In asubscription model, payers agree to a fixed cost to access aparticular drug over a set period of time. (Photo:Shutterstock)

Medicaid programs in Louisiana and Washington have pioneered theuse of prescription drug subscriptions for newhepatitis C pharmaceuticals, with a goal of expanding patientaccess and containing costs.

But a new report by the RAND Corporation cautions that drugsubscription models are relatively new and untested, and they maynot ultimately reduce costs for public and private payers. Payerscould end up spending more under drug subscriptions than they dowith the traditional cost-per-unit models, the paper argues.Moreover, private payers and Medicare drug plans cannot implementdrug subscriptions without regulatory changes, it notes. But thewider push toward value-based health care means that drugsubscriptions may be an area of growth.

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"Compared with traditional payment arrangements, the advantageof subscription models is that they could reduce uncertainty inspending for payers and uncertainty in revenue for manufacturersthrough a negotiated fixed payment, but such models do notnecessarily lead to lower prescription drug spending for payers,"reads the report, "Subscription Models for Prescription Drugs: TheMotivation, Potential, and Limitations of a New PaymentModel."

Under the traditional model, payers negotiate a per-unit pricewith a drug manufacturer. That means they pay a set rate for everypill, for example. Costs rise with patient usage. In a subscriptionmodel, payers agree to a fixed cost to access a particular drugover a set period of time. Depending on usage of the drug, they maypay more or less than they would have under a per-unitarrangement.

One benefit of subscription models is that they have thepotential to broaden patient access to the covered drugs, accordingto the report. And both payers and manufacturers may welcome thecertainty over spending and revenue that is built into thesubscription model.

Several conditions are necessary for payers to benefitfinancially from a subscription model in a market without pricenegotiation constraints, according to the paper. First, there mustbe "significant uncertainty around patient utilization" of the drugat issue. Next, that pharmaceutical therapy should be one wherepayers expect utilization and spending to increase. Lastly, thepayer must control a sizable share of the market and focus on drugswhere two or more manufacturers offer products that can besubstituted for each other.

"Prescription drugs that align with these two conditions and areassociated with significant uncertainty in patient utilization arepotential candidates for subscription models," according to thereport.

And those subscriptions models offer potential on the cost andpublic health fronts, the report adds.

"Payers using subscription models have incentives to encourageclinically indicated utilization of prescription drugs, which iswell aligned with their goal of managing and improving health atthe population level," it reads.

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