New “Pay for Performance” Drug Deal

pharmaceuticals

In a agreement that continues to the trend towards pay for performance in the industry, U.S.-based health insurers Cigna Corp and Aetna Inc have struck deals with Novartis AG for a performance-based price for Entresto, the Swiss drugmaker’s new heart drug.

According to Reuters, the agreements are among the few performance-based deals that have been made public by drugmakers and U.S. managed-care companies, which say they have been having more discussions about linking price to health outcomes in order to cut unneeded drug spending.

Drug prices have been making headlines, increases of around 13 percent in the United States last year have caused public outcry and moved the issue onto the campaign platform of Hillary Clinton and other U.S. presidential candidates. Under the agreement, Cigna said its payments to Novartis will be linked to how well the drug improves the relative health of Cigna customers.

Entresto has FDA approval for the treatment of chronic heart failure

Specifically, Cigna said payments will be based on a reduction in the proportion of customers who are admitted to hospital for heart failure. The agreement applies to Cigna’s commercial business and does not apply to its Medicaid or Medicare plans.

Entresto, which costs about $12.50 a day, or $4,560 per year, was approved by the U.S. Food and Drug Administration in July. It is cheaper than some other new drugs, but costs more than analysts expected.

The Boston-based Institute for Clinical and Economic Review, an independent group that analyzes drug prices, has said the price should be 9 percent lower.

Aetna, in an emailed statement, said it signed a value-based agreement with Novartis that is based on the drug replicating results that it achieved during clinical trials. In trials, Entresto cut hospitalizations and the rate of cardiovascular death related to heart failure.

Novartis has publicly discussed signing more outcome-based pricing deals

A Novartis spokesman on Monday confirmed that the company’s head of pharmaceuticals, David Epstein, was referring to Cigna and Aetna when he said during an investor conference call late last month that Novartis had signed deals with two health insurers. Epstein, on the Jan. 27 call, said that under the deals, Novartis had agreed to a base price and a modest rebate, which would fluctuate based on hospitalizations and savings to the plan.

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