Exploring Dynamic Cost-sharing Models in Value-Based Insurance Design

Consider this scenario: You have a chronic condition and, thankfully, there are three medications that could help you to successfully manage your condition. These drugs are available at three different pricing “tiers,” with increasingly higher costs to you.

Unfortunately, the medication on the lowest cost tier is ineffective or even unsafe for you to use, based on your personal biology. Instead, a second drug, placed on a higher tier, works especially well for you. Under today’s static, tiered cost-sharing system, using that medication means that your out-of-pocket costs could be significantly higher.

This tiered system often discourages patients from taking the medicines they need and potentially puts them at risk for increased medical interventions, such as doctor’s visits and hospital stays. The cost of these interventions can quickly add up for both patients and the health care system as a whole.

But are there alternatives to the current tiered pricing system? Dr. Mark Fendrick of the Value-Based Insurance Design Center believes there are. In his paper, “A ‘Dynamic’ Approach to Consumer Cost-Sharing for Prescription Drugs,” Dr. Fendrick proposes a new solution: aligning consumer cost-sharing with the actual clinical value of a treatment via “dynamic” pricing. He outlines the need to acknowledge different levels of value for individual patients, in keeping with Value-Based Insurance Design (V-BID).

As Dr. Fendrick discusses in his paper, “the level of consumer cost-sharing for higher cost medication should be aligned with the clinical value – not solely the price – when lower cost alternatives do not produce the desired patient-centered outcomes.” Instead, he suggests using a treatment approach that will “Reward the Good Soldier”: Rather than punishing a patient who perfectly complies with the treatment steps required by the health plan but cannot safely take/does not respond to first-step therapy and requires higher-level treatment, a dynamic approach would instead lower the consumer cost-sharing obligation for higher-line treatment alternatives “only when the first-line therapy is contraindicated or is deemed ineffective at achieving the desired clinical outcome.”

Such a plan would still emphasize lower-cost therapies for initial use when “clinically appropriate,” but Dr. Fendrick says shifting to dynamic cost-sharing “enhances access to effective, clinically appropriate therapies, improves patient outcomes, aligns with quality-driven provider initiatives, and promotes efficient expenditures for the payer.”

In the search to balance patient need and value as part of an evolving health care system, stakeholders including patients, payers, insurance companies, medical institutions and pharmaceutical companies must expand beyond current practice to envision the successful health care of the future. Considering Fendrick’s dynamic cost-sharing is, as he notes in his paper, “an important and necessary step forward if the goal of ‘Right drug, Right person, Right time, Right price’ is to be ultimately achieved.”

The paper was supported by the National Pharmaceutical Council.