What is Risk Sharing and how does it work?

risk sharing and managed entry agreements
really are something that applies mostly to breakthrough technology innovations, and can
be a make or break in terms of the success of those innovations. So the pharmaceutical
and biotech industry really has broken ground in this area over the last decade in negotiating
a variety of very innovative agreements with payers and governments, where the clinical
value of the technology in clinical trials was somewhat understood, but there were often
unresolved questions about the economic value of the technology or about the real world
clinical comparative effectiveness of the technology, such that payers were willing
to adopt but unwilling to bear the full financial burden of the new technology and wanted to
go at risk in order to provide incremental reimbursement or access to the new therapies.
What often has been negotiated is – is additional data collection, real world data collection
that would happen to track the clinical and the financial outcomes, and that there was
a linkage of the payment to the outcomes in the real world practice. And this could happen
at a variety of different levels through essentially negotiated contractual arrangements, such
that if the manufacturer hit particular end points, then it triggered the payout, either
prospectively or retrospectively. And in other cases, then the payments were dependent on
individual patient outcomes. So that if a patient underwent a trial of a new drug for
30 days and they achieved the benefit for long term use of the drug, then the payer
would be paid at – or the manufacturer would be paid at list price. But if the trial was
unsuccessful, then the manufacturer would have to refund the costs of the payment. So
in the medical technology space, what we’re seeing is that that is starting to be experimented
with, as well. some of the examples in the medical technology
space of risk sharing and managed entry agreements have started with transcatheter valves and
ventricular assist devices. And an example is Medicare coverage with evidence development
programs. So increasingly, CMS in the United States has worked together with national specialty
societies, with the FDA, and with industry to provide national coverage in exchange for
additional data collection that often took form of participation in a national society
sponsored registry. And as the payer continued to track the outcomes in the real world, then
they would look to see if the outcomes matched the original clinical trials, and if so, then
coverage was expanded and made permanent and relaxed, in terms of the restrictions. Similarly,
there are new technology payment mechanisms, such that if a promising technology is approved
by the FDA, that CMS would provide temporary incremental reimbursement for a time period
based on the initial clinical evidence, and then reevaluated two to three years downstream,
after there was real world experience with the technology at which point they would decide
whether to provide permanent reimbursement at a higher level, or retired into the existing
payment category. And some examples of where this has been used is with – with the transcatheter
mitral valve device called the Mitraclip device, that was just approved by the FDA.

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