What is Value Based Contracting (VBC)?
Value based contracting refers to contracts between pharmaceutical manufacturers and payers which tie payment for the drug to a predefined outcome. Value based contracts can be structured around a lot of different outcomes including potentially clinical outcomes or measures such as adherence and persistence. Typically, there are certain levels set for the outcome of interest with changes in rebate amount tied to falling in specific ranges. Outcomes based rebates may also be on top of more traditional volume based rebates. For example, a manufacturer may contract with a payer for a tiered volume-based rebate as well as an outcomes based contract around persistence which may give 0% extra rebate for achieving persistence above 80%, 5% for persistence between 60-80%, 10% for 40-60%, and so on.

Value based contracting has been noted of high interest on both pharma and payer sides, but numerous challenges have made the contracts relatively uncommon in practice. Data capture and validation by a third party can often be challenging, especially for data that is not readily captured in pharmacy claims. Medicaid ‘best price’ has also been cited as a barrier given uncertainty on how value based pricing impacts determination of best price.