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Formulary Decision Making: Must Have Instruments in Value Translation

Healthcare decision-makers across the board agree that value-based reimbursement marks an irreversible trend. United HealthGroup, the largest health insurer in the US, released data that in 2017 about half its $130 billion annual medical spending occurred through value based models, a share the group seeks to increase to 60% over the next two years.1 As healthcare systems are driven to accept increasing accountability and downside risk, payers and providers are looking to the biopharmaceutical industry to share the risks around the performance of their products—based on outcomes measured in the actual healthcare setting.

Delivering added value to health plans as a priority, however, is not a new topic of discussion. For many years, pricing negotiations of new products have been shaped by the perceived level of improvement of a new treatment and innovation relative to the standard of care. And although this has been traditionally demonstrated to payers through treatment effectiveness in randomized clinical trials (RCTs), formulary decision-making is increasingly influenced by actual real-world effectiveness (RWE) considerations that go beyond RCT efficacy. In turn, instruments to support this value translation that were likely in the “nice to have” category (e.g., database analyses, economic models, surrogate validation) are now considered “must haves” in the real world evidence discussion. In a nutshell, payers are less and less inclined to accept ‘theoretical arguments’ to bridge perceived gaps between observed clinical trial efficacy and promised real-life value.

New paradigm: Value translation demands increasing level of certainty on product benefits


In the absence of certainty on real-world effects, outcomes-based agreements (OBAs) are seen as the next chapter of the pay-for-value trend wherein reimbursement for the pharmaceutical product is directly tied to the actual measurable “real world” value it provides.  In part one of our 3-part OBA Whitepaper Series, The Shifting Landscape for Outcomes-based Contracting, we explore OBA as a reimbursement tool and how it can help manufacturers address the various market access challenges.



  1. UnitedHealthcare (2018). 2nd Annual Value-Based Care Report. Retrieved from:


To learn more, read the white paper.

About the author

By: Ulrich Neumann