Considerations for Using Risk- vs Value-Based Contracts for Prescription Digital Therapeutics

Gary Owens, MD, president, Gary Owens Associates, shares challenges related to covering prescription digital therapeutics with an emphasis on risk- vs value-based contracts.

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Welcome back to PopHealth Perspectives, a conversation with the Population Health Learning Network where we combine expert commentary and exclusive insight into key issues in population health management and more.

In the first part of this podcast, Dr Gary Owens describes how the evolving prescription digital therapeutics landscape has challenged payers.

I'm Gary Owens, a former payer medical director, and prior to that, a former primary care physician. For a decade or so, I've been in the consulting world and have my own consulting organization.

What challenges have payers faced with the arrival of PDTs to the market?

Yeah, that is a great question. While we only have a handful of approved PDTs at the present time, the number of these in development is rather daunting, and the use or potential application of them crosses multiple disease states—in fact, many common disease states.

The first PDTs we saw were behavioral health-directed for the most part, such as cognitive behavioral therapy, addiction therapy, that type of thing. We're now seeing PDTs being applied to things like diabetes, hypertension, and other common diseases.

While payers have been in the business of evaluating new drugs and devices through their technology evaluation and the PDT committees, number one, payers have not developed a process to evaluate these new PDTs. Number two, there's no real, clear benefit category.

Everything that a health plan covers is contractual, meaning it has to fit into one of the benefit categories in the contract between the health plan and either the member or the member's group, if it's group insurance. In essence, everything has to fit into the central health benefits that have to be covered by insurance based on a legislation in the Affordable Care Act.

Payers are struggling a bit. Number one, how do you evaluate these agents and with what process? Number two, what benefit category? Is it a medical benefit?

In some ways, you could argue, even though they're called digital therapeutics, they do use hardware. You need a handheld device or some other type of hardware. So many payers say, "Well, that is closely matched to DME and therefore medical benefit." Others are saying, "No, the intent of these is to treat diseases much like traditional medications, and therefore it ought to be a pharmacy benefit." And yet others are saying, "This is really neither fish nor fowl, right? It needs to have its own yet separate benefit category that hasn't been defined."

Payers are actively working on all of these issues. However, at the present time, there's still a lot to be determined on what benefit, how they're going to be covered, what type of member cost share might be applied to these, and there isn't yet a simple solution nor consensus.

Thank you, Gary. Payers have expressed that value-based contracts could be the way to go. What would you say payers should keep top of mind as they create those agreements?

We look at value based contracts, and, in many cases, they seem to be more talked about than actually done. That's not saying we haven't made great progress, but there is a big gap between where we thought value-based contracting would be by 2022 and where it is.

I think that gap has been because the details of how to work out a value-based contract—how to measure an outcome that can be easily measured and measured in a time period that allows reconciliation within the actuarial cycle or shortly afterwards with your self-funded clients—has been a bit of a challenge. I think there are going to be the same challenges for prescription digital therapeutics.

A couple of thoughts I have. Perhaps an easy way, at least initially, is not so much a value-based contract, but a risk-based contract, because obviously these types of therapeutics only work if members have them and engage with them just like medications only work if you take them. We certainly know that adherence and compliance rates with a lot of chronic medications leave a bit to be desired.

Perhaps one simple way is a risk-based contract on the part of the developer that basically says that if patients don't use these prescription digital therapeutics to a certain level—80% of the anticipated time, 90%, 75%—if they're not engaging, which can be easily measured because they're all software-based, the plan gets their money back on those. And for those that do engage, then the developer reaps the benefit.

Other outcomes might be finding simple parameters. For instance, in a behavioral health scenario, maybe you could look at the occurrence of some events specific to that behavioral health. Thinking of addiction, obviously it would be days free of substance use, or if it's in diabetes, things like hemoglobin A1c levels might be measurable.

But again, I think the point is these are large populations, so the measurements need to be simple. They need to be repeatable. They need to be collectable and reconcile at least on an annual basis so that, especially for self-funded clients, one can return to them those portions of the guarantees that the plan collects on their behalf.

It’s often easy to talk about value-based contracts. I think it's a bit harder to actually implement some of those, and especially in a category where we don't even know how to manage these. Do these agents, for instance, need to have prior authorization? And if so, are they going to be prior auth like a drug or a medical device? What I'm getting at is there are a lot of unknowns in the space yet.

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This transcript has been edited for clarity.