Featured Health Business Daily Story, June 3, 2016

Cigna Makes Deals With Pharma to Base Contracts on Drug Outcomes

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Sign up for a $91 two-month trial subscription today.

May 23, 2016Volume 26Issue 18

Continuing to extend value-based contracting to its prescription drug business, Cigna Corp. recently said it signed two separate deals with Amgen Inc. and Sanofi S.A./Regeneron Pharmaceuticals, Inc. for their PCSK9 inhibitors for commercial business. A top Cigna executive says the new arrangements are part of a broader strategy in play for the insurer, and one that will measure outcomes for positive results as an incentive to drug makers.

“This is about transforming drug reimbursement from more volume-based to more value-based. And it is something we have been at for many, many years now. We think it is essential that in addition to negotiating great unit prices, we start aligning manufacturers with how their products are performing in the real world, both clinically and from a financial outcome perspective,” Christopher Bradbury, senior vice president, integrated clinical and specialty drug solutions for Cigna Pharmacy Management, tells HPW. “And through that it leads to a tremendous amount of additional analytic insights and actions over time that we think are going to improve health and both lower drug costs short, medium and long term.”

He stresses that the PCSK9 inhibitors’ deals are aimed at covering all the bases in the pay-for-value spectrum. “We are doing this with hospitals, with physicians and increasingly with pharmaceutical manufacturers and pharmacy. And the power that we believe exists is when you align all four of those key stakeholder groups, which play major roles in the delivery of health care. This happens when you align all four of them on common outcomes metrics and have the right type of financial arrangement to ensure the best care at the most effective cost is delivered.”

Health Plan Week

The Cigna contracts will modify the insurer’s cost for the new cholesterol-lowering drugs, Amgen’s Repatha and Praluent, which is co-marketed by Sanofi/Regeneron, based on how well customers respond to the medications. The two injectable drugs, which gained FDA approval in 2015, are PCSK9 inhibitors, which help lower low-density lipoprotein (“bad”) cholesterol (LDL-C) in individuals who do not respond to statins.

While Cigna said it is the first insurer to disclose value-based agreements for its commercial business for both PCSK9 inhibitor drugs, last November Harvard Pilgrim announced it reached a deal with Amgen on a pay-for-performance guarantee for Repatha (HPW 11/16/15, p. 4).

“The [Cigna] contracts are independent of each other, but they share the same overall objective. If Cigna’s customers aren’t able to reduce their LDL-C levels at least as well as what was experienced in clinical trials, the two pharmaceutical companies will further discount the cost of the drugs. If the drugs meet or exceed expected LDL-C reduction, the original negotiated price remains in place,” Cigna said in a statement.

In reaction, one Wall Street analyst said deals like Cigna’s are becoming more the norm. “Such value-based deals are becoming more common as rising costs are leading consumers to demand assurances that they are getting what they pay for,” said Ralph Giacobbe, securities analyst for Citi, in a May 11 note to investors.

He added that Cigna has long experience with these types of arrangements, starting five years ago with a contract with Merck for its diabetes therapy Januvia (HPW 8/24/09, p. 5). “Additionally, recall that earlier this year Cigna [and Aetna Inc.] entered into an outcomes-based contract with Novartis for the drug Entresto (HPW 2/22/16, p. 4), which is FDA-approved for the treatment of heart failure with reduced ejection fraction,” Giaccobe said. “Under this arrangement discounts were linked to whether the medication reduces hospitalizations for commercially insured patients with congestive heart failure. Often under these value-based arrangements in exchange for price discounts the pharmaceutical company’s drug becomes a preferred drug, which in turn leads the pharma company to gain volume.”

Innovation Is Good, but Price Is High

Bradbury says insurers face a real challenge in paying for innovative yet expensive new medications. “Increasing drug costs is a major problem and unless we move forward with additional strategies it will become an increasing problem over time,” he says. Plans are struggling with not just the price set when the drug is introduced, he adds. “It is also about the annual price increases over time of those therapies. And that is an equally important point to address because you could start at a place from day one where the price-to-value is where people could agree on. But if you are seeing double-digit increases on the price of those drugs after five years, the price has doubled and we ask have the outcomes doubled in that time frame? Typically not,” Bradbury explains.

The Cigna approach with these outcomes-based contracts is to start aligning incentives so that “they deliver on their expectations and if they don’t, manufacturers discount the products even further. These contracts also introduce new forms of competition for firms today and tomorrow competing on the clinical efficacy of their products in the real world and those two things are very, very important,” he adds.

Copyright © 2017 Managed Markets Insight & Technology, LLC. All Rights Reserved.

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