The deafening public outcry over drug pricing has forced health insurers and pharmaceutical companies to devise ways of expanding access to potentially life-saving drugs without breaking the bank.
Value-based contracts, in which insurers pay for drugs based on their effectiveness, have begun to sprout, and more are expected to follow. But experts believe these types of deals, although potentially beneficial, are not a panacea for managing drug costs. Value-based contracts may also be hard to orchestrate since they require doctors, insurers, pharmacy benefit managers and drug companies, often rivals, to cooperate and share data.
“What you still don't know at the end of the day with these outcomes agreements is whether they save money,” said Dr. Steven Pearson, president of the Institute for Clinical and Economic Review.
He added that while the public may see more value-based arrangements between insurers and drug companies in the future, “Their ability to meet everybody's needs will turn out to be not as easily achieved as people think.”
This month, drugmaker Novartis and insurers Aetna and Cigna Corp. agreed to pay-for-performance deals for Novartis' heart drug Entresto, which costs about $4,500 annually and was approved by the government last July.
The discounted amount Aetna and Cigna will pay for Entresto depends on whether the medication reduces hospitalizations for their commercially insured patients with congestive heart failure. In exchange, Novartis will gain volume, and Entresto will become a preferred drug, subject to prior authorization, on Aetna and Cigna's formularies.
The Entresto contract came just months after Harvard Pilgrim Health Care, a New England-based insurer, publicly reached a deal with Amgen for Repatha, a new cholesterol-lowering drug. Amgen will provide rebates to Harvard Pilgrim if its members' cholesterol levels are not reduced to “what was observed during clinical trials,” and if the medicine is prescribed beyond a predetermined quantity.
Express Scripts Holding Co., the nation's largest pharmacy benefit manager, or PBM, also started paying for the performance of certain cancer drugs this year.
Contracts that link drug payment to health outcomes are common in the U.K. and other European countries, many of which run single-payer systems. But the U.S. has tinkered with these arrangements as well. Cigna, for example, worked with Merck & Co. in 2009 to create a value-based deal for Merck's diabetes medications Januvia and Janumet.
Paying for the efficacy of drugs is a logical extension of how the U.S. wants to finance healthcare. Medicare rewards hospitals that deliver good care and penalizes those with high levels of costly readmissions. Private insurers have created narrow networks with selected health systems and doctors presumably based on their low costs and superior quality.