Pharma companies have recently jumped on the value bandwagon with proposals for value-based drug pricing based on outcomes and effectiveness. They have started to enter contracts with payers for specific drugs based on the impact the drug has on the condition the drug is treating.
This is a step in the right direction, and much better than pricing based on maximizing shareholder value, but value is in the eye of the beholder, and the patient is a key stakeholder. Shared decision making does a good job defining what’s important to a patient. The goal of shared decision making is to choose courses of care that offer the best outcome to the patient, and can consider some of the following:
- Is this procedure my only option? What are alternative types of treatment?
- What are the possible outcomes and side effects of each option, including the option of doing nothing?
- What is the estimated cost of the procedure and any related follow-up care or medication?
Simply, value can be defined by the following.
The challenge of the equation is in the definitions of acceptable outcomes and costs. Here are a few things that people might consider when evaluating a drug or a course of care.
- Inconvenience or effort: How much does this disrupt their life? Does it prevent the person from doing other things?
- Cost: How much does it cost? This could be in monetary terms, time, side effects, or quality of life.
- Outcome: What is the expected outcome and how closely does it align with the outcome that’s important to me?
You can see that based on these factors, that healthcare can be a market of one. My idea of value and acceptable outcomes could be very different from yours. And, unfortunately, the patient is not a consumer in a free and transparent market. That said, it is possible to make consumer-like decisions in healthcare.
Let’s look at the value decision I tried to make this past weekend. I fractured and dislocated a finger while playing Ultimate Frisbee. I was pretty sure the finger was dislocated, which shouldn’t be a big deal, so tried to go to urgent care where I expected value based on time, outcome, and cost. Well guess what? Urgent care is not open on a Saturday night. I had a feeling that emergency care would not meet my value criteria of effort, since I expected a long wait, and I got it. On the cost, I did know that the provider I went to was in-network so that wasn’t a big issue, but I still don’t know the total cost if I’d had to pay out of pocket.
Outcome was great, and the level of care was great. What was not great is that it took 4 hours to get x-rays, pop my finger back in, and splint it. If I had been choosing as a consumer, I’d never have chosen this. With higher deductibles and co-pays, people are making decisions as consumers which is why hospitals advertise wait times, and some are looking at how to completely overhaul the ER, both of which would get us closer to value.
Let’s look at an example on value-based drug pricing. Back when I had the Cadillac of US healthcare plans when I was working at Microsoft, I was prescribed a topical psoriasis drug. The expected outcome was no psoriasis lesions. The cost was $800 for a 60g tube. Since I didn’t have to pay anything out of pocket, I got the prescription. Did it work? Yes. Was it worth it to me? No. I had other creams that cost much less, and worked almost as well. I didn’t end up getting it again—I wouldn’t have paid $800 for it myself, so why should my employer? If cost is not part of the equation, people are making decisions with only partial information, and can’t possibly judge value. Co-pays and transparency can help guide people to consumer-like behavior in healthcare, even in an imperfect market.
What’s the upside? The upside is that we’re having these discussions, and that we can see a shift to value and consumer focus, even without legislation, which is really how it needs to happen. The other thing to remember is that people want to deliver excellent and quality care. Everyone I met during my finger ordeal, from the admitting staff to the x-ray tech, to the resident who was excited to see a dislocation he’d never seen before was excellent, and that defines quality in my mind. Maybe we have less far to go than we thought.