A tricky path to pay-for­per­for­mance drug pric­ing

Modern Healthcare - - NEWS - By Adam Ruben­fire

The lat­est wrin­kle in the fight against ris­ing drug prices in­volves in­sur­ers and phar­macy ben­e­fit man­agers ask­ing drug­mak­ers to ac­cept lower prices for the lat­est medicines emerg­ing from their labs when they don’t achieve the de­sired re­sults.

In­sur­ers like Aetna, Cigna and Har­vard Pil­grim Health Care, as well as phar­macy ben­e­fit man­agers such as Ex­press Scripts, are en­gag­ing ma­jor man­u­fac­tur­ers in­clud­ing No­var­tis, Merck and As­tra Zeneca in these riskbased deals be­cause many of the lat­est blockbusters drugs are lack­ing long-term ben­e­fits data.

In most of the deals, in­sur­ers agree to of­fer re­im­burse­ment for a drug at a set price as long as the drug­maker agrees to pay a penalty if cer­tain met­rics aren’t met. Drugs for com­bat­ing di­a­betes, hepatitis C and heart dis­ease are prime tar­gets for the new pric­ing ar­range­ments, where biomark­ers like choles­terol, blood glu­cose or virus erad­i­ca­tion can be used as mea­sur­able bench­marks.

Pay­ers say the deals give them as­sur­ance that they won’t be left hold­ing the bag if a drug doesn’t de­liver its promised med­i­cal ben­e­fit. Drug­mak­ers are will­ing to go along be­cause it helps get their prod­ucts to more pa­tients more quickly.

Man­u­fac­tur­ers also like the deals be­cause they usu­ally don’t have to com­pro­mise on the price of their lat­est drugs, which of­ten come to mar­ket at sig­nif­i­cantly higher costs than older med­i­ca­tions for the same con­di­tion. Some­times the pay-for-per­for­mance ar­range­ments are even tied to ex­clu­sive or pre­ferred-provider status, which can guar­an­tee a steady stream of pa­tients.

Although the deals seem like a win-win, the devil is in the de­tails. Out­comes-based deals can be com­pli­cated. The usu­ally an­tag­o­nis­tic re­la­tion­ship be­tween payer and sup­plier can in­ter­fere with reach­ing an agree­ment on met­rics and how they are mea­sured.

It also in­volves shar­ing data on out­comes. Pay­ers and man­u­fac­tur­ers say the neces- sary data in­fra­struc­ture—such as a payer’s abil­ity to gain ac­cess to pa­tients’ choles­terol or blood glu­cose lev­els— sim­ply isn’t where it needs to be to make most of these deals work.

“The data un­der­neath the met­rics are a real is­sue for both sides,” said Pa­trick Dav­ish, as­so­ciate vice pres­i­dent for global mar­ket ac­cess at Merck & Co. “Even the most so­phis­ti­cated pay­ers don’t have all the data you’d imag­ine them to have. … It’s also ad­min­is­tra­tively bur­den­some.”

Merck struck a deal in 2009 with Cigna and in Oc­to­ber with Aetna for di­a­betes drugs Janu­via and Janu­met. The com­pany has about a dozen value-based deals cov­er­ing as many as eight prod­ucts. It hasn’t dis­closed the other deals.

Aetna and Cigna both struck deals with Switzer­land­based No­var­tis in Fe­bru­ary for En­tresto. The deals give the heart fail­ure med­i­ca­tion pre­ferred status in their for­mu­la­ries while al­low­ing the in­sur­ers to re­ceive a dis­count based on whether the med­i­ca­tion re­duces hos­pi­tal­iza­tions for pa­tients with con­ges­tive heart fail­ure. The deal gives cus­tomers ac­cess to the drug while al­low­ing the in­sur­ers to hope­fully lower their hos­pi­tal­iza­tion-re­lated costs, said Dr. Ed Peza­lla, Hart­ford, Conn.-based Aetna’s na­tional med­i­cal di­rec­tor for phar­macy pol­icy and strat­egy.

“The con­tract al­lows us to cover it more broadly, and there’s an in­cen­tive for us to put spe­cific pro­grams in place for pa­tients tak­ing the drug,” Peza­lla said. “We would have cov­ered it oth­er­wise, but prob­a­bly with more re­stric­tions; and we prob­a­bly wouldn’t have had in­cen­tive to do ad­her­ence pro­grams.”

Non­ad­her­ence is a huge risk with these deals. Drug­mak­ers and in­sur­ers can craft a great deal based on a med­i­ca­tion with strong clin­i­cal trial re­sults. But if pa­tients don’t take it prop­erly, ev­ery­one loses.

That’s why in many of these agree­ments pay­ers are tak­ing re­spon­si­bil­ity for en­sur­ing pa­tients take their med­i­ca­tions in full and on time. That means us­ing pre­dic­tive mod­el­ing to de­ter­mine which pa­tients are most likely to be non­ad­her-

ent and tar­get­ing those pa­tients through mo­bile apps, phone calls, letters and other com­mu­ni­ca­tion meth­ods to check on their progress and re­mind them to take their med­i­ca­tion. In some cases, pa­tients may be re­moved from cov­er­age if they don’t stay on the med­i­ca­tion.

“If they’re not ad­her­ent, they’re re­moved from the de­nom­i­na­tor: They’re not in the pro­gram and not get­ting the ben­e­fit of be­ing on the med­i­ca­tion,” Peza­lla said. “If they’re ad­her­ent, we reap the ben­e­fits with the pa­tients.”

Aetna and Cigna say the deals are com­ple­mented by physi­cian in­cen­tives in ac­count­able care and col­lab­o­ra­tive care agree­ments that give physi­cians in­cen­tives to en­sure pa­tients are tak­ing their drugs. Those agree­ments help drive ad­her­ence and lower costs, said Chris Brad­bury, se­nior vice pres­i­dent of in­te­grated clin­i­cal and spe­cialty drug solutions for Cigna Phar­macy Man­age­ment, a phar­macy ben­e­fit man­ager that mainly serves Bloom­field, Conn.-based Cigna’s med­i­cal plans.

“These out­comes and value-based agree­ments are hard, but they’re get­ting eas­ier,” Brad­bury said. “We think it’s one of the key el­e­ments to en­sure con­tin­ued ac­cess to es­sen­tial med­i­ca­tions at af­ford­able prices.”

Ex­press Scripts, the na­tion’s largest PBM, uses its Ac­credo Spe­cialty Phar­macy unit to en­sure ad­her­ence through care co­or­di­na­tion pro­grams, ac­cord­ing to Dr. Steve Miller, the St. Louis-based PBM’s chief med­i­cal of­fi­cer. The com­pany guar­an­tees to its plan spon­sors that pa­tients will ad­here to the reg­i­men for Viekira Pak, Ab­bVie’s hepatitis C drug.

If a pa­tient doesn’t take the full 84 pills of the treat­ment, Ex­press Scripts will refund the drug costs to its client. The PBM con­trols de­liv­ery of the drug by dis­tribut­ing it through Ac­credo and em­ploys a care co­or­di­na­tion team of phar­ma­cists and so­cial work­ers who spe­cial­ize in hepatitis C to en­sure pa­tients are ad­her­ent and ac­cu­rately in­formed about their treat­ment, Miller said.

It’s a ma­jor win for Ab­bVie. Some pay­ers are skep­ti­cal about giv­ing broad cov­er­age to the drug be­cause they doubt pa­tients will con­sis­tently take the mul­ti­ple pills each day in­stead of the one-pill-a-day treat­ment avail­able from com­peti­tors, Miller said. That helped Ex­press Scripts ne­go­ti­ate a large but undis­closed dis­count. The com­pany has been able to se­cure 92% ad­her­ence among pa­tients, he said.

Assess­ing blame for non­com­pli­ance

The com­plex­ity of the deals and dis­agree­ments over who is re­spon­si­ble for non­ad­her­ence or un­sat­is­fac­tory out­comes has led to con­flicts be­tween pay­ers and drug­mak­ers in these deals, Miller said. For ex­am­ple, a drug­maker might ar­gue that it shouldn’t have to pay out­comes-re­lated dis­counts if ad­her­ence was low, while the payer might ar­gue that a flaw in the drug, such as un­de­sir­able side ef­fects, led to non­ad­her­ence.

Miller be­lieves many value-based deals are fall­ing apart due to non­ad­her­ence. The ad­min­is­tra­tive costs that come with ad­ju­di­cat­ing these is­sues can­cel out an­tic­i­pated sav­ings, he said.

So Ex­press Scripts is stay­ing away from out­comes-based deals and in­stead bet­ting on its own abil­ity to get pa­tients to ad­here. In deals like the one for Viekira Pak, it is giv­ing its health plan clients full or par­tial re­funds if a pa­tient doesn’t fully ad­here to their reg­i­men, while get­ting lower prices from man­u­fac­tur­ers in ex­change for giv­ing them pre­ferred status in its for­mu­lary, Miller said.

The deals can give plans ac­cess to drugs they would oth­er­wise be skep­ti­cal to pay for, Miller said. In the case of Iressa, a lung can­cer drug made by As­tra Zeneca, if a pa­tient doesn’t stay on the drug for more than a month, for any rea­son, the drug­maker will refund the health plan 100% of what it paid for the drug. Like the Viekira-Pak deal, Ex­press Scripts is again bet­ting on its abil­ity to en­sure ad­her­ence through care co­or­di­na­tion.

Ex­press Scripts ex­pects to even­tu­ally of­fer sev­eral sim­i­lar agree­ments for other drugs used to treat kid­ney can­cer, prostate can­cer and lung can­cer, Miller said. Start­ing in Jan­uary, it will of­fer a deal for anti-in­flam­ma­tory drugs for rheuma­toid arthri­tis—a ma­jor cost strain for pay­ers—in

which the drug­maker will refund two-thirds of the drug costs if a pa­tient doesn’t stay on the drug for three months. Another deal set to launch in March in­cludes third-party re­tail phar­ma­cies that have agreed to sup­port an ad­her­ence pro­gram for Ex­press Scripts pa­tients for whom they fill pre­scrip­tions for an undis­closed di­a­betes drug.

In ad­di­tion to be­ing eas­ier to ex­e­cute, Ex­press Scripts’ agree­ments also avoid the much-de­bated strat­egy of try­ing to de­ter­mine the true value of a drug, Miller said. In­stead, it sim­ply offers at­trac­tive fi­nan­cial in­cen­tives for both par­ties.

“Un­like peo­ple who keep talk­ing about what should the value of a drug be, this isn’t about try­ing to put a value to the cost of the drug,” Miller said. “

Where does this leave pa­tients?

Although Ex­press Scripts has been able to ne­go­ti­ate dis­counts, hes­i­tance to sub­stan­tially lower drug prices is one of the big­gest rea­sons why man­u­fac­tur­ers are in­creas­ingly in­ter­ested in en­gag­ing in out­come-based deals, said Dr. Mark Fen­drick, di­rec­tor of the Cen­ter for Value-Based Insurance De­sign at the Univer­sity of Michigan. In most of these deals, they don’t take a hit on price if the drug works as it should.

De­vice-mak­ers sim­i­larly say that many pay­ers want more data show­ing long-term ef­fects. They are avoid­ing low­er­ing prices by of­fer­ing con­sult­ing that helps providers bring down the costs sur­round­ing pro­ce­dures. Like drug­mak­ers, they’re not ad­dress­ing the ac­tual price of their prod­ucts.

One is­sue that comes up is what hap­pens to pa­tients when a treat­ment doesn’t work as ex­pected. Few if any deals of­fer any di­rect com­pen­sa­tion for pa­tients whose out­comes aren’t as promised; the deals are strictly to pro­tect the fidu­ciary in­ter­ests of share­hold­ers at payer or­ga­ni­za­tions. Payer ex­ec­u­tives say there sim­ply isn’t a good mech­a­nism in place for how pa­tients would re­ceive com­pen­sa­tion.

From an eth­i­cal per­spec­tive, pa­tients should get com­pen­sated when they don’t see re­sults, said Dr. Michael Sher­man, CMO of Har­vard Pil­grim Health Care, which has a num­ber of deals with Am­gen, Eli Lilly & Co. and other drug­mak­ers. But in a pop­u­la­tion-based model, that just isn’t prac­ti­cal.

“Op­er­a­tionally, the man­ual process and ef­fort to do that is so much that it would prob­a­bly ex­ceed any ben­e­fit in terms of value cre­ation,” Sher­man said. “In do­ing this, we re­duce the over­all spend on phar­ma­ceu­ti­cals and keep pre­mi­ums af­ford­able. Don’t just think of it as one drug.”

Both Sher­man and Miller point out that pa­tients are in­di­rectly com­pen­sated be­cause the deals help pay­ers keep over­all pre­mium costs down. But Miller ac­knowl­edged that most pa­tients have a hard time con­cep­tu­al­iz­ing that ben­e­fit. How­ever, pa­tients are ben­e­fit­ing from bet­ter cov­er­age and gain­ing a pre­mium ser­vice through the care co­or­di­na­tion com­po­nent of the deals, Miller said.

“We pro­vide pa­tients with more choice than they would have, and a higher qual­ity of care then they would nor­mally get,” Miller said.

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