From Specialty Pharmacy News

CIGNA Signs Outcomes-Based Contract That May Be First Deal for Specialty Drug

April 2011Volume 8Issue 4

Following the success of its first outcomes-based contract, one health plan recently signed a second such contract with a pharmaceutical manufacturer that may be the first to involve a specialty drug. CIGNA Corp.’s deal with EMD Serono, Inc. around the manufacturer’s multiple sclerosis therapy Rebif (interferon beta-1a) is focused on helping prevent relapses in MS patients — adverse events that cost the health plan on average around $11,000 per hospitalization. Deals such as this are fairly rare at this point, but results from the initial contract, which was for diabetes management, are encouraging. And while experts predict more of these agreements, plans should keep in mind various factors that could hinder the success of such contracts.

CIGNA will track the percentage of hospitalization and emergency room visits avoided by people using Rebif by tracking medical claims in order to determine whether a relapse was the cause. The company will use 2010 as a baseline, looking at data from medical, pharmacy and lab claims, and measuring members’ medication-possession ratio.

“This is a significant commitment to specialty on both the pharmacy and the medical side,” says Dan Haron, president of CIGNA Pharmacy Management. “We’re in a unique position to deliver on outcomes-based contracts” because of “our ability to see the individual holistically. We can engage them earlier, get them on needed medications quicker, ensure they take their medication appropriately and identify gaps in care.”

Because MS “eventually leads to a state of disability,” CIGNA is helping these members comply with their therapy to help delay the disease’s progression, explains Thom Stambaugh, R.Ph., senior vice president and chief clinical officer of CIGNA Specialty Pharmacy Management. About “75% of MS patients will have a flare-up and then go into remittance. The longer they have MS, the closer the relapses get, and the more severe the condition gets.” When people are in the remittance phase, “they may feel like they don’t need to take their medication,” he says. “But this is the most critical time to take it because it prolongs the progression toward disability.”

CIGNA data show that disability costs account for 6% of the plan’s total MS costs, while specialty therapies cost almost 60%. In addition, “75% of these individuals have at least one other chronic condition” such as depression, diabetes, asthma and cardiovascular issues, Stambaugh says, so the ability to see across the entire health plan spectrum of benefits in order to provide appropriate patient management is critical.

He explains that of the 17,000 individuals with MS across CIGNA’s member population, about 4,200 are on a specialty drug and about “1,400 or so” are on Rebif.

“This isn’t about moving existing customers from what they’re on to something else,” clarifies Haron. “We’re not handling the treatment of these patients any differently.”

“We are tracking improved medication adherence,” Lindsay Shearer, a spokesperson for CIGNA, explains to SPN. “Both the ER visits/hospital admissions and medication adherence do have specific percentages of compliance, but that is specific contract language which is proprietary. I can tell you that it’s a multitiered contract where discounts are in ranges for medication adherence, and then there is another discount based on customers with MS being relapse-free.” She declines to provide further details on the financial aspects of the deal.

Haron notes that in its patient analyses, CIGNA’s informatics team also will be looking at more intangible measures, such as productivity impact and quality of life.

The agreement began Jan. 1, 2011, and runs through December 2012. “The contract will be measured regularly, but outcomes won’t be available until three months after the first year to account for medical claims run-out,” Shearer says.

“I believe this kind of contract will be a trend on a go-forward basis,” says Haron. “One of the most significant ways to cut down on health care costs is to adopt evidence-based medicine.” The ability to measure total medical outcomes and costs, he says, can help determine “the effectiveness of new drugs in the marketplace.”

Cyndy Nayer, president, CEO and co-founder of the national nonprofit Center for Health Value Innovation (CHVI), confirms to SPN that there are more outcomes-based pharmaceutical contracts in the works, but only CIGNA’s has been made public. “Other ones will come to fruition rather quickly. There are others being talked about and negotiated across America,” but nondisclosure agreements prohibit her from revealing more information.

But outcomes-based types of contracts may be easier said than done. For one thing, there must be an agreement between both companies “on the measurement of outcomes,” says Haron.

“The key measures of success are hospitalization and emergency room visits avoided,” points out Elan Rubinstein, Pharm.D., founder and principal of consulting firm EB Rubinstein Associates. “If CIGNA/EMD Serono can convincingly demonstrate this savings over time, then the increased drug spend that would attend improved adherence could be offset.”

According to Rubinstein, “Clarity about the time horizon will be important, because increased adherence will increase payers’ Rebif drug spend immediately, while reduced hospitalization and emergency room utilization and spend will take much longer to manifest, if that happens at all.”

With its employer clients — and especially administrative services-only clients — “CIGNA should be prepared to explain…that they may initially see Rebif costs increase in the specialty pharmacy benefit, give them an idea of when…and by what percentage they may expect to see the promised outcome (in terms of lower overall hospital/ER/Rebif spend per-person per-time period of measure), and finally let employers know the financial penalty to CIGNA/EMD Serono and share back to themselves, if promised outcomes are not achieved in the promised time frame.”

Rubinstein concedes that this “sounds a bit harsh, but the reality is that this program will more certainly raise Rebif spend than the certainty that it will yield a net savings — so if the manufacturer is comfortable that the outcome will be achieved, it should be prepared to offer up a guarantee that offsets the certain short-term increase in drug spend in the event long-term benefits are not achieved.”

All Stakeholders Should Share Risks, Rewards

Nayer maintains that “when you do outcomes-based contracts, everyone should be sharing the risk and the reward.…The current purchasing model in America is not of benefit to all stakeholders.” When companies strike deals for drug purchasing based on rebates, “the provider and patient are not in the room.…Rebate contracts fly in the face of outcomes-based contracts.…If we want accountable consumers, we must include them in the discussion process.”

At CHVI, says Nayer, they look for three things with these agreements:

(1) “Better engagement and adherence at the patient level,”

(2) “Better accountability” at the provider and purchaser level, and

(3) A “predictable cost trend.”

“How we weight them and put different levers” in place is “how they come together,” she says. And the bottom line with all of these deals is that “they all must produce an engaged patient who must be adherent.…Adherence drives a predictable cost trend.”

“From an employer plan sponsor perspective, there is no claim cost guarantee per se, and the health plan is ‘in charge’ with pharma, so the ultimate value is unknown,” says F. Randy Vogenberg, Ph.D., a principal with the Institute for Integrated Healthcare and strategic pharmacy advisor to the Business Group Pharmacy Collaborative. “The concept for such contracting is a good thing, but execution in the real world is fraught with issues.”

For example, David Uldricks, director of strategic initiatives and assistant general counsel for Employers Health Purchasing Corp. of Ohio, points out that the ultimate cost to the PBM or plan sponsor “cannot exceed the Medicaid best price.” A law mandates that “the federal government gets the best deal on any particular drug,” so companies can’t sell it for a lower price when discounts are applied to someone other than Medicaid, he explains. So when there are rebates involved, “pharmaceutical companies have to make sure that…they don’t exceed those savings. Depending on their rebating strategy, they may be close to that already, or they may not be.”

Deals Are ‘Not Easy to Do’

According to Vogenberg, there are “lots of talks,” around outcomes-based contracts, “but [they are] not easy to do or implement in a meaningful way for all parties. Unlike a value-based strategy, where alignment is obvious and beneficial, these types of contracts have many potential pitfalls.”

One place where these contracts have become popular is in the United Kingdom, points out Rubinstein. The National Institute for Health and Clinical Excellence has engineered deals with manufacturers under which NICE will cover a therapy only if a patient responds to the treatment after a period of time. For example, in a deal approved in October 2007 that involves the multiple myeloma drug Velcade (bortezomib), if relapsed patients have had less than a partial response (as determined by a blood or urine test) after four weeks of treatment, manufacturer Janssen-Cilag will refund NICE the entire cost of the medication. If patients have a partial or complete response, then treatment will continue with NICE covering the cost (SPN 7/08, p. 9).

Contact Stambaugh and Haron through Shearer at, Nayer at, Uldricks at, Vogenberg at and Rubinstein at

Join AIS on April 19 for the webinar Outcomes-Based Contracts: Innovative Payer Deals to Improve Member Health and the Bottom Line. Speakers include Stambaugh, Nayer and CIGNA Pharmacy Management Vice President of Pharmaceutical Contracting Alex Krikorian. Visit the MarketPlace at or call (800) 521-4323 for more information.

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