Entresto Risk Sharing Could Equate To 8.6% Discount, ICER Says; Is Express Scripts Interested?

Cost effectiveness report on Novartis’ new heart failure drug includes a hypothetical risk-sharing payment model using hospitalization or death as patient endpoints; Express Scripts exec notes outcomes-based contracts have been problematic but hints at potential for Entresto.

A hypothetical risk-sharing payment arrangement for Novartis AG’s new heart failure drug Entresto (valsartan/sacubitril) could effectively reduce the drug’s list price by 8.6%, according to a draft cost effectiveness report released by the Institute for Clinical and Economic Review Sept. 11.

The report considers the risk-sharing payment model along with an analysis of the long-term cost effectiveness of Entresto and its potential impact on US health care spending. It also addresses St. Jude Medical Inc.’s CardioMEMS system for monitoring increases in pulmonary artery pressure, a key indicator of worsening congestive heart failure.

ICER reports are aimed at facilitating contract negotiations between payers and manufacturers and informing coverage decisions. The organization recently released a report on the PCSK9 drugs that suggested steep reductions in the prices of Praluent and Repatha (Also see "PCSK9 List Price Discounts Of 67% To 85% Suggested By ICER Analysis" - Pink Sheet, 14 Sep, 2015.).

In the risk-sharing arrangement envisioned for Entresto, payers would not have to pay for the drug for six months if a congestive heart failure hospitalization occurs following initiation of treatment, the report explains. If a patient on the drug dies of cardiovascular disease, any payments made in the previous six months would be refunded.

Entresto launched in July at a wholesale acquisition cost of $12.50 per day, or $4,560 annually (Also see "Novartis' Entresto: Slow Uptake Expected Following Fast FDA Approval" - Pink Sheet, 13 Jul, 2015.).

The risk sharing model “translated into an effective 8.6% discount on the drug price (i.e., $4,168 annually vs. $4,560),” the report states. The model is based on outcomes data from the clinical studies on Entresto. The pivotal PARADIGM-HF study showed a 20% reduced risk of cardiovascular death and heart failure hospitalization compared to the ACE inhibitor enalapril.

ICER Entresto Report: Next Steps

• Public comments accepted until Sept. 25.
• Final version released following Oct. 29 public meeting of the California Technology Assessment Forum, a core program within ICER.

The report’s authors said they developed the risk sharing payment model because Novartis has publicly expressed an interest in exploring alternative payment arrangements with payers (Also see "Novartis’ Shaw Pushing For U.S. Outcomes-Based Reimbursement" - Pink Sheet, 9 Jun, 2015.). Novartis has not yet announced any such agreements with payers.

Pharmacy benefit manager Express Scripts Holding Co. is interested in pursuing discussions about alternative payment models for Entresto, Chief Medical Officer Steve Miller commented during a recent public meeting.

“Novartis is very interested in doing a pretty simple approach to outcomes-based [contracting] for heart failure, especially because these patients end up in the emergency room so often,” Miller said at the National Cancer Comprehensive Network Policy Summit in Washington, D.C. Sept. 11. “This is truly a remarkable drug, so we’re excited about entering into something like that.”

However, he noted that defining patient endpoints is a key part of any risk sharing arrangement and that many outcomes-based contracts in the past have failed because of disagreements between manufacturers and payers over measuring endpoints. “The reality is that every single one of these experiments has collapsed under its own weight because the administrative overhead ate up the potential savings,” Miller said.

His comments were in response to questions about outcomes-based contracting. Miller did not elaborate on whether an endpoint such as CHF-related hospitalization would make such contracting more workable.

The outcomes data on Entresto contributed to ICER’s conclusion that the drug can be considered cost effective over the long-term based on commonly accepted cost effectiveness thresholds. The report estimates the cost effectiveness of Entresto (at list price) is approximately $51,000 per quality-adjusted life year (QALY), which is below generally-accepted thresholds for cost effectiveness of $100,000 to $150,000 per QALY.

QALY is a measure of health improvement attributable to a medical intervention, which takes into account both the quality of life and overall survival benefits. Treatments that cost less than or up to the $100,000 or $150,000 thresholds could be considered a better value than those costing more.

17% Price Discount Would Avoid Budget Impact

Nevertheless, when the cost of treatment with Entresto is considered in the context of the US health care system, the report recommends an annual reduction of 17% in its list price to avoid an unsustainable budget impact.

“When intervention costs and potential cost savings are evaluated on a population basis, and likely patterns of intervention uptake are considered, the annual cost of Entresto exceeds the potential budget impact threshold at which excessive cost burdens would be placed on the overall health care system,” the report states. “Our value-based price benchmark is therefore $3,779 annually for Entresto.”

The report notes that the recommended 17% price reduction is in line with typical price discounts that are already provided to payers.

ICER’s budget impact threshold is based on the assumption that health care costs should not grow faster than the US gross domestic product plus 1%. ICER estimates that new drugs should cost less than $904m per year to avoid driving health care cost growth rates above GDP plus 1%.

The reports projects that approximately 1.9 million individuals would receive Entresto at peak uptake, five years after launch. At full list price, the total budgetary impact of treating 1.9 million patients over five years “is approximately $17bn, or approximately $3.5bn in net cost growth per year, despite cost offsets,” which is “well above the budget impact threshold of $904m for a new drug,” the report points out.