How Can Value-Based Care Embrace the Possibilities of Biosimilars?

As the healthcare delivery model transitions from a fee-for-service (FFS) model to a value-based model, biosimilars may begin to play a much larger role.

The American healthcare system has largely operated under the FFS model, but a value-based model places more emphasis on cost-saving practices when clinically appropriate and using less-expensive alternatives to branded medications.

In a recent podcast interview broadcast on Not So Different, Jeffery Scott, MD, chief medical officer of Integra Connect, a company that uses cloud-based technologies and services that help specialty care providers optimize their performance in the ongoing shift to value-based models, talked about the future of the value-based system, what’s holding it back, where it’s already working, and what role biosimilars will play in a value-based system.

“The key about value-based contracting would be trying to identify products that offer the best care or in the setting of multiple entities that have similar outcomes, contracting, to drive down the total cost of care by choosing the one that you get a contract on,” Scott said.

A value-based model is already being used in some areas of the healthcare space, most notably Veterans Affairs (VA). Although the VA, like Medicare, is paid for with taxpayer money, the VA is separate and has the ability to negotiate its prices with industry, according to Scott.

“The prices paid to the VA and other DOD, the Department of Defense, facilities are, are not calculated as part of the average selling price. So this would allow the VA to lower cost of care through negotiations since anything that they pay is related to the cost of the drug, not a markup,” Scott said.

According to Scott, a system like the one the VA has would allow physicians to lower out-of-pocket costs for patients. However, several things are holding the value-based system back, with contracts being one of the most prominent.

So far, the value-based system has had very little impact on the oncology space because there are not currently contracts based on value, according to Scott. For example, United Healthcare has signed a deal that forces physicians to use the branded version of pegfilgrastim, Neulasta (which is produced by Amgen).

“And the community, we deal with Part B and D in the Medicare plans,” Scott said. “The Part B Medicare for the injectable drugs sets a market reimbursement at average selling price plus 6%. Short of a change in the Medicare Modernization Act of 2003 or a Medicare waiver, it would be a challenge for any value-based contract.”

According to Scott, any discount provided would impact the rest of the market because it would lower reimbursement, thus taking the ASP lower.

While Scott believes biosimilars have an important role to play in a value-based market, healthcare needs to go beyond biosimilars to provide true savings to the patient.

“When I think of a value-based contract, I think of an opportunity for us not to just lower the acquisition cost to the practice, but commensurate to that, lower the cost that the payer has to pay,” Scott said.

According to Scott, over 60% of the total costs of care come from drugs, most of which are new immunotherapies (IO). IO can have an amazing impact on patients but also contribute to massive growth in cost, he noted.

“Now, across the IO class, multiple drugs appear to be similar. I think there's an opportunity for payers and the IO companies to start to have discussions, for example, that could lead to a preferred choice of therapy and exchange to a lower cost,” Scott said.

“I think if there's a way to maintain the physician margin while lowering the cost of care to the payer, there'll be a lot of interest in that contracts and those types of contracts,” Scott said.