Academic Literature

Money-Back Guarantees for Expensive Drugs: Wolf's Clothing but a Sheep Underneath

Pharmaceutical manufacturers push for adoption of outcomes-based contracting as a means of achieving a value-based price, but such contracts are ill-suited to do so.

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Originally published on 06/19/2018 in Annals of Internal Medicine

As launch prices for new specialty drugs continue to rise, pharmaceutical manufacturers have pushed for adoption of outcomes-based contracting as a means of achieving a value-based price.

Outcomes-based contracts not only do little to achieve this aim in their current form, but are more generally ill-suited to the task. Limited not only by treatment and transactional complexities, such contracts are inherently constrained by the mathematical challenges of reaching a value-based price when the list prices is many times its multiple, as demonstrated in an analysis by Kazi and colleagues. Furthermore, the strategy may lead to unintended consequences affecting programs such as Medicaid Best Price.

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