March 02, 2018
Value-based health care is one of the most pressing topics in health care finance and policy today. Value-based payment structures are widely touted as critical to controlling runaway health care costs, but are often difficult for health care entities to incorporate into their existing infrastructures. Because value-based health care initiatives have bipartisan support, it is likely that these programs will continue to play a major role in both the public and private health insurance systems. As such, there is a pressing need to evaluate the implementation of these initiatives thus far and to discuss the direction that American health care financing will take in the coming years.
To explore this important issue, the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School collaborated with Ropes & Gray LLP to host a one-day conference on value-based health care. This event brought together scholars, health law practitioners, and health care entities to evaluate the impact of value-based health care on the American health care system.
For more information, visit our website at: http://petrieflom.law.harvard.edu/events/details/will-value-based-care-save-the-health-care-system
Ira Klein, Can Value-based Contracting Work for Pharma Companies?
1. Can Value-based Contracting Work
for Pharma Companies?
Are we extracting more value already than we believe
we are, and are we asking the right questions?
March 2, 2018
Ira Klein, MD, MBA, FACP
Senior Director, Healthcare Quality Strategy
Strategic Customer Group
Johnson & Johnson Health Care Systems Inc.
02/18 em-02159v1
2. Disclaimer
This presentation is for informational purposes only. The presenter is not providing this
information as a consultant, and the presentation is not in any way intended to provide
quality or reimbursement advice.
• Johnson & Johnson Health Care Systems Inc. is not the subject matter expert on the
topic of quality for patients with the listed health or any other medical conditions, and
employees cannot provide any advice or consultation.
• It has not been established that any Janssen products or programs can address the
issues relating to quality, quality measurement, or the value-based care performance
program under which quality measures are used.
• Laws, regulations, and policies concerning quality measurement and its relationship to
reimbursement are complex and are updated frequently. The information in this
presentation is not exhaustive and should be evaluated against other available sources
of information before decisions are made about how to approach quality within your
organization. While we have made an effort to be current, new or revised information
may now be available. All information is subject to change.
• In addition, this information does not represent any statement, promise, or guarantee
by Johnson & Johnson Health Care Systems Inc. about quality, quality measurement, or
levels of reimbursement related to quality measurement. Please consult with your local
quality or reimbursement specialist on matters of quality and reimbursement as it
relates to your institution.
3. 3
0%
2%
4%
6%
8%
10%
12%
14%
16%
0%
2%
4%
6%
8%
10%
12%
14%
16%
PercentAnnualGrowthRate
PercentofTotalNational
HealthExpenditures
CMS Retail CMS Non-Retail
Total Health Expenditure Growth Rate Prescription Drug Growth Rate
Impact of
Hepatitis C
Sources: Altarum Institute and 2014 CMS National Health Expenditures Report; CMS 2018
MA and Part D advance Notice and Draft Call Letter (Feb. 2017)
(https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-
items/2017-02-01.html).
Share of total health spending attributable to pharmaceuticals
is expected to remain steady
Drug Spending Growth is in Line with
Total Health Spending
4. 95
105
115
125
135
145
155
165
175
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
ConsumerPriceIndexGrowth in Drug Prices Has Been in Line With
Other Healthcare Prices
104
Average Price Levels, Selected Goods and
Services,
2007-2016
All Medical
Costs
Hospital and Related
Services
Consumer Price
Index—Urban, All
Items
Prescription
Medicines
100
PhRMA analysis of Bureau of Labor Statistics data. Consumer price index—all urban
consumers, history table. https://data.bls.gov/cgi-bin/dsrv?cu.
Accessed February 2017.
5. List Price Increases Are Only Part of the Story
62.6%
18.5%
12.0%
6.9%
Brand Companies
Market Access Rebates and Discounts
Statutory Rebates and Fees
Supply Chain Entities
1/3 of Brand Medicine List Prices
Rebated Back to Payers,
Government or Retained by
Supply Chain
Source: Berkeley Research Group, https://chartpack.phrma.org/biopharmaceuticals-in-perspective-2017; Quintiles
IMS Institute, Understanding the Drivers of Drug Expenditure in the US (September 2017) https://www.iqvia.com/-
/media/iqvia/pdfs/institute-reports/understanding-the-drivers-of-drug-expenditure-in-the-us.pdf?_=1512914768222
(chart 7).
Net Branded Pharmaceutical
Price Growth is Significantly
Lower than List Price Growth
9.3
10.0
11.4
13.7
12.0
8.7 9.1
4.9
5.1
2.5
0
2
4
6
8
10
12
14
2011 2012 2013 2014 2015
List price growth
Net price growth
Gap between list and net
reflects off-invoice rebates
and discounts
5
6. 1. Food and Drug Administration (FDA). Drugs@FDA: FDA approved drug products. FDA Web site.
http://www.accessdata.fda.gov/scripts/cder/drugsatfda. Accessed May 2017
A Decade of Advances
Source: FDA1
7. 9
1. Centers for Disease Control and Prevention (CDC), National Center for Health Statistics. Health, United States, 2015: with special feature
on racial and ethnic health disparities. https://www.cdc.gov/nchs/data/hus/hus15.pdf. Published May 2016. Accessed May 2017.
2. Lacey MJ, Hanna GJ, Miller JD, Foster TS, Russell MW; Truven Health Analytics. Impact of pharmaceutical innovation in HIV/AIDS
treatment during the highly active antiretroviral therapy (HAART) era in the US, 1987-2010: an epidemiologic and cost-impact modeling case
study. http://truvenhealth.com/Portals/0/Assets/Life-Sciences/White-Papers/pharma-innovation-hiv-aids-treatment.pdf.
Published December 2014. Accessed May 2017.
HIV/AIDS: Decline in Death Rates
Actual vs Projected Death Rates for HIV/AIDS in the United States, 1988-20101
Sources: CDC1; Truven Health Analytics2
The number of US AIDS deaths decreased dramatically following the introduction of highly
active antiretroviral treatment (HAART).1 As a result of HAART and all the important medical
innovations that followed, it is estimated that more than 862,000 premature deaths have
been avoided in the United States alone.2
8. 11
1. American Cancer Society (ACS). Cancer facts & figures: 2017. https://www.cancer.org/content/dam/cancer-org/research/cancer-facts-and-
statistics/annual-cancer-facts-and-figures/2017/cancer-facts-and-figures-2017.pdf. Published 2017. Accessed May 2017.
2. Seabury SA, Goldman DP, Lakdawalla DN, et al. Quantifying gains in the war on cancer due to improved treatment and earlier detection.
Forum for Health Econ Policy. 2016;19(1):141-156.
3. Dunellari A. Researchers optimistic about future of cancer treatment. VOA. http://www.voanews.com/content/researchers-optimistic-about-
future-cancer-treatment/3144653.html. Published January 13, 2016. Accessed May 2017.
4. National Cancer Institute (NCI), Surveillance, Epidemiology, and End Results Program. Cancer of any site: number of new cases and deaths per
100,000 people (all races, males and females), age-adjusted. http://seer.cancer.gov/statfacts/html/ld/all.html. Accessed May 2017.
Cancers: Decline in Death Rates
3
Since peaking in the 1990s, cancer death rates have declined 25%.1 Approximately 73% of
survival gains in cancer are attributable to new treatments, including medicines.2
1,4
Sources: ACS1; Seabury SA et al.2; Dunellari A3; NCI4
9. Cardiovascular Disease: Declining Rates of Death
• Tremendous strides have been made in reducing cardiovascular disease
morbidity and mortality, thanks in part to new medicines.
US Death Rates Due to
Diseases of the Heart*
*Age-adjusted death rates based on year 2000 US standard population. 1980-1998 causes of death are classified by the
International Classification of Diseases, Ninth Revision (ICD-9). Beginning in 1999, causes of death have been classified by
the International Statistical Classification of Diseases and Related Health Problems, Tenth Revision (ICD-10).
Since 2000 alone
the death rate from
HEART DISEASE
has declined by
35%
1. Centers for Disease Control and Prevention (CDC), National Center for Health Statistics (NCHS), National Vital Statistics System.
Age-adjusted death rates for 72 selected causes by race and sex using year 2000 standard population: United States, 1979-98.
http://www.cdc.gov/nchs/data/mortab/aadr7998s.pdf. Accessed May 2017.
2. Kochanek KD, Murphy SL, Xu J, Tejada-Vera B. Centers for Disease Control and Prevention (CDC),
National Center for Health Statistics, National Vital Statistics System. Deaths: final data for 2014. Natl Vital Statistics Rep. 2016;65(4).
https://www.cdc.gov/nchs/data/nvsr/nvsr65/nvsr65_04.pdf. Updated April 3, 2017. Accessed May 2017.
10. 10
Potential First-in-Class Medicines in the Pipeline
An average of 80% of drugs across the pipeline are
potential first-in-class medicines
Source: PhRMA, based on study by
Analysis Group
Percentage of Products in Clinical Development and
Regulatory Review That Are Potentially First-in-Class,
Selected Therapeutic Areas, 2016
60%
68%
73%
73%
74%
75%
79%
86%
0% 20% 40% 60% 80% 100%
HIV/AIDS
Immunology
Diabetes
Cardiovascular
Neurology
Psychiatry
Cancer
Alzheimer's Disease
12. Pragmatic Solutions to Address
Drug Cost Concerns
Modernize the Drug Discovery and Development
Process
Modernize the FDA to enable it to keep pace with scientific
discovery and increase the efficiency of generic approvals
Promote Value-Driven Health Care
Address barriers to paying for value, develop patient-
centered value assessment tools, and support appropriate
use of medicines
Engage and Empower Consumers
Make information about quality and patient costs public to
aid in decisions and enforce common-sense rules that
prevent discrimination against vulnerable patients
Address Market Distortions
Reform market-distorting programs such as the 340B
Drug Pricing Program
Pharmaceutical Research and Manufacturers of America (PhRMA). Policy solutions:
delivering innovative treatments to patients. http://phrma-
docs.phrma.org/files/dmfile/policy-solutions4.pdf. Published March 2016. Accessed May
2017.