Still, some drug companies are aggressively seeking innovative, results-based purchasing deals, knowing they’re likely to face resistance from payers to the high price tags of their products if they don’t accept risk. And payers are open to their pitches.
“We are seeing uptake because people are extremely worried about these extremely high-priced drugs generally targeted toward orphan populations,” said Kathy Hughes, managing director at Avalere Health. “Unless these therapies live up to the promise of being curative, there will be some refund for them.”
Spark Therapeutics has with Harvard Pilgrim that links payment for Luxturna—for patients with confirmed biallelic RPE65 mutation-associated retinal dystrophy—to both short-term efficacy within 90 days and longer-term durability at 30 months.
In addition, Spark said it’s talking with the CMS about a long-term payment demonstration for Medicare and Medicaid patients, tying 50% of the price of Luxturna to efficacy and durability over three to five years. That would be done either through installment payments or a rebate.
Harvard Pilgrim’s Sherman was impressed that Spark offered his plan such a bold risk-based deal. “I give them a lot of credit,” he said. “It was the first treatment for the class. They know damn well we wouldn’t have restricted it for the right population. They acknowledged that $850,000 is a high price to justify if it doesn’t work. But they had confidence in the product.”
Some experts see Spark’s proposal as a foreshadowing of the next generation of outcomes-based pricing deals, placing greater upfront risk on drug manufacturers with the potential of greater rewards later. “Instead of a money-back guarantee, you could think about an initial payment bonus payments if the drug performs as hoped,” said Rachel Sachs, associate professor of law at Washington University.
AstraZeneca is another drugmaker that’s been active, pointing to more than 40 value-based agreements across its therapeutic areas.
In January, the company announced an outcomes-based deal with UPMC for its heart-attack prevention drug Brilinta, with payment linked to cardiovascular outcomes for patients treated with the drug following a recent hospitalization for heart attack or unstable angina. UPMC is now offering the brand-name product on its generic tier, potentially saving members hundreds of dollars a year.
Last September, UPMC Health Plan announced what it called an with Boehringer Ingelheim tying payment for the Type 2 diabetes drug Jardiance to the total costs of care for all UPMC diabetes patients treated.
Some observers say pharma companies are now more willing to engage in value-based discussions of pricing and payment arrangements because they’re feeling rising political heat on affordability. The Congressional Budget Office that net spending on specialty drugs in Medicare Part D rose from $8.7 billion in 2010 to $32.8 billion in 2015, while Medicaid’s net spending on these drugs more than doubled to $9.9 billion during that period.
“Pharma trends are unsustainable,” said Kim Bimestefer, executive director of the Colorado Department for Health Care Policy and Financing. The state has seen a 171% rise in Medicaid spending on high-cost and specialty drugs over the past six years, which is why it’s launching an outcomes-based contracting program. “Why are prices where they are? We must hold Big Phar-ma accountable.”
“In the court of public opinion, if you say your drug is worth a couple million, the gene therapy companies understand if they’re not willing to go at-risk they won’t be able to defend that pricing,” Sherman said.
With political pressure mounting, some pharmaceutical companies are even showing openness to setting their initial prices lower than anticipated based on the Institute for Clinical and Economic Review’s cost-effectiveness evaluations, Whitrap said. Examples include the eczema drug Dupixent, which Sanofi and Regeneron priced at around $35,000 rather than the expected $60,000, and the cholesterol inhibitor Praluent, whose price those same two manufacturers to around $4,000 from $14,000.
But drug companies have been reluctant to enter risk-based deals for cancer treatments, knowing it’s particularly tough for payers to refuse to cover them. “In this country at this point, if there is an unmet need, health plans have virtually no ability to say no,” Sherman said.
UPMC’s Manolis said outcomes-based deals are complex but that his organization feels the need to advance the model for shared financial risk for drugs. Unlike in previous outcomes-based agreements, UPMC wants to publicly report the results through its Center for Value-Based Pharmacy Initiatives, so everyone can learn from the experience. Still, he said no one should expect rapid cost or quality breakthroughs.
“We’ve got to crawl before we can walk,” he said. “We’re starting to get closer to the value price of drugs. But these are very complex paradigm shifts and we won’t get there overnight.”
Correction: An earlier version of this story misstated what type of drug Brilinta is; it is a heart-attack prevention drug.