Medtronic inks outcome-based contract with Aetna for insulin pumps

Medtronic and Aetna announced a new outcomes-based agreement Monday for Type 1 and Type 2 diabetes patients who transition to Medtronic's insulin injectors, signaling the continued growth of value-based contracts throughout the industry.

Medtronic will pay Aetna rebates for patients who switch from multiple daily injections of insulin to Medtronic's insulin pump and their health does not hit specified outcomes, according to the agreement that aims to increase accountability and lower the cost of care.

"This agreement reinforces our shift toward value-based healthcare," Hooman Hakami, president of the Diabetes Group at Medtronic, said in a statement. "We know technology alone isn't enough and ultimately, improved outcomes are what matter."

Drugmakers have been experimenting with risk-based contracts for years, but devicemakers have been somewhat slower to adopt arrangements that tie reimbursement to outcomes.

There has been pressure to curb skyrocketing drug costs and lower overall healthcare spending as the industry transitions from a volume- to value-based model. Outcome-based contracts where manufacturers return a percentage of the device's price if it doesn't meet performance benchmarks or where the pay incrementally scales as certain quality measures are fulfilled, have been touted as a way to increase accountability and lower costs.

Diabetes is one of the biggest drivers of overall healthcare spending, accounting for more than $300 billion a year, according to estimates from officials at the National Institutes of Health.

While medical device developers have been relatively slow to take on risk compared with drug companies, that is changing as more value-based contracts come into the fray, said James Gelfand, senior vice president of health policy for the ERISA Industry Committee, a lobbying group for employee benefit issues.

"Value-based payments make sense because that's what we do with doctors and hospitals—when we have readmissions into hospitals, we shouldn't pay for that," he said. "I think it is all about accountability. As cost pressures have heightened, we have to go throughout the entire system and ensure incentives are aligned such that everyone wants to do the most efficient and effective thing."

On the pharmaceutical side, drug developers such as Amgen have about 75 value-based programs, including a pay-for-performance contract with Harvard Pilgrim for the cholesterol treatment Repatha, said Dr. Joshua Ofman, Amgen's senior vice president of global value, access and policy.

"We need to take some risk and put more value on the table," he said. "This can be a solution to rising healthcare costs."

Medtronic said the outcome-based agreement with Aetna is an "important first step" in broadening access to diabetes treatment while ensuring positive outcomes.