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Innovative Contracting: What Europe is Teaching the World

In late March 2017, news broke that Amgen signed an agreement with a U.S. consulting firm to support outcomes-based contracting (OBC) for their product portfolio. While the announcement was surprising to some in the United States, avid pharmaceutical trend-watchers saw it as merely reaffirming a long-term trend that began in Europe, spread globally, and had begun to take root in the US.

The global recession and consequent cuts in healthcare budgets have erected new hurdles for innovative drugs to achieve market access, let alone premium pricing, in the last decade. In response to this impasse, payers and pharmaceutical companies have searched for alternative funding formulas that allow them to maximize public coverage of innovative pharmaceuticals without breaking the bank for healthcare budgets.

Simple managed entry agreements (MEAs) such as rebates and discounts have existed for decades. These have allowed pharmaceutical manufacturers to provide discounts without compromising the official list price, thereby protecting themselves from the negative knock-on effect a simple price reduction would have based on international reference pricing (IRP)*. In fact, these confidential discounts have become de rigueur in many markets, with the list price rarely portraying the reality of the drug’s price.