Jason Shafrin Ph.D. Senior Research Economist and Director Precision Health Economics
Mark Linthicum MPP Senior Research Scientist and Director Precision Health Economics

Academic and Industry Leaders Launch Initiative to Advance Value in Healthcare

Rapid biomedical progress and rising healthcare costs have led to increasing calls to link spending to value rather than volume of care in the United States. These calls have come from payers, patients, providers, and even innovators. For example, Medicare aims to link 90% of payments to some form of value-based reimbursement. Providers-based organizations such as the American Medical Association have also endorsed using value-based pricing for pharmaceuticals. Joseph Jimenez of Novartis called on the pharmaceutical industry to “…shift to a model that focuses on value and outcomes delivered.” This leads to the question, “How do you quantify value, particularly when outcomes cannot be easily measured in purely economic terms?” 

Definitions of value should reflect the reason why we have a healthcare system in the first place. It is to help people live healthier, happier, fuller lives. It is imperative to fulfill that mission as efficiently and affordably as possible, so as to maximize the efficacy of every dollar spent.

Advancing the Science of Value Assessment

Reorganizing our health system to link cost to this value is not entirely straightforward, however. A number of organizations have released “value frameworks” intended to guide purchasing to higher-value treatments, but these existing efforts face key limitations including incomplete value measurement, lack of integration of value assessments into marketplace decision-making, and an absence of true multi-stakeholder perspectives into value measurement.

If we are to successfully link spending to value in the U.S., innovation in value measurement and reimbursement design is needed. Precision Health Economics, a research consulting firm to the healthcare industry, recently launched the Innovation and Value Initiative (IVI). IVI is a multi-stakeholder scientific initiative to advance the way value is measured and rewarded in the healthcare marketplace. Darius Lakdawalla, CSO at Precision Health Economics and the Quintiles Chair in Pharmaceutical Development and Regulatory Innovation in the School of Pharmacy and Price School of Public Policy at the University of Southern California, serves as IVI’s Executive Director.

IVI will advance the science of value measurement and find common ground in how value is measured and rewarded in healthcare by pioneering new scientific methods, developing novel approaches to pricing new technologies, and promoting best practices in value assessment. IVI researchers will conduct scientific studies, analyze public policy, and apply state-of-the-art methods to assess value in the real world.

A Unique Approach

IVI offers a unique, scientific approach to measuring value in healthcare and includes leaders from academia, health systems, pharma companies, providers and patient advocacy groups. This inclusion of multiple stakeholder groups’ perspectives is critical to the work of IVI. The research agenda is established by a diverse Panel of Health Advisors, which represents the leading voices in care delivery, insurance, pharmaceuticals, and patient advocacy. Chaired by Samuel Nussbaum, previously the executive vice president for Clinical Health Policy and Chief Medical Officer for Anthem and current Senior Fellow at the USC Schaeffer Center for Health Policy and Economics, the Panel’s viewpoints will shape the actual research, and allow diverse voices on quality, access and affordability to be heard and inform public policy.

The goal of IVI is to find common ground for mitigating costs in healthcare while preserving innovation and access to breakthrough treatments. Existing organizations, such as the Institute for Clinical and Economic Review (ICER), make coverage recommendations for U.S. payers based on assessments of value, but we believe organizations like ICER leave out vital criteria essential for measuring value in the United States.

Our goal is not to dictate the price of medications, but rather to provide unbiased research and analysis to help improve valuation models in the healthcare marketplace. Our view is that ICER currently emphasizes a short-term budget impact approach based on concepts of affordability. Our research focuses on creating a healthcare system that delivers long-term, high-value treatments to patients. Healthcare spending should not always be seen as pure cost – rather, spending on healthcare should be seen as an investment. IVI uniquely focuses on how to reform the healthcare marketplace and better align prices with value in order to make sure that we are investing our healthcare dollars wisely.

Theory, Policy, and Practice

IVI is applying scientific principles to the study of value in medicine to achieve a common framework. Our research focuses on four core areas: advancing methodologies for measuring value, improving healthcare pricing, identifying high-value treatments, and reforming healthcare policy.

To accurately and completely measure value, rigorous new methods are needed that capture hard-to-measure costs and benefits and incorporate the perspectives of multiple stakeholders. IVI supports research that develops state-of-the-art methods for measuring the value of new medical technologies.

Developing policy proposals and state-of-the-art methods for measuring value is only part of the puzzle. Any recommendation must not only improve the U.S. healthcare system in theory, but must work in practice.

To test and refine new methods, IVI conducts state-of-the-science technology assessments using the latest guidelines from experts in the field. These assessments are designed to provide scientifically credible, objective, and timely review of emerging technologies using advanced methods, representing multiple perspectives, to identify key areas of uncertainty and opportunities for value-based pricing. They may also serve as tools to help patients, physicians, and payers identify the best treatment for each patient based on all available evidence.

Frequently, public policy discussion focuses on the symptoms instead of the underlying issues. To improve outcomes for patients and the health of our healthcare system, it is essential that policy debates take the “long view” and not shy away from complexity. IVI’s research adds balanced and objective insights to policy debate.

IVI conducts and disseminates policy analysis to educate the public and policy makers about the short- and long-term consequences of policies affecting pricing, access, and innovation, and examines costs and benefits of potential policy reforms that can better ensure value-based pricing in U.S. healthcare markets.

Informing the Debate

IVI aims to achieve a common framework for understanding value and tying reimbursement to value. Without this framework, debates about drug pricing will likely go round in circles. Pharmaceutical companies will assert that the profit motive provides the incentives needed to undergo the risky ventures of developing new treatments, and use that argument to justify a high price; payers will assert that the skyrocketing prices of medications are driving costs beyond sustainable levels, and will use this rationale to justify price reductions and access restrictions.

Our hope for IVI is that we inform this debate and many others using credible science and without taking one side or the other. We are an organization comprised of and run by scientists. We apply scientific principles to the study of value in medicine to achieve a common framework for determining and enhancing value.

Jason Shafrin, Ph.D. ([email protected]) and Mark Linthicum, MPP ([email protected]) are the Director of Research and Director of Scientific Communications, respectively, for the Innovation and Value Initiative (IVI), a multistakeholder initiative launched by Precision Health Economics (PHE). At PHE, Dr. Shafrin is a Senior Research Economist and Mr. Linthicum is a Senior Research Scientist as well as the Director of Scientific Communications.

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