Smart pharma CEOs are getting ahead of the drug pricing argument. Rather than getting in the trenches to defend their price tags, they’re flanking the fight by talking up value-based payer deals.
In recent days, Novartis chief Joe Jimenez and Amgen CEO Robert Bradway, among others, have spoken out publicly about pegging drug costs to their results. They’re veterans of the practice--Novartis has performance-based contracts on its heart failure med Entresto, for one, as does Amgen on its PCSK9 cholesterol-fighter Repatha--so they can already claim to be part of the spending solution.
Meanwhile, Johnson & Johnson has signed on to help Medicare move toward rewarding “the value of care,” according to Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services. And Roche, which has outcomes-based deals in a variety of European countries with single-payer systems, says it now sees cancer patients as ripe for such an approach.
Echoing similar comments he made this summer, Jimenez now says the entire pharma industry needs to move to value-based models that focus on outcomes, not per-unit pricing. In a column for Forbes, Jimenez actually paints pharma as a potential standard-bearer for healthcare spending in general.
“We believe in the efficacy of our products, and by collaborating with payers on solutions for reimbursement, we hope to help start a shift toward value pricing in the healthcare system,” Jimenez wrote. “We want to be rewarded for the tangible outcomes our products provide patients, not for simply selling pills.”
That’s the whole “beyond-the-pill” idea that pharma companies have been dabbling with for several years now, some more extensively than others. In addition to Entresto, Novartis has value-based deals on its multiple sclerosis drug Gilenya and leukemia treatment Tasigna, Jimenez says.
Bradway wasn’t so sweeping in his estimations; instead, he focused on the market-access theme in comments during Amgen’s Q3 earnings call.
“We would expect to see more and more value-based contracts arise as one of the ways of enabling more patients to gain access to the right innovative medicines for their ailments at the right time," Bradway said.
Payers are certainly receptive to it. A survey earlier this year found that most U.S. payers are either inking value-based pricing deals or working toward them.
Pharmacy benefits manager Express Scripts, for instance, recently said it’s working on value-based deals for pricey anti-inflammatory meds that treat rheumatoid arthritis, psoriasis and similar ailments. That’s on top of its switch to indication-specific pricing in cancer, where prices vary according to a drug’s proven efficacy in its various approved indications.
As Slavitt’s Health Care Payment Learning and Action Network suggests, even CMS is interested. In a recent--and very controversial--proposal to overhaul reimbursements for Part B meds, the agency mentioned pay-for-performance reimbursements as a method it would like to try.
In fact, CMS says it would look to private payers for "value-based purchasing tools" and wants to use strategies similar to those used by commercial health plans, pharmacy benefits managers, hospitals and other benefits managers.
In fact, the technology has held many drugmakers back from value-based deals. Roche has been skeptical of results-oriented contracting in the U.S. market, with its plethora of different payers and health-record systems, and its wealth of data spread over separate databases and platforms. In cancer, however, the push for a cure has improved data collection, enabling value-based approaches in that field--including indication-specific pricing, as Express Scripts is pushing.
It’s more wary of similar approaches in multiple sclerosis, however, pricing chief Jens Grueger told Reuters. The company’s multiple sclerosis drug Ocrevus is on the verge of approval in the U.S. “The data are not available,” he said.
But Jimenez, whose MS med Gilenya is among the company’s biggest sellers, says the tech obstacles can be overcome. "Building the framework needed to support value-based pricing, and the infrastructure of data and systems required to achieve them, is a priority for us,” he told Reuters.
In any case, moving beyond the “pricing funds innovation” argument is wise, Slavitt said in his blog post. “In every state I visit now, governors pull me aside to tell me that they can't sustain the rising cost of drugs in their Medicaid programs,” Slavitt wrote, citing stats showing Oregon’s Medicaid program spent 19% of its money on drugs last year, up from 16% in 2012.
Overall, life sciences may need to tell its “value story” better, but that’s not enough, he said. The industry “also needs to do the math. If something is growing by 11%, unless it's causing something else to decrease by 12%, it's not going to last forever,” Slavitt wrote. “The reality is that in the next few years these costs will put unsustainable pressure on the Medicare program, and action is going to be necessary to address them.”