Health Insurers Looking To Pay Less When Drugs Don’t Work As Advertised

Image courtesy of Michael G. Chan

If a drug maker says their new prescription medication will reduce cholesterol by a certain percentage, or that it will counter symptoms of some chronic illness, but it doesn’t quite live up to its marketing, should the insurance companies still pay the price they originally agreed to? A growing number of insurers are making deals that tie the price of a drug to its real-world performance.

The latest of these so-called “value-based” contracts between a major insurer and drug companies involves Cigna, which announced this morning that it is tying the price on an entire new class of cholesterol-reducing drugs — known as PCSK9 inhibitor drugs — to how well the drugs succeed in actually reducing certain types of cholesterol.

There are currently only two drugs in this new class, Repatha and Praluent, made by Amgen and Sanofi/Regeneron, respectively. Cigna will track the cholesterol levels of its insured patients on these drugs. If the results meet or exceed what was achieved in clinical trials, the original negotiated discounts for the drugs remain the same. If these drugs don’t perform as well as expected, Cigna will receive additional discounts.

The full retail price — before any sort of negotiated discount by the insurance company — for a year’s supply of either of these drugs is around $14,000.

The Wall Street Journal notes that while this appears to be the first time an insurer has reached a value-based discounting deal with an entire class of drugs, it’s just the latest in a growing number of pricing agreements intended to protect insurers against drugs that aren’t effective as advertised.

Since 2014, more than a dozen of these sort of deals have been made with a variety of drugs, especially those medications with sticker prices that run into five or six digits annually for a single patient.

For example, AstraZeneca’s cancer treatment drug Iressa (gefitinib) can cost several thousand dollars for a single bottle of 30 pills. Last year, the drug maker agreed to reimburse Express Scripts for patients who stop treatment before reaching a third refill on their prescription.

While value-based pricing can protect insurers and pharmacy benefits companies from subsidizing substandard drugs, the work involved with tracking patient’s medical records can be onerous and can in some cases require years of research to determine if a drug is working as promised.

One concern with this model is that drug companies are actually getting paid more than they should at the outset of a drug’s release because of promises of a possible discount later. So rather than the insurance company drive a hard bargain and demand a steep discount right off the bat, some in the industry are worried insurers might accept a softer discount at the start because of that potential for significant savings down the road.

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