Drug Manufacturers Weigh Options For Money-Back Guarantees On Product

By Paul Gaita 10/12/15

But can drug companies figure out how to make it work?

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A handful of drug manufacturers and insurance providers are discussing the possibility of offering a guarantee on medication and other products that would provide patients and hospitals a percentage of the item’s cost if it fails to deliver its promised treatment.

The consideration is seen as part of a movement away from the fee-for-service system that pays medical professionals based on the number of tests they perform and the treatments they prescribe. In its place, manufacturers and insurers want to implement a contract system that would focus on the quality and efficacy of treatment. Medicare has already stated that it plans to base 50% of its payments on such a model by 2018.

Other companies have begun to explore the contract arrangement as well. St. Jude’s Medical is currently offering hospitals a guarantee on its Quadra CRT system of pacemakers which guarantees a refund of 45% of the system’s cost if patients need corrective surgery to repair a failure within a year of purchase, while ICU Medical has a similar plan in place for its central-line catheters, which are designed to reduce obstructions when delivering medication. More than 35 health plans that cover 30 million members also offer pay-for-performance programs, including Aetna, Harvard Pilgrim Healthcare, and United Healthcare.

The system is not without its challenges. Chief among these is the definition of performance and what criteria are used to define an effective response. “What metric are you going to select to measure performance? That can be challenging to select and agree on,” said Genia Long, a senior advisor at Analysis Group, which provides consultation work for drug manufacturers.

How the patient takes the drug or uses the device, or outside factors like diet and lifestyle, can also affect response, and companies like Qualcomm Life, which uses wireless technology to aid disease management, are developing software and other devices to monitor whether patients are taking their medication correctly.

These and other measures are being developed to meet what many professionals see as a permanent change to the financial side of the medical industry. As Qualcomm Life senior vice president and general manager Rick Valencia noted, “If that’s the way the hospital and doctors are going to get paid, then the people they do business with have to be prepared to get paid that way as well."

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Paul Gaita lives in Los Angeles. He has contributed to the Los Angeles Times, Variety, LA Weekly, Amazon.com and The Los Angeles Beat, among many other publications and websites.