Are Manufacturers Willing To Do Outcomes-Based Pricing? Payers Are Skeptical

FDA/CMS Summit speakers say they've yet to see any real interest from manufacturers in putting money at risk if their products don't meet outcome measures.

Manufacturers have been avowing their commitment to try new ways of pricing their products based on value and outcomes, but payer representatives at Informa's recent FDA/CMS Summit in Washington, DC, expressed skepticism about how willing they are to follow through.

Speaking on a Dec. 15 panel about payment reform, Mike Funk, VP, Provider Development, Center for Excellence at Humana Inc., noted that he had heard pharmaceutical industry speakers on a previous panel discuss performance-based payment for drugs. They had expressed support for collaborating on the idea, but also noted barriers such as Medicaid best price regulations and limits on what they can tell payers about pharmacoeconomic data and other off-label drug information.

"The question in mind was: is the pharma industry really committed or are they just talking the talk?" Funk said.

"To me, if you are committed, we will begin to talk about how you are going to transform the way you do business. It will have to be a transformation, and it can't just be tweaking the edges," he said. "I think you start by becoming very transparent about your research and development [costs] and the cost of manufacturing that drug and you put that on the table along with a reasonable profit, and that's how you price your product. I think that's where you have to go if you're committed, as opposed to just talking the talk."

Transparency has become a central theme of payers' discussions about drug pricing (Also see "Drug Costs Now A Major Driver Of Insurance Premium Increases, Execs Say" - Pink Sheet, 26 Oct, 2015.). Even the acting head of CMS, Andrew Slavitt, is looking to pricing transparency as an area to explore to help bring prices down (Also see "HHS Drug Forum: CMS' Slavitt Highlights Price Transparency As One Key To Affordability" - Pink Sheet, 20 Nov, 2015.).

Funk added that payers are willing to pay for a drug that shows value, but that manufacturers also have to be willing to take a risk on their payments.

"I have yet to receive a rebate offer to consider that would adopt a performance-based outcome measure." – Utah Medicaid pharmacy director Chad Hope

"It's not just about driving the price down, down, down," Funk said. "We'll pay where there's value, but we also want you to put at risk of taking dollars off the table where there's not value. And you've got to be willing to join that game."

Outcomes-based contracts for drugs have been rare in the US, although one recent exception is Amgen Inc.'s pursuit of such pricing for its PCSK9 inhibitor Repatha (evolocumab) as it seeks to get preferred formulary status over rival product Praluent (alirocumab), from Sanofi and Regeneron Pharmaceuticals Inc. (Also see "Amgen's Repatha Gets Big Formulary Win With CVS Health" - Pink Sheet, 23 Nov, 2015.) Industry stakeholders, however, believe such a model is not really at a stage where it can be applied more broadly (Also see "Outcomes-Based Drug Pricing Still In Early Stages, HHS Forum Speakers Say" - Pink Sheet, 30 Nov, 2015.).

Chad Hope, the pharmacy director for Utah's Medicaid program, noted that while manufacturers are eager to show how much value their products provide, none have offered him outcomes-based pricing.

"I have yet to see a cost-benefit study done by a manufacturer that doesn't show that their product is the most cost-advantageous for a particular condition. … That being said, I have yet to receive a rebate offer to consider that would adopt a performance-based outcome measure or some kind of at-risk rebate," Hope said.

He expressed hope that the recent letter from CMS to manufacturers of hepatitis C drugs seeking to facilitate value-based discounts in Medicaid will lead to some progress in that area, and that the model would then expand to other therapeutic areas (Also see "CMS Wants To Facilitate Value-Based Discounts For HCV Drugs In Medicaid" - Pink Sheet, 6 Nov, 2015.).

Providers also are skeptical of manufacturers' attempts to demonstrate value, xG Health Solutions CEO Earl Steinberg said.

"I think that probably most providers are skeptical about whether pharma firms are truly interested in value transformation or whether they're interested in a program that's going to result in more of their product getting used," he said. He noted that manufacturers have the resources to sponsor programs that could benefit patients, such as patient adherence programs, but "we need to be sure that it's focused truly on value improvement and it's not a marketing tool."