A U.S. government proposal to introduce value-based pricing of drugs has the potential to change the business fundamentals for health insurance companies, drug makers and physicians, and what patients pay for their treatments. In a model where patients pay for drugs based on health outcomes, insurers must renegotiate what they pay drug companies, and pass on discounts or rebates to patients, which could include lower-priced health plans, say experts at Wharton and Georgetown University.

On March 8, the Centers for Medicare & Medicaid Services (CMS) announced a proposed rule to test new models to improve how Medicare Part B pays for prescription drugs and supports physicians and other clinicians in delivering higher quality care.…