Los Angeles, November 11, 2020 - Members of the Lydion Research Alliance including Jennifer Hinkel, MSc, Sirtaj Singh Brar, and Arka Ray presented their work on “Advancing Outcomes-Based Pharmaceutical Reimbursement Models Using Structured Risk and Investment Funding” at the European meeting of the International Society for Pharmacoeconomic and Outcomes Research (ISPOR), which took place virtually due to the COVID-19 pandemic.
“One of the well-established barriers to further adoption of value-based and outcomes-based reimbursement models in the life sciences industry is that neither pharma companies nor health insurers are equipped to manage the risk that would arise from such agreements. To truly spur their adoption, we believe that outside capital investment is needed. Fortunately for the market, Outcomes-Based Agreements isolate a very interesting subset of risks that look quite different than the risk profile of biotech or pharma equities, so they may become an attractive investment instrument for certain institutional investors, hedge funds, and the like,” said Arka Ray, a Principal of the Lydion Research Alliance and one of the project’s co-authors.
Outcomes-Based Agreements (OBAs) in the pharmaceutical industry cover a range of pricing agreements. Typically, these types of pricing contracts link drug payments from insurers to actual patient or population-level outcomes. For example, if a pharmaceutical company is marketing a new drug that costs more than competitors, but reduces the amount of time a patient spends in the hospital or ER and thus the total cost of taking care of that patient, an OBA may stipulate a discount for the insurer if the patient’s time in the hospital is not reduced. Another type of OBA offers refunds if the drug does not show a benefit within a certain amount of time, such as the first few months of treatment. Both pharmaceutical companies and health insurers, whether private companies or government-backed, are interested in these types of arrangements because they more closely link payments to actual benefits delivered to the patient. However, because these types of agreements are relatively new to the market, and could measure outcomes over longer time periods, they are not well-matched to current drug payment methods where insurers look at 12-month budgets and pay based on drug prescribed and administered, not a future outcome or result.
“Outcomes-Based Agreements have the potential to revolutionize how we look at value and payments in the life sciences industry by linking payments to meaningful results. However, pharma companies and insurance companies aren’t set up to manage the financial risks that go along with these types of agreements. On the other hand, banks, hedge funds, and institutional investors such as pension funds are looking for exactly these types of risk scenarios for investment. For example, pension funds looking to hedge against longevity risk, or having to pay more pensions if people live significantly longer, may have a strong interest in investing in the upside of a drug that would provide large benefit for Alzheimer’s disease, cancer, or similar ailments that disproportionately impact older populations,” said Jennifer Hinkel, MSc, part of the Lydion Research Alliance and a DPhil student in Evidence Based Health Care at the University of Oxford, who is lead author of the project.
About the Lydion Research Alliance:
The Lydion Research Alliance is a consortium of scientists, engineers, economists, technologists, artists, and futurists dedicated to the advancement of the scientific field of Data Economics and the commercialization of Data Economic technologies.
About The Data Economics Company and the Lydion Engine:
The Data Economics Company (DECO) has developed the Lydion® Engine, the Operating System for Web3. The Lydion Engine powers decentralized applications to solve complex, large-scale problems and generate new revenue streams for people and companies by converting their data into valuable digital assets—structured as NFTs—that can be monetized, shared, and transacted using secure, private Lydion Data Vaults and Networks (DENETs) without requiring underlying cryptocurrencies. DECO’s mission is to pioneer and propagate the field of Data Economics by leading scientific research in the field of Data Economics, building a toolset to enable a wide array of distributed applications via the Lydion Engine, and creating a global ecosystem of partners to advance Data Economics as an applied science. More information about DECO and the Lydion DEOS can be found at lydion.com.
About the Lydion DEOS :
The Lydion® Data Economics Operating System is the Operating System for Web3.
The Lydion® DEOS is a middleware engine used to develop distributed,decentralized applications and application platforms. By capturing energy spent in completing real-world work, The Lydion® DEOS mints digital assets called Lydions that can be utilized, shared, and transacted using secure, private Lydion Data Vaults and Networks (DENETs).
Current Lydion Engine-based applications target a combined $350B addressable market across the Health Sciences, Agriculture, Climate, Industrials, Fintech, Personal Data, Gaming, and Education sectors.