Health insurer Harvard Pilgrim Health Care has struck a deal with drugmaker Amgen for its new cholesterol-lowering drug, Repatha. In addition to providing a discount, Amgen will be at risk financially if health plan members' cholesterol levels aren't lowered enough.
Insurers and pharmacy benefit management companies have aggressively pursued discount negotiations with drugmakers to stem the tide of rising drug costs, and Harvard Pilgrim's deal with Amgen is one of the first to add a pay-for-performance element on top of the discount. But it's uncertain if this tactic will catch on, or if it will do anything to curtail high drug pricing.
“The pharmaceutical segment has remained primarily in a traditional 'pay-for-pill' model,” Harvard Pilgrim Chief Medical Officer Dr. Michael Sherman said. With the latest deal, Amgen is “putting their money where their mouth is,” he said.
The retail price of a year's supply of Repatha costs $14,100, slightly less than the $14,600 price tag of Praluent, the other major cholesterol drug approved by the Food and Drug Administration this past summer. Harvard Pilgrim did not negotiate any agreement for Praluent, which means Repatha will be on its preferred formulary. Express Scripts Holding Co., a PBM, said last month it would cover prescriptions for both Praluent and Repatha.
Sherman declined to say how much the price was reduced. All contracts with pharmaceutical companies have confidentiality clauses that prohibit those terms from being disclosed, but Sherman said the discount was “material.”
Amgen executives recently told investors that they would not disclose discounts given to third-party payers. For the blockbuster hepatitis C drugs made by Gilead Sciences, the average discounts were around 50% of the sticker price, but the drugs still cost more than $40,000 for a course of treatment, raising questions of whether discount negotiations broadly help the system.
A report this year from the Institute for Clinical and Economic Review said the new class of cholesterol drugs, called PCSK9 inhibitors that go after a person's “bad” cholesterol, are extremely overpriced. Based on cost-effectiveness measures, those drugs should cost $2,520 per year, the group said.
Unique to the deal is that Amgen will have to provide larger rebates to Harvard Pilgrim if patients' low-density lipoprotein cholesterol levels are not lowered to “what was observed during clinical trials.” Harvard Pilgrim can also receive additional rebates if the drug is used more than a predetermined amount, which essentially lowers costs on a per-prescription basis. The insurer said it still wants to encourage patients to use lower-cost statins.
Insurers have experimented with risk-sharing with drug companies in the past. Cigna Corp. did it with Merck & Co.'s diabetes medications, and Health Alliance Medical Plans, owned by Urbana, Ill.-based health system Carle Foundation, created a value-based deal for the osteoporosis drug Actonel. Sherman said he believes conversations about value-based contracting for prescription drugs will become more commonplace.
“We hope that the pharma companies will finally start to realize this is the right way to align with the healthcare delivery and financing system,” Sherman said.