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European Pharmaceutical Contractor

Adding Value

In ordinary commerce, if one buys a faulty product, one expects to be able to return it and have one’s money refunded. That is not yet the way it works for prescription medications. Instead, the familiar pricing concept applies, where the seller – the pharmaceutical company – sets a price, and the buyer – healthcare providers, patients, payers – either pays that price or chooses an alternative. This way, the buyer is taking all of the risk in purchasing the drug, based on an understanding that it may work in only a fraction of individuals eligible to use it. While prices are negotiated for different countries, insurers and so on, one underlying model applies. Therefore, whether a patient is cured, mildly improved or made worse, the cost of the prescription must be paid by the buyer.

Discontent with the existing model is widespread (1). For example, a recent poll by the Kaiser Family Foundation found that 72% of Americans consider the cost of prescription drugs to be “unreasonable”, with large majorities supporting government intervention to control drug costs, as current reimbursement practices may lack incentives for doctors to prescribe lower cost medications. Care providers who buy and bill for using higher-priced medications may make more by spending more (2).

Value-Based Reimbursement

In this climate, pharma companies are exploring new approaches to pricing medications. A recent example is Novartis’s Entresto™ – a newly approved prescription drug for heart failure. Novartis proposed a pricing model based on offsetting the cost of care that the Entresto treatment avoids. The suggestion was to offer Entresto to patients at a discount initially, with additional payments following for those patients for whom the treatment actually offset costs for hospital admissions, emergency treatment or lost work, for example (3). Even though Entresto will likely not be offered with variable pricing (4), the idea of value-based reimbursement is out of the bottle and may be worth fighting for.

To price prescription drugs in a manner that optimises pharmacotherapy while also appealing to payers is a challenge. Assessing the value of treatment may be the key. Offset costs are one component of value, and another is the clinical benefit of treatment – revealed by how the patient feels and functions. For measuring benefit there are two approaches: one predictive and the other reactive. Both are becoming rapidly more powerful.

Predictive Techniques

With this method, the probable value of a medication to a particular patient is assessed beforehand. Technologies now support healthcare professionals with access at their clinics to fast gene screening and other personalised ohmic criteria to help identify patients who are likely or unlikely to respond to therapy. Examining phenotypic information quantifying past experience, behaviours, attitudes, beliefs, knowledge, health status and relationships with healthcare providers also predicts treatment response (5,6). Such measures can be collected directly from patients using electronically administered patient-reported outcome questionnaires with automated scoring and analysis to give immediate predictive guidance to care providers.

Reactive Approaches

These can support individualised real time management of care and also concurrently document the experience of each patient. Technologies already exist that can capture timely, detailed and trustworthy tracking information about the response to treatment when subjects take medications in clinical trials. Tracking patients who have been prescribed approved medications using frequent (daily) capture, analysis and reporting would enable healthcare professionals to evaluate benefit conferred (or not), as empirically informed by the time course of key assessments (such as symptoms, medication consumption, concomitant medications or adverse events) for that patient. Reactive care could also inform and sharpen predictive evaluations if the tracking data across patients were compiled and studied to explore demographic, physiological and phenotypic characteristics that may be associated with likelihood of response to therapy.

Recent innovations, including the sensitive and reliable self-assessments and objective measurements from wearable devices, have made use of tracking measures more worthwhile and less intrusive. It makes sense to include a combination of assessments, ones that apply in common for all patients (such as impact on health-related quality of life), as well as specific ones that reveal disease specific changes (restored function, prolonged life span, reduced pain, cognitive performance and so on). The net benefit of a medication depends on weighing the incidence, frequency and severity of adverse drug reactions, which in principle can be accurately logged in the real world using individual tracking methods that work well in more closely managed clinical trials.

Such ongoing accumulation of information about a medication has economic significance, particularly if value-based pricing takes hold. Dynamic pricing could reflect changes in the measured components of value over time. Furthermore, regulators might find it reasonable to approve medications earlier, given that post-approval tracking and monitoring will supplement the initial evidence of efficacy and safety.

Evaluating Impact

From analysis of such tracking measures, a trajectory of the patient’s day-to-day experiences can be compiled. But it would also be wise to ask the patient about their own impressions: on balance, how did things really turn out? What mattered most?

In Atul Gawande’s insightful book Being Mortal: Illness, Medicine and What Matters in the End (7), he sees the meaning of a life to hinge on experience revealed as a story. Individual differences in the experience of treatment will matter; not just numbers, not just statistics. Gawande writes: “A story has a sense of a whole, and its arc is determined by the significant moments, the ones where something happens. Measurements of people’s minute-by-minute levels of pleasure and pain miss this fundamental aspect of human existence.” In addition, he notes that in assessing significance, “endings matter”. How narratives and stories might be implemented is foreign territory in the highly structured, data-centric world of clinical studies. But the technical capability is there, and www.patientslikeme. com shows that patients are not only willing to share medical stories, but that they find existential value in providing them (8).

Structured items in tracking devices can be part of the story, but free text comments should be considered as well. The technical capacity for logging comments is now attached to many experiences (attending a game, buying a car, using a dishwasher, and so on) and people rely on the opinion of others when making decisions. Collecting comments from healthcare professionals and patients is part of the value discussion, and can also serve as a source of emergent findings such as the unexpected effects of an approved medication (9).

The trustworthiness of the information and the credibility of tracking measures and outcomes are crucial if such methods are to be used in clinical care and in pricing models of prescription drugs. Marketing surveys (for example, how can we make your flight more enjoyable?) are not a good model, as they do not show what is really happening. Tracking devices, diaries and surveys would best be developed by/in conjunction with scientists who know how to obtain research quality information and how such information depends on content validity, data integrity, adequate training and ethical considerations.

Extending an appropriate monitoring technology as a routine practice in the administration of approved drugs is possible, and could be transformative. However, tracking is not common in clinical practice (10). A visit-based instrument, completed at timed milestones following initiation of treatment, may be adequate for determining effectiveness of therapy in chronic conditions with infrequent administration of prescription drugs. As long as an ultimate outcome can be established, which is related to the value of treatment to the patient and care delivery system, the pricing negotiation will be informed even without the enhanced reactive care from tracking.


An experimental approach is needed to address dissatisfaction over pharmaceutical pricing. To start with, how a value-based prototype works in practice should be explored. The next concrete step should be to develop an innovative system that meets the following objectives of five stakeholders (11):
  1. Pharma companies: to share the risk that a medication will not work in a given case or particular disease by value pricing medications according to credible measurements of the degree of benefit, including offset costs of other therapies and the impact on patients’ lives
  2. Regulator: to protect public interest by closer post-approval surveillance of patients using approved medications
  3. Payers: to explore a rational basis for reimbursement based on credible evidence of benefit, impact on quality of life and cost of avoided medical care
  4. Healthcare professionals: to support remote management of adherence, quick inspection of trending measures to see how the patient is doing, and shared insight into patient experience as a guide for evaluating other patients
  5. Patients: to experience individualised pharmacotherapy based on evidence and real-time, remote care. To feel that their documented experience of problems and benefits contributes to medical care
1. Alonso-Zaldivar R, Poll: Majority in US wants gov’t to curb prescription costs, Washington Post, August 2015. Visit:
2. Werth B, A tale of two drugs, MIT Technology Review, October 2013. Visit:
3. Hirschler B, Novartis to test new pricing model with heart failure drug, June 2015. Visit: idUSKCN0PA1N720150630
4. Husten, L, ‘Slow start for new Novartis heart failure drug Entresto’, November 2015. Visit:
5. Greenfield S et al, Development and testing of a new measure of case mix for use in office practice, Med Care 33(4): pp47-55, 1995
6. Polinski JM et al, Rationale and design of the multinational observational study assessing insulin use: The MOSAIc study, BMC Endocrine Disorders 2012, 12:20 doi: 10.1186/1472- 6823-12-20
7. Gawande A, Being Mortal: Illness, Medicine and What Matters in the End, Henry Holt & Co LLC, NY, 2014
8. Visit:
9. What if the cure for Ebola were already in your local pharmacy? Washington Post, June 2015. Visit:
10. Raymond SA, It's time to follow patients taking approved drugs, Clinical Leader, pp1-4, September 2013. Visit:
11. Reaney M et al, One programme, four stakeholders: An overview of the utilisation of patient-reported outcomes in intervention development to meet the needs of regulators, payers, healthcare professionals and patients, Pharmaceutical Medicine, 29: 69 Springer Intl Publishing. DOI 10.10017/s40290-015-0088-4, 2015

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Stephen Raymond is Chief Scientist in Scientific Affairs at ERT. His academic experience was in Physiology and Electrical Engineering. As an Assistant Professor in Anesthesia, he invented the personal health tracker in 1995, and then worked to commercialise the system for measuring the clinical benefit of therapies in clinical trials. Stephen is engaged by innovations that may improve quality of life, particularly where subjective assessments can provide evidence of meaningful change.

Matthew Reaney
is a Chartered and Practitioner Health Psychologist in the UK, who has been working in the field of health outcomes and outcomes research for more than a decade. At ERT, he holds the position of Senior Scientist.

Stephen Raymond
Matthew Reaney
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