costs.

Value-Based Arrangements Put Responsibility and Collaboration at the Forefront

Pharmaceutical companies are not traditionally responsible for managing the issues illustrated in these scenarios, but if their income becomes dependent on consistently realizing a high level of positive outcomes — on delivering maximal value – they will need to start caring about them. Providers have already begun to deal with this in their own version of value-based arrangements.

The scope of an organization’s work must expand as it enters into value-based arrangements. For example, CareMore (now part of Anthem), which was also a Medicare Advantage plan and thus had responsibility for its patients’ total cost of care, famously cut their patients’ toenails and removed shag carpeting from their homes to prevent the falls that led to hospital stays and declines in health.

Pharmaceutical manufacturers need not immediately invest in an army of medical assistants to cut the toenails of anyone who uses their drugs. But they would be well-served to think through the new skillsets, technical capabilities, and partnerships needed to thrive in a value-based world.

Going Beyond the Pill

There are a number of steps drug companies could take, and the mix will likely depend on the specific nature of their portfolios and the benefits and risks associated with them. For example, they could collaborate with pharmacies and primary care clinics to provide additional resources and tools to facilitate medication reconciliation, deploy nurses to contact patients with high risk of noncompliance, or build apps and online portals so patients get their questions answered quickly and definitively.

Many manufacturers are beginning to go down this path, such as Otsuka and Proteus’ Abilify MyCite® (aripiprazole tablets with sensor for Diabetes treatment compliance). Similarly, there’s also Roche’s recent acquisition of Flatiron Health (cancer care data solutions). But efforts like these need to become a larger, more systematic part of organizations’ activities if they are to survive in a value-based environment.

Necessary capabilities don’t all need to be built internally. A number of organizations have emerged with innovative approaches to pharmaceutical management (such as Mango Health, PillPack-recently acquired by Amazon, and AiCure), many of which could be valuable partners. In some cases, pharma companies’ roles may be to provide additional support to those payers and providers who are already addressing these issues. Ignoring the need to obtain these capabilities completely, however, is not an option.

Some may note the concept of going “beyond the pill” has bounced around in the pharmaceutical industry for a while, as companies looked to differentiate themselves and build consumer relationships. However, these efforts often just amounted to bulked up marketing campaigns.

As an example, Amgen entered a collaboration in 2017 with Humana to facilitate research on real-world evidence. In May 2018, the company further entered a collaboration with National Cancer Institute, Connect2Health Task Force, the University of Kentucky (UK) Markey Cancer Center and the University of California, and San Diego (UCSD) Design Lab to enhance cancer symptom management support via connected technologies.

Efforts like these – although their outcomes are currently unknown – demonstrate commitment toward a new value-based arrangement push to provide a more concrete purpose for expanding scope and execute a concrete set of future initiatives. Pharma has potential to thrive in a value-based world and create a sustainable system for all.

  • John Rudoy, PHD and
  • Zhe Yu, MD, MPH