Harvard Pilgrim bets on value-based drug payments with new deals
- As high pharmaceutical prices strain budgets of payers and patients alike, Harvard Pilgrim is betting so-called pay-for-performance deals will help lower drug costs and improve patient outcomes.
- The large New England health insurer announced Wednesday it had inked two separate agreements with Amgen and Eli Lilly that tie the costs of Amgen's Enbrel (etanercept) and Lilly's Forteo (teriparatide) with either performance or patient adherence.
- Over the past year, a number of large drugmakers have begun pushing value- or outcomes-based payments as a potential solution to blowback on rising drug prices. Under these types of deals, insurers and other payers would pay less for drugs that fail to meet specified benchmarks. Drugmakers, on the other hand, would be rewarded for innovative medicines that improve outcomes.
The idea of value-based payments has been around for some time, particularly in Europe. Recently, however, more U.S. insurers have been willing to experiment on these types of agreements in an effort to address rising costs.
Aetna, Cigna, Humana and Harvard Pilgrim have all signed deals with major drugmakers over the past year which link, in various fashion, the cost paid by the insurer to how well the drug performs on a specified measure. Typically, the drugmaker will either discount the drug's price or pay a larger rebate to the insurer if the drug fails to measure up.
Tying performance to payments, rather than the price itself, is important. Drugmakers can use these deals as a way to secure coverage with a specific insurer without undermining the list price used by the companies as a starting point in negotiations with payers across the market.
Harvard Pilgrim has been a particularly active participant in negotiating value-based payments, signing similar deals with Novartis and Eli Lilly last summer for the Swiss pharma's heart drug Entresto (sacubitril/valsartan) and Lilly's diabetes medicine Trulicity (dulaglutide).
In the recently announced deal with Amgen, Harvard Pilgrim will pay less for Enbrel if a patient scores below a specified score, as measured by six criteria in an "effectiveness algorithim." A lower score would indicate a patient has not responded as well as expected to Enbrel and, for example, escalated the dose regimen or needed a steroid intervention.
Harvard Pilgrim's Chief Medical Officer Michael Sherman said that only a third of patients on Enbrel historically meet all six criteria, suggesting the insurer sees an opportunity to reduce costs.
That Harvard Pilgrim was able to find a willing partner in Amgen is no surprise either. Amgen CEO Robert Bradway predicted last fall that value-based contracts would become more common and said the company planned to do more in the future.
Eli Lilly, on the other hand, will tie the cost of Forteo to patient adherence, lowering the unit cost if persistence is higher compared to a baseline level.
Novartis and Merck have also been experimenting with value-based contracts, and J&J CEO Alex Gorsky has said it favors an Affordable Care Act replacement that encourages such deals.
But value-based contracts are not an easy panacea. Tracking patient outcomes and adherence to specific drugs requires improved data systems and lots of administrative work. For measures like adherence, deals could depend on how well patients self-report. Other benchmarks might require stepped-up monitoring efforts.
Faced with an angry public and frustrated lawmakers, though, drugmakers in the U.S. appear willing to give value-based payments a shot.
- Harvard Pilgrim Press release (re: Amgen's Enbrel)
- Harvard Pilgrim Press release (re: Eli Lilly's Forteo)
- BioPharma Dive (Look back:) Amid pricing scrutiny, Amgen CEO predicts more value-based contracts
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