Value-Based Pricing Viewed as Most Potentially Transformative Factor Facing the Industry

May 24, 2017

In Lazard's Global Healthcare Leaders 2017 survey, most respondents said pricing and reimbursement were the most significant challenge, but nearly half of the pharma executives who responded see value-based pricing as having the greatest impact on the business, potentially even more than scientific breakthroughs.

In healthcare circles, discussion and debate continues over value-based medicine.  Value-based practices, designed to reduce the cost and improve the results of healthcare, are already in place at many hospitals and healthcare centers.  Even though a growing number of companies are entering into risk-sharing pricing agreements with payers for specific therapies, value-based medicine has not generally been a hot button topic for pharma professionals.

However, that clearly appears to be changing.  In its Global Healthcare Leaders survey for 2017, Lazard asked more than 200 C-level executives and more than 100 investors in the pharmaceutical industry, medical devices and healthcare services what the most important issues, opportunities and challenges were.

Pricing and reimbursement were cited as the top issue by 88% of US pharma executives and 58% of European pharma executives.

But respondents cited the move to value-based medicine and risk-based pricing models as the most significant change facing the industry, suggesting that it might even have more of an impact than scientific breakthroughs.  The new value-based environment will require increased innovation and new business models, respondents said.

Nearly half of those who responded to the survey (47%) see value-based payments as the most “transformative” issue facing the industry over the next 10 years, compared with 38% for scientific breakthroughs.

In addition, 13% expect value-based payments to account for half of payments by 2019, while 25% expect them to account for half of all payments by 2020.

Respondents expect mergers and acquisitions activity to continue, and plan to rely more on collaborative research as a way to boost innovation.  They also noted the activity of tech innovators in healthcare, and said that they expect companies such as Apple and Google to have a niched impact on certain markets.