Challenges to the wider use of drug therapy innovations include:

• Cost-effectiveness: Plan sponsors and pharmacy benefit managers (PBMs) may not cover advanced therapies if the treatments fail to drive first-year savings.⁵ Similarly, purchasers will have concerns about the long-term curative efficacy of new treatments and the role of patient adherence, as both factors affect short- and long-term value realization. Resistance to raising premiums, limited ability to displace other immediate care delivery expenses, inability to manage adherence and failure to continue evidence generation can cause new therapies to be heavily managed through formulary and reimbursement restrictions or delays in patient access.⁶
  
  
• Insurance switching: Churn across individual carriers and funding sources (e.g., commercial, Medicare, Medicaid) within patients’ lifetimes can create disincentives for payers to cover high-cost therapies with delayed or long-lived benefits. Those covering the initial cost may not benefit from downstream cost offsets. This challenge can limit access to innovation and lead to disparate coverage approaches such as pushing for significant discounts in early coverage or rationing.⁷
  
  
• Comprehensive valuation: Assessments of the value and cost-effectiveness of breakthrough therapies may fail to fully measure potential efficiencies in treatment and societal benefits like productivity growth or reductions in spend on ancillary government programs. Purchasers may understate the benefit of new drugs based on limited value measurement. Similarly, players across the ecosystem may sense risk in adopting therapies that deprioritize or make obsolete traditional care, which has happened as anti-obesity medication reduces the appeal of bariatric surgery.⁸

Solutions to expand novel drug therapy uses:

• Collective funding: Creating an incentive or model for all purchasers to fund and cover breakthrough therapies will be critical to avoiding issues arising from upfront payment, delayed benefits and insurance switching. Ensuring universal access will allow all payers to capture the downstream benefits and unburden the health system at large. Many options exist to remove insurer’s incentives to limit coverage for their independent risk pool, from savings transfers based on patient churn between plans, to alternative insurance vehicles for high-cost therapies, to mandated coverage.
  
  
• Increasing real-world evidence collection: Transparent and ongoing generation of high-quality evidence can inform fair pricing and coverage decisions. Manufacturers, pharmacies, payers and providers can collaboratively fund studies on the treatment outcomes of new therapies in the field to inform cost and clinical effectiveness evaluations. By performing data analysis on cohorts treated with standard practices and measuring benefits on economic productivity, caregiver quality of life and other societal benefits, health care organizations can better capture the long-term impact of breakthrough therapies on downstream utilization and costs.
  
  
• Outcomes-based pricing: Continuing to expand the use of value-based reimbursement for novel therapies can accelerate access while controlling risk for funding sources. Amortization and performance-based rebate models can help reduce upfront budget impact and improve treatments’ cost-effectiveness by rewarding longer term outcomes. Manufacturers, pharmacies, PBMs and employers will be incentivized to improve adherence and appropriate use. Similarly, by paying based on the clinical outcome, new pricing models reduce purchaser’s cost-effectiveness concerns.

Example: A new medication contracting company, which aggregates demand across major and independent health insurers, has set about improving affordability and access to costly, cutting-edge therapies. It seeks to help control pricing and provide niche drug evaluation and contracting experience that individual plans may lack. The hope is to accelerate value-based models that get new, curative medicine to people who might die without it, while also bringing greater efficiency to related negotiations and administration.