UnitedHealth uses newfound scale to negotiate pay-for-performance deals

Newly bulked-up UnitedHealth ($UNH) now boasts the U.S.' third largest pharmacy benefits business--and it's using its scale to push for refunds when meds don't live up to their billing, it says.

The company's OptumRX--which swallowed rival Catamaran Corp. earlier this week--has already worked out a deal with hep C drugmaker Gilead ($GILD) to link payments to the performance of its pricey treatments, head Mark Thierer told Bloomberg. And it's not stopping there. It's in the process of negotiating similar deals with the makers of PCSK9 drugs, multiple sclerosis therapies and rheumatoid arthritis meds, he said.

"We're actively engaged in discussions that would effectively contemplate having the innovator companies make some level of assurances around, 'Will this drug work?'" he told the news service. "We're going to have the innovator companies stand behind the science of the drugs they're bringing to market."

It's a plan even rival PBM Express Scripts ($ESRX)--whose CMO, Steve Miller, ranks among the industry's most vocal drug pricing critics--doesn't yet know if it can fully get behind. Earlier this month, Novartis ($NVS) announced it would be offering up a pay-for-performance plan for new drug Entresto, a heart failure-fighter the Swiss pharma has dubbed a blockbuster-in-the-making. Insurers will be able to initially pay a lower price, followed by another payment if Entresto successfully keeps patients out of the hospital and helps cut associated costs.

Express Scripts' Steve Miller

Miller, though, recently expressed his reservations, pointing out that so many different factors can influence patient outcomes.

"If patients on this new drug go out and have a salty pizza and end up in the emergency room, is that the drug's fault or the patient's fault?" he said, as quoted by Bloomberg. "If the patient isn't adherent with taking the drug, is it the drug's fault or the patient's fault?"

How UnitedHealth addresses that question remains to be seen, but one thing is clear: Rapid consolidation among insurers is bad news for pharma companies trying to hang onto their pricing power.

"[I]nsurers' strengthening market share will escalate reimbursement pressure over time, which will reduce the use of some pharmaceutical products and depress pricing on others," Moody's Investor Service said in a report earlier this month.

And Novartis CEO Joe Jimenez, for his part, agrees. "Across the board in the U.S., the pricing environment is more difficult," he told Bloomberg this week. "With a consolidated payer base as well as consolidated providers, you have to assume going forward that price increases in the U.S. are going to be quite limited."

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