Novartis CEO: Payers not sold on performance pricing yet, but that'll change

Novartis CEO Joe Jimenez

Novartis ($NVS) CEO Joe Jimenez sees a couple of rays of hope for drug spending--and for the viability of higher-priced meds. Big Data, for one. And performance-based pricing for another.

In an interview with the Swiss daily Le Temps, Jimenez delivered a sort of state-of-Novartis snapshot, covering everything from the Google-partnered contact lens that will go into testing next year to the Gleevec patent tempest underway in Colombia to the GlaxoSmithKline ($GSK) sale-and-swap that put one of Novartis' Swiss plans in GSK's hands. But one thread running through the conversation was cost--the spending on drug development, the price of branded meds and the costs that hit Novartis' own bottom line.

Jimenez has been talking up pay-for-performance approaches recently, as the company prepared to roll out its new heart failure drug Entresto. Pricey drugs aren't so pricey when you compare that cost to the long-term bill for hospitalizations and other complications, he says.

So far, differential pricing for Entresto hasn't caught the fancy of payers, Jimenez told Le Temps. Few insurers were willing to give it a go, because they considered the approach too complicated. The old-style fixed-price approach is much easier to administer, he pointed out.

Nonetheless, Jimenez continues to believe that "money back" pricing and other performance-based deals are "a way forward" through the pressures of rising drug prices and aging populations.

"If nothing changes, health expenditure … will explode and become unbearable. The pharmaceutical industry will have to provide new approaches to pricing that will eliminate waste," Jimenez said, while acknowledging that getting insurers to sign on will continue to be a challenge.

With more and more targeted drugs on the market--including Novartis' own lung cancer drug Zykadia, effective in just 3% of patients with the disease--there's another avenue for savings for the health system overall, even as payers shell out for a pricey med. "This prevents a huge waste, since you know that it is useless to prescribe this drug to 97% of patients," Jimenez pointed out. Together with its drug's ability to cut hospital stays short, "the final gain for the health system is very important," he said.

And then there's Big Data, which could suss out which cancer drugs work in which patients, turning more meds into precisely targeted therapies. Understanding why a drug works in one patient but has no effect on another patient with the same disease can eventually help unnecessary spending, Jimenez figures. "This new knowledge will prevent the enormous costs due to inefficient healthcare systems," he said.

- read the Le Temps interview (French)

Special Reports: Top 15 pharma companies by 2014 revenue - Novartis | The 25 most influential people in biopharma in 2015 - David Epstein - Novartis

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