Novartis, Roche CEOs see performance-based future, but U.S. isn't ready yet

Amgen ($AMGN) may have pulled off a pay-for-performance pricing deal on its pricey new cholesterol drug Repatha with Boston-based Harvard Pilgrim. But other outcomes-based pricing negotiations haven't been as successful, and there are major reasons why.

Novartis CEO Joe Jimenez

So say the CEOs of Novartis ($NVS) and Roche ($RHHBY), who both tell Reuters that current payment approaches won't work in the long term. The Swiss drugmakers have each experimented with pay-for-performance with small deals, and Novartis made headlines with its push for an outcomes-based approach on Entresto, its new heart failure drug that beat one standard-of-care treatment at keeping patients out of the hospital in a clinical trial.

Obstacles include the fragmented U.S. healthcare system, with its plethora of electronic medical records providers--not to mention patient files still kept in manila folders. Those record-keeping systems can't track patient adherence to drug regimens and the effects of the drugs, the executives say.

"The basic infrastructure of electronic medical records, let's call it 'real-world data', is going to have to increase so that we can easily track and monitor outcomes," Novartis chief Joe Jimenez told the news service. "If you move to that kind of pricing system over a period of years, you will be able to take out a lot of waste."

Roche CEO Severin Schwan

But as Roche CEO Severin Schwan told Reuters, there are other obstacles as well. Medical privacy worries, for one. Also, doctors might be reluctant to sign on because such pricing arrangements could mean more work for them and their staff. But Schwan figures that eventually, payers will come around--because economics will force them to. "When the pressure is high enough in health care systems we'll more and more move toward aligning value with price," he told the news service.

One reason why the two execs are keen on the idea is evident from Jimenez's comments. Putting drug costs in context--particularly for drugs that stand to save costs elsewhere, including Entresto--could actually mean more revenue for drugmakers as outcomes goals are met. Novartis' proposal on Entresto, for instance, would have involved a discount up front, with follow-up payments if it did reduce the need for costly follow-up care.

That approach might increase immediate drug costs, Jimenez told Reuters, but reduce overall medical bills.

Amgen's performance-based deal on Repatha pegs payments to cholesterol numbers and Harvard Pilgrim's overall related costs. The two agreed on specific cholesterol targets for various patient groups, and if Repatha doesn't help patients hit those goals, the insurer can collect additional rebates. More rebates would be due if Harvard Pilgrim's spending on the drug surpasses an agreed-upon threshold.

- read the Reuters news

Special Reports: Top 15 pharma companies by 2014 revenue - Novartis - Roche - Amgen

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