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Removing Barriers to Appropriately Safeguarded Value-Based Arrangements in Healthcare

Photo of Representative Louis Ruiz

Rep. Louis Ruiz, Chair of the NHCSL Healthcare Task Force

Sponsored by: Rep. Joseph Miró (DE), Sen. Iris Martínez (IL), and Sen. Carmelo Ríos (PR)

Reported to the Caucus by the NHCSL Healthcare Task Force
Rep. Louis Ruiz (KS), Chair

Ratified by the Caucus on December 8, 2018

WHEREAS, the United States, including Puerto Rico and the US Virgin Islands, spends substantially more on health care services than any other country in the world but has poorer healthcare outcomes;[1] and,

WHEREAS, the United States, including Puerto Rico and the US Virgin Islands, spends less on prescription drugs as a percentage of overall health care spending than the overwhelming majority of OECD countries;[2] and,

WHEREAS, aside from helping to prevent, treat, and cure disease, medicines also generate downstream costs savings by avoiding other expensive medical services; for example, for every 1 percent increase in medicine utilization, total Medicare program costs fall by 0.2 percent;[3] and,

WHEREAS, many health conditions from mental health to cancer are ripe for development of more effective drug therapies and innovation must be incentivized to bring these new breakthrough drugs to market; and,

WHEREAS, while medicines bring good value to the health care system and close to 90 percent of medicines dispensed today are generics,[4] newer therapies that reflect advances in innovation may have a higher price; and,

WHEREAS, different patients respond to drug treatments differently, and insurers are often averse to the risk of paying for new high cost therapies when outcomes are not guaranteed and members frequently change health plans; and,

WHEREAS, traditional reimbursement models and restrictive benefit designs can threaten patient access to new therapies, which can have a direct impact on a patient’s health and generate more downstream costs to the health care system; and,

WHEREAS, the consensus of the health care community is that the health care system must move from simply paying for services to paying for health outcomes; and,

WHEREAS, several insurers and drug manufacturers are interested in and are actively working on value-based reimbursement models that pay for better outcomes instead of just the dispensed therapy; and,

WHEREAS, in determining the quality of an outcome, different stakeholders, such as patients and insurers, view the effectiveness of medicines differently; and,

WHEREAS, well-designed value frameworks that recognize the total value that a medicine brings to patients, caregivers and society, over the long-term can facilitate informed, shared decision-making and improve the quality and efficiency of the health care system; and,

WHEREAS, there are no set criteria for determining the value of medicines, therefore, frameworks often use entirely different factors when determining a treatment’s value; and,

WHEREAS, good value frameworks recognize that the patient is the ultimate stakeholder in the health care system and that a treatment’s benefits change over time and therefore must consider value from both a short- and long-term perspective; and,

WHEREAS, certain value frameworks, which do not hew to the patient-first principle, determine a drug’s value by estimating the value of human life using a metric known as cost per quality adjusted life year (QALY), which assumes a single maximum value for a life, without regard for patient preferences; and,

WHEREAS, the use of the QALY in value frameworks is ethically reprehensible and is specifically prohibited by federal legislation for establishing what type of health care is cost effective or recommended, including for Medicare coverage decisions; and,

WHEREAS, value frameworks that use such metrics are discriminatory at best and deadly at worst for those whose only hope is the development and support of new innovative medicines to keep them alive; and,

WHEREAS, while correctly structured value-based arrangements are one solution that can lead to greater care and efficiencies for all, there are statutory and regulatory constraints that threaten the ability of drug manufacturers to enter into appropriately safeguarded value-based payment arrangements.

THEREFORE, BE IT RESOLVED, that the National Hispanic Caucus of State Legislators (NHCSL) endorses the appropriate use of value frameworks and value-based arrangements as defined in this Resolution; and,

BE IT FURTHER RESOLVED, that legislators and regulators should review current statutory and regulatory provisions that may impact the ability of drug manufacturers and insurers to develop and implement value-based contracting models, including regulations around Medicaid rebate calculations, application of anti-kickback statutes, permissible communications between drug manufacturers and health care providers on medicine uses, indications and clinical and economic outcomes; and,

BE IT FURTHER RESOLVED, that drug manufacturers and insurers should be encouraged to explore and test value-based contracting in pilot programs to study effectiveness and operational feasibility of these models within the guidelines defined in and by this Resolution; and,

BE IT FURTHER RESOLVED, that, in evaluating a treatment’s value, the value frameworks and value-based arrangements endorsed by this Resolution must incorporate the patient perspective and voice,[5] considering not only data from clinical trials, but also the patient experience, including the impact of an intervention on their quality of life, the convenience of an intervention and the impact on overall well-being; and,

BE IT FURTHER RESOLVED, that value frameworks must appropriately weigh the clinical, economic and societal benefit that a medicine provides; and,

BE IT FURTHER RESOLVED, that value frameworks must reflect perspectives from all relevant stakeholders through a transparent public review and commentary process; and,

BE IT FINALLY RESOLVED, that the National Hispanic Caucus of State Legislators opposes value frameworks or value-based arrangements that lack any of the patient, caregiver, social, participatory and transparency safeguards and protections outlined in this Resolution, underscoring that those other sorts of frameworks, such as QALY-based frameworks, should not be used by states or insurers as the sole or dominant tool used to make clinical or coverage decisions, particularly pricing, co-pay, deductible or other payment determinations.


[1] Squires, D., & Anderson, C. (2015). U.S. Health Care from a Global Perspective: Spending Use of Services, Prices, and Health in 13 Countries. Retrieved from: http://www.commonwealthfund.org/publications/issue-briefs/2015/oct/ushealth-care-from-a-global-perspective2 Data.oecd.org – data compiled through 2015

[2] Data.oecd.org – data compiled through 2015

[3] Congressional Budget Office (November 2012). Offsetting effects of prescription drug use on Medicare’s spending for medical services. Congressional Budget Office Report.

[4] Association for Accessible Medicines. (2017). Generic Drug Access & Saving in U.S. Retrieved from:


[5] The patient’s perspective and voice may be received from patients, family or caregivers, as may be appropriate under the circumstances.