In a subscription model, payers agree to a fixed cost to access a particular drug over a set period of time. (Photo: Shutterstock)
Medicaid programs in Louisiana and Washington have pioneered the use of prescription drug subscriptions for new hepatitis C pharmaceuticals, with a goal of expanding patient access and containing costs.
But a new report by the RAND Corporation cautions that drug subscription models are relatively new and untested, and they may not ultimately reduce costs for public and private payers. Payers could end up spending more under drug subscriptions than they do with the traditional cost-per-unit models, the paper argues. Moreover, private payers and Medicare drug plans cannot implement drug subscriptions without regulatory changes, it notes. But the wider push toward value-based health care means that drug subscriptions may be an area of growth.
"Compared with traditional payment arrangements, the advantage of subscription models is that they could reduce uncertainty in spending for payers and uncertainty in revenue for manufacturers through a negotiated fixed payment, but such models do not necessarily lead to lower prescription drug spending for payers," reads the report, "Subscription Models for Prescription Drugs: The Motivation, Potential, and Limitations of a New Payment Model."
Under the traditional model, payers negotiate a per-unit price with a drug manufacturer. That means they pay a set rate for every pill, for example. Costs rise with patient usage. In a subscription model, payers agree to a fixed cost to access a particular drug over a set period of time. Depending on usage of the drug, they may pay more or less than they would have under a per-unit arrangement.
One benefit of subscription models is that they have the potential to broaden patient access to the covered drugs, according to the report. And both payers and manufacturers may welcome the certainty over spending and revenue that is built into the subscription model.
Several conditions are necessary for payers to benefit financially from a subscription model in a market without price negotiation constraints, according to the paper. First, there must be "significant uncertainty around patient utilization" of the drug at issue. Next, that pharmaceutical therapy should be one where payers expect utilization and spending to increase. Lastly, the payer must control a sizable share of the market and focus on drugs where two or more manufacturers offer products that can be substituted for each other.
"Prescription drugs that align with these two conditions and are associated with significant uncertainty in patient utilization are potential candidates for subscription models," according to the report.
And those subscriptions models offer potential on the cost and public health fronts, the report adds.
"Payers using subscription models have incentives to encourage clinically indicated utilization of prescription drugs, which is well aligned with their goal of managing and improving health at the population level," it reads.
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Karen Sloan
Karen Sloan is the Legal Education Editor and Senior Writer at ALM. Contact her at [email protected]. On Twitter: @KarenSloanNLJ Sign up for Ahead of the Curve—her weekly email update on trends and innovation in legal education—here: https://www.law.com/briefings/ahead-of-the-curve/
