A Closer Look At The US Pricing Pushback

Critics of high prescription drug prices are making headlines in the US, and politicians on the presidential campaign trail and on Capitol Hill are talking about government-imposed price controls. But the real news may be unfolding behind the scenes in the private health insurance market, as Cathy Kelly finds out.

The financial challenges posed by the launch of expensive but highly effective specialty drugs over the past two years may have finally tipped the scales toward a more serious pursuit of innovative performance-based risk sharing contracts between manufacturers and payers.

Under such contracts, drug pricing is tied to pre-specified outcomes demonstrating the value of treatment. Agreements may also include guarantees that drug utilization will be limited to certain types of patients to control payer costs. In return, payers provide preferred coverage and may also offer assistance with other access challenges, such as medication adherence.

Although they’ve been talked about for years, performance-based risk sharing arrangements have not moved very far beyond the pilot stage in the US. One challenge to widespread adoption has been the lack of detailed information on how effective they are. Other obstacles have included defining outcomes, determining who would measure outcomes and agreeing on how they would be measured.

Nevertheless, as manufacturers face serious resistance from payers concerned with the prospect of covering highly priced drugs that could be prescribed very broadly the incentives are there to slog through some of the difficulties and execute these kinds of arrangements.

It’s worth taking a closer look at what’s been going on in that area. The introduction of Gilead Sciences Inc.’s hepatitis C drug Sovaldi (sofosbuvir) in early 2014 at a list price of $84,000 per treatment regimen galvanized payer demands for value-based contracts. Sovaldi’s launch was followed in October 2014 by the introduction of Gilead’s follow-on hepatitis C drug, Harvoni (sofosbuvir/ledipasvir), at a comparable cost.

It wasn’t until competition to Harvoni and Sovaldi came out in December of 2014, in the form of AbbVie Inc.’s Viekira Pak (ombitasvir/paritaprevir/ritonavir plus dasabuvir), that payers were equipped with better leverage to negotiate innovative deals with the manufacturers.

Although the most highly publicized aspect of those contracts have been big discounts in pricing – Gilead estimates average discounts to Harvoni approached 50% in 2015 - they also involve assurances that patients achieve a sustained virologic response (SVR), the accepted surrogate for a cure.

For example, national insurer Cigna Corp. announced a performance-based contract in early 2015 that provides exclusive formulary coverage to Harvoni for hepatitis C patients with genotype 1 premised on patients achieving SVR. Cigna has been one of the more proactive payers pursuing outcomes-based agreements.

Although innovative payment arrangements are accelerating among commercial payers, performance-based contracts have not taken hold in one of the largest markets for hepatitis C drugs, Medicaid, due to manufacturer concerns they don’t fit the traditional drug rebating model in that program.

The current approach to Medicaid rebating is based on per-unit pricing, which is a model that performance-based contracts attempt to move away from. Manufacturers are required to pay a rebate to Medicaid programs that are the greater of either 23.1% of the average manufacturer price for brand drugs, or the difference between AMP and the best price offered to any purchaser of the drug. 

In the hopes of encouraging outcomes-based contracts in Medicaid, the Centers for Medicare and Medicaid Services recently took the unusual step of contacting manufacturers of hepatitis C drugs to better understand their concerns. The goal is for CMS to develop guidance on how such contracts could square with the rules regarding Medicaid rebates.

PCSK9 Inhibitors And Harvard Pilgrim

If the challenges of covering the costly hepatitis C drugs constituted a wake-up call for payers and providers, the advent of the super cholesterol-reducing PCSK9 inhibitors have further heightened concerns. As a result, performance-based contracts for the PCSK9s are already coming to light.

Harvard Pilgrim Health Care announced in November that it had reached a “first in the nation” type of contract with Amgen Inc. for its Repatha (evolocumab). Under the arrangement, Amgen will provide pricing discounts to the insurer if patients taking the cholesterol-lowering drug fail to reach certain outcomes measures or its utilization exceeds predetermined levels.

The payer described the deal as containing "a pay for performance guarantee through which Amgen is taking financial risk by providing the health plan with an enhanced discount if the reduction in LDL levels for Harvard Pilgrim members is less than what was observed during clinical trials.” Patients will also need to reach the acceptable level of cholesterol reduction within six months of use.

The firms declined to divulge the utilization levels that would trigger an additional discount, as well as the amount of the discounts. However, Harvard Pilgrim will have responsibility for collecting and analyzing outcomes and utilization data.

In return, Repatha will get a "preferred formulary position" at the health care system relative to competing PCSK9, Praluent (alirocumab), which is marketed by Sanofi and Regeneron Pharmaceuticals Inc. The contract may be followed by others like it for Repatha. Amgen said it continues to “engage constructively with other payers to enable patients to have access” to the drug.

Harvard Pilgrim’s announcement about the contract follows Amgen’s public declarations about its interest in negotiating performance-based contracts. In a late-August release on the approval of Repatha, Amgen suggested it would respond to payer concerns about the drug’s $14,100 annual list price by pursuing contracts that tie Repatha’s net cost (after rebates) to its value in the relatively narrow population it is indicated for.

Amgen’s comments were noteworthy because they signaled a new level of support in the industry for such contracts. In another example, Novartis AG invited innovative coverage arrangements for its heart failure treatment, Entresto (sacubitrol/valsartan), around the time the drug was approved in July.

Like the PCSK9s, Entresto would be a chronic-use drug, possibly taken for life, and payers worry it could be prescribed more widely than its current labeled indications. However, its annual list price of $4,560 is considerably lower than the $14,100 and $14,600 prices for Repatha and Praluent, which has kept it out of the news as another example of egregious pricing by the biopharma industry.

Novartis has said it is interested in pursuing outcomes-based reimbursement models for Entresto that are similar to a pilot coverage program underway for its multiple sclerosis therapy Gilenya (fingolimod). Such an approach might involve a lower wholesale acquisition cost, company executives said, but Novartis would receive additional payment if a certain cost-reduction threshold is met.

No performance-based contracts for Entresto have been announced to date. However, a technology assessment of the drug by the independent Institute for Clinical and Economic Review modeled the potential savings that might result from a performance-based contract.

In the risk-sharing arrangement envisioned for Entresto, payers would not have to pay for the drug for six months if a congestive heart failure hospitalization occurs following initiation of treatment. If a patient on the drug dies of cardiovascular disease, any payments made in the previous six months would be refunded.

Express Scripts Holding Co. expressed support for a performance-based payment approach for Entresto during a recent public meeting. The PBM’s chief medical officer, Steve Miller, commented during the National Cancer Comprehensive Network Policy Summit held in September that: “Novartis is very interested in doing a pretty simple approach to outcomes-based [contracting] for heart failure, especially because these patients end up in the emergency room so often. This is truly a remarkable drug, so we’re excited about entering into something like that.

However, he noted that defining patient endpoints is a key part of any risk sharing arrangement and that many outcomes-based contracts in the past have failed because of disagreements between manufacturers and payers over measuring endpoints. “The reality is that every single one of these experiments has collapsed under its own weight because the administrative overhead ate up the potential savings.".

Further complicating such a contract with a stand-along PBM like Express Scripts is the fact that it would not have in-house access to medical claims and would have to make arrangements with its payer clients to track outcomes like hospitalization rates.

Policies To Promote Outcomes-Based Contracts

The US Pharmaceutical Research and Manufacturers of America (PhRMA) is advocating regulatory changes that might facilitate innovative contracting, such as relaxing FDA restrictions around communications between biopharma manufacturers and payers about the value of treatment.

It is promoting the idea that manufacturers should be able to provide more information to payers and other health care professionals before a drug is approved, to allow them to better prepare for the expense of a new treatment. After a drug is approved, manufacturers should be able to proactively go to payers and discuss outcomes that are not necessarily part of the approved label, such as a reduction in hospital stays, according to the organization.

PhRMA advocates the establishment of a safe harbor from federal anti-kickback penalties for manufacturer-run medication adherence programs. Such programs are being discussed more frequently as part of outcomes-based contracts. The changes being sought can be accomplished administratively and without legislation, PhRMA believes, which may improve prospects for achieving them.

There is bipartisan talk about controlling drug pricing among members of congress but chances for passing legislation imposing controls seem slim. Even presidential candidate Sen. Bernie Sanders, D-VT, who has co-authored a bill, admitted, “I know how hard it will be to pass this legislation. I know how hard it will be to defeat the prescription drug industry. In fact, to my knowledge the prescription drug industry has never lost a battle on Capitol Hill.”