Launching into value: Pharma’s quest to align drug prices with outcomes

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With intense pressure on drug prices the pharmaceutical industry is turning to value-based contracts – which link the price of a prescription drug to its clinical or economic performance – to ease the tension. But the use of these new drug pricing models with insurers remains limited, despite an active minority of enthusiastic participants.

Pharmaceutical and life sciences organizations that want to expand the use of value-based payment models will need a higher tolerance for financial risk, regulatory change, and the willingness and flexibility to work in close collaboration with payers, health systems, pharmacy benefits managers and patients.

Does your organization currently use value-based drug contracts of any kind?

Despite public enthusiasm from many drugmakers, policymakers, insurers and other stakeholders, HRI’s survey of pharmaceutical executives suggests that value-based contracting remains limited in practice.

Just over one-third of pharmaceutical executives surveyed believe that the potential rewards of a successful value-based contract are commensurate with the risks. However, over two-thirds of executives that have participated in a value-based contract said the contracts were successful.

What this means for your business

Regulatory trends and breakthroughs in cloud-based technologies are making it easier to capture the clinical and financial impact of new therapies in the real world setting. The success or failure of a value-based contract may depend on the unique attributes of a new therapy, and the organizational and technical capabilities of the collaborating partners.

Pharmaceutical and life sciences organizations

  • Consider the benefits and risks of additional clinical studies
  • Build trust by assuming real risk
  • Overcome data sharing challenges
  • Advocate for regulatory reform
  • Demand that patients share the benefits of value-based contracts

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Insurers, health systems and pharmacy benefits managers

  • Bring specific needs to the negotiating table
  • Understand the resource commitment
  • Leverage third party value assessment groups

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How PwC can help

Pharmaceutical, biotech, and medical device companies confront a challenging competitive landscape in the New Health Economy. Pricing pressures, scientific breakthroughs, expanding demand for health care access, and emerging digital and analytic capabilities are pushing companies to explore unconventional business models and build value-based customer relationships. PwC's pharmaceuticals and life sciences practice helps pharmaceutical, biotech and medical device clients develop future focused business strategies and to implement the programs and procedures essential to success.

Contact us

Kelly Barnes

Global and US Health Industries Leader, PwC US

Karen C. Young

US Pharmaceutical and Life Sciences Leader, PwC US

Douglas Strang

Global Pharmaceutical and Life Sciences Advisory Leader, PwC US

Benjamin Isgur

Health Research Institute Leader, PwC US

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