SNY Sanofi

By Peter Loftus and Anna Wilde Mathews 

Health insurer Cigna Corp. will get extra price discounts from drugmakers if new cholesterol medications don't help patients as much as expected, a significant step in a broader push to tie the cost of drugs to how well they work.

Such "value-based" deals are becoming more common as rising costs spur customers to demand assurances they are getting what they pay for. U.S. prescription spending rose 12% to nearly $425 billion in 2015, following a 13% increase in 2014, according to research firm IMS Health.

Cigna is set to announce on Wednesday that it is the first insurer to reach value-based contracts for an entire new class of cholesterol drugs: Praluent, which is co-marketed by Sanofi SA and Regeneron Pharmaceuticals Inc., and Amgen Inc.'s Repatha are the only two cholesterol-lowering drugs known as PCSK9 inhibitors currently on the U.S. market.

Both drugs were introduced last year to reduce levels of LDL cholesterol, or "bad" cholesterol, beyond what can be achieved by an older class of drugs known as statins. Reducing LDL can lower risk of heart attacks and strokes, though Praluent and Repatha haven't yet been proven to reduce cardiovascular risk in trials.

Both drugs cost at least $14,000 a year, and Cigna negotiated an undisclosed discount off the list prices.

If Cigna-insured patients who take the drugs aren't able to reduce LDL cholesterol at least as well as what was shown in clinical trials, the manufacturers will further discount the costs of the drugs -- and not just for patients who didn't meet the cholesterol goals. If the drugs meet or exceed expectations, the original negotiated price stays, according to Cigna.

Health insurers and pharmacy-benefit managers have signed at least a dozen such deals with drugmakers since 2014, including Cigna, Harvard Pilgrim Health Care and Express Scripts Holding Co., targeting high-cost drugs in categories including cancer and hepatitis C.

While the number of value-based deals has increased, they remain somewhat limited in scope, and may not put a huge dent in drug spending in the near-term, experts say. Insurers and manufacturers say the complexity of tracking patients' health -- which falls on the insurer -- can be a barrier, and most supply contracts still tie payments to volume of prescriptions.

"There is a general increase in interest in exploring these kinds of contracts, but a fair amount of caution as well, largely because the administrative aspects tend to be quite daunting in the short term," said Steven Pearson, president of the Institute for Clinical and Economic Review, a Boston nonprofit that promotes value-based drug prices.

Chris Bradbury, senior vice president for Cigna's pharmacy-benefits business, said the deals "are protecting our clients and customers if something doesn't work as expected...especially for many of these medicines now that cost thousands or tens of thousands of dollars a year."

Cigna has access to patients' cholesterol levels and will track them over "a period of time, months and quarters," Mr. Bradbury said, to determine whether they are meeting the targets. Cigna also plans to track whether these patients have heart attacks and other cardiovascular events over the long-term, but that information doesn't determine reimbursement levels in the current contracts. The drugs aren't currently approved to reduce the risk of cardiovascular events.

A Cigna spokeswoman said the company can monitor patients' adherence to prescriptions, side effects and drug interactions. The company also can review lab results and work with customers' doctors as needed, she said.

Joshua Ofman, senior vice president of global value and access at Amgen, said the company has agreed to such contracts with insurers to "address their short-term budget concerns and real-world performance regarding Repatha." Amgen hopes the agreement will enable patients to get access to the drug.

Sanofi and Regeneron said in a joint statement they have pursued value-based contracts for Praluent to address insurers' "complex needs and facilitate access for appropriate patients who require additional treatment options to lower their bad cholesterol."

Drugmaker AstraZeneca PLC signed a deal last year with Express Scripts to reimburse costs of the lung-cancer drug Iressa if a patient stops treatment before the third prescription fill. And Eli Lilly & Co. has a deal with insurer Humana Inc. that ties the level of reimbursement for the heart drug Effient to the rate of hospitalizations among patients who take it.

"More and more in the U.S., people are making choices between a bag of groceries and a medicine, a copay," Paul Hudson, president of AstraZeneca's U.S. unit, said in an interview. "The long-term sustainability of the industry and our ability to deliver breakthrough medicines requires us to demonstrate value."

AstraZeneca has been among the more active drugmakers pursuing alternative payment arrangements. In addition to the Iressa contract, AstraZeneca has a deal with University of Pittsburgh Medical Center's regional health plan to cover a portion of the costs of treating patients who have additional heart attacks after taking the heart drug Brilinta, if the rate of heart attacks exceeds a threshold. Brilinta has been shown in clinical trials to reduce the rate of heart attacks in patients. A UPMC spokesman declined to comment.

CVS Health Corp., the second-biggest U.S. pharmacy-benefit manager, has also made deals that tie payment to patient outcomes.

Alan Lotvin, executive vice president for specialty pharmacy at CVS, said the setups can be difficult to execute because many achievements -- such as a reduction in heart attacks and deaths for cholesterol drugs -- can take years to become clear, while patients may be impossible to track over time as they change insurers and jobs.

Also, he said, drug manufacturers may have advantages in negotiating favorable terms because they have the best data on their products. "What we want to be sure is that we're not letting the manufacturer use the outcomes-based arrangements to avoid the best price on day one," Dr. Lotvin said.

Colin Wight, CEO of GalbraithWight, which advises drugmakers on pricing strategies, says many of the value-based contracts amount to a "fancy way of rebating." He thinks drugmakers should go further and consider payment models used in other industries, like software licenses. In that model, an insurer could pay a set monthly fee to a drugmaker for as long as a patient benefits from it, he said.

Write to Peter Loftus at peter.loftus@wsj.com and Anna Wilde Mathews at anna.mathews@wsj.com

(END) Dow Jones Newswires

May 11, 2016 00:15 ET (04:15 GMT)

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