Value-based healthcare and Value Labs

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US payers continue to struggle to manage medical product costs on two fronts: first, high-volume, high-cost chronic diseases, and second, high-cost specialty products. Although stakeholders are interested in value-based models that link a drug’s performance to emerging evidence of improved patient outcomes, such agreements are difficult to implement and too limited in scope to drive a shift to value-based reimbursement.

In a paper published in the July/August issue of In Vivo, “The Value Lab – Moving Value-based Healthcare from Theory to Practice,” the authors – including EY’s Susan Garfield and Ellen Licking – suggest a new, structured approach, called Value Labs, to bring these contracts into the mainstream, thus transforming product reimbursement and fueling the shift from volume to value.

The Value Lab construct begins to address the complex relationship between manufacturers and payers/purchasers, creating an opportunity to build trust and transparency through aligned incentives. As such, it becomes a “joint venture” between industry, payers, and other stakeholders to research, evaluate and deliver value to the health care system – creating efficiency, improving outcomes and increasing quality. Value Labs also provide a forum to experiment in four key areas where current hurdles have limited the uptake of value-based contracts (VBCs):

  • Value-centric clinical and economic study design
  • Innovative contracting structures
  • Data tracking, technology infrastructure and interoperability models
  • Strong evaluative and administrative protocols

Value Labs can also provide a roadmap for replicating the findings from successful value-based pilot programs across multiple payers to drive more rational research utilization, improve patient outcomes and accelerate their collective impact. And, since Value Labs create economies of scale, they can enable greater use of “hard to capture” outcomes measures, and therefore expand the number of therapeutic areas amenable to performance-based agreements.

At the heart of the Value Lab is a focus on improving patient outcomes and more rational resource utilization, which enables collaboration between two groups of stakeholders – manufacturers and payers/purchasers – that, historically at least, were driven by different incentives. Creating a forum to reduce the hassle factors associated with VBCs is necessary but not sufficient to creating an environment that will promote value-based reimbursement. The future-state will undoubtedly be more hospitable to outcomes-based deals if and when stakeholders embrace a collective migration toward a more collaborative model.


This excerpt is from the article “The Value Lab – Moving Value-based Healthcare from Theory to Practice,” by Susan Garfield, Principal, EY Global Life Sciences Advisory Services; Roger Longman, CEO, Real Endpoints; Michael Sherman and Chief Medical Officer and SVP of Harvard Pilgrim Healthcare, as well as faculty member of Harvard Medical School’s Department of population medicine and chair of the Board of the Harvard Pilgrim Healthcare Institute; Susan Shiff, PhD, SVP for the Center for Observational and Real-World Evidence at Merck & Co; and Ellen Licking, EY Global Life Sciences Senior Analyst and published in the July/August 2017 edition of In Vivo.