Since the FDA’s approval of GILEAD’s SOVALDI in December 2013, there has been loud outcry from some members of the healthcare community regarding the continuing increase in cost of pharmaceutical drugs. SOVALDI offers the first “curative” treatment for HCV at USD 1,000 a pill, or USD 84,000 for the entire 12 week treatment regimen (84 pills). As a result, SOVALDI’s controversial launch price has led to much debate among health insurance plans (i.e. payers) and other healthcare stakeholders, as well as a call to ban CMS coverage of the drug by some Congressional members. With these events as the backdrop, discussions have resurfaced regarding alternative payment models to reduce reservations of upfront payment for life-saving, but high cost therapies such as SOVALDI.
An amortised payment model would allow for a health plan to pay for high cost treatments over an extended timeline, rather than in large upfront payments (3 payments of $28K). Paying in smaller installments over a longer period of time may alleviate payers’ anxiety to pay for high cost drugs since it is similar to the current payment model for chronic disease management. This amortised payment model could also ease some of the challenges for risk sharing agreements such as outcomes based contracting; the health plan would continue to pay until the drug is paid off, the patient progresses, or the benefit is no longer realised. Moreover, some health plans such as IDNs and related ACOs are particularly equipped for amortised payment contracts where avoidance, delay, or elimination of downstream health resource utilisation can be more effectively measured.
However, there are also many perceived hurdles that must be further explored when considering this model. Contracts for amortised payments are especially difficult as many US patients switch health plans before the full payment would be received. This leaves open the question of which health insurance plan should continue to pay for the drug: the one that initially approved the therapy or the one that is currently benefiting from the downstream reduction in costs? Moreover, health plans would initially receive coinsurance/copayments for the three-month regimen, but would in theory not be able to collect future out-of-pocket payments by the patient over the extended contract period. Adding to this is the notion that US payers have also historically been uninterested in participating in innovative contracts, such as risk sharing agreements, since it is logistically difficult to set-up, effectively manage, or monitor for actual outcomes. In conclusion, while amortised payments offer one solution to the current healthcare debate on paying for curative high cost drugs, there are still many hurdles and questions that must be addressed before widespread adoption.