Drug Approvals: Value-based Contracting

Value-based contracting helps hold Big Pharma accountable. If the drug shows a lack of clinical effectiveness and/or results in unreported side effects, the manufacture owes the plan sponsor two-thirds of the drug’s cost. Rishi Manchanda, the Chief Medical Officer (CMO) of The Wonderful Company, believes that the sequel to the triple aim is the quadruple aim which is comprised of: outcomes, costs, provider experience, and patient experience (Manchanda, 2016). The downside of this approach is that if a drug doesn’t work, the insurance company gets a “penalty fee” from the drug manufacturer. So essentially what is happening is that if ineffective drugs are administered to patients, meaning that the patient is not getting better or is even getting worse, the insurance company profits (Appleby, 2017). One on hand the insurance company may need the extra money to subsequently care for the patient, but it seems like the insurance company will always profit in the end. The rising cost of prescription drugs is unsustainable. Value-based contracts can add both financial and therapeutic value.