Best practice around value-based contracting, which involves tying reimbursement for drugs (or devices or digital health tools, etc.) to proof that they deliver improved outcomes or lower treatment costs, is an evolving science. Just ask Mark Vineis, VP of market access and commercialization for Novartis.
“Economically justified price is really in the eye of the beholder; we don’t have a societally aligned view of that,” said Vineis, while speaking on a panel at the MM&M Transforming Healthcare Conference this month.
That comment not only set the stage for the panel; it was also a lamentation of sorts on the launch experience for Entresto, the Novartis heart failure (HF) drug that became a case study in why hitting clinical endpoints is not enough to sway payers to extend coverage for a new drug.
Entresto jumped onto the market in 2015 with late-stage trial data showing the drug cut the rate of HF-related cardiovascular death by 20% vs. the leading ACE inhibitor. Given the pill’s combination of clinical efficacy, large treatable population (roughly 2 million patients) and premium price tag of $4,500 per year (which, by the way, the nonprofit research organization ICER ruled cost-effective), many analysts forecasted mega-blockbuster sales.
But something went wrong. Entresto generated just $21 million in sales in its first year on the market. A year later, sales weren’t much better, rising to $68 million.
It comes back to the need for societal agreement on economically justified price. Said Vineis, “We had a product, we value-based priced it, but we didn’t get value-based access.”
Never mind the fact that, about six months into the launch, Novartis actually inked performance contracts with Aetna, Cigna and Harvard Pilgrim, in which it agreed to a reduced price if Entresto didn’t lower hospital admissions.
As to why its launch failed to live up to the initial outsized expectations, Vineis said, “We got our forecast wrong…It ended up taking some pretty significant discounts to get that product [back into coverage].” The brand finally crossed the $1 billion threshold last year.
This doesn’t bode well for other drug makers counting on value-based contracting to provide early access. Yet this panel discussion on the future of value-based reimbursement, which doubled as a postmortem on the Entresto launch, revealed several important lessons for others wading into this fraught area.
First, be prepared to go granular with the data. Gauging the performance of the drug vs. standard of care must have proved difficult for Entresto. Even today, lack of patient-level data is still one of the main impediments to value-based reimbursement.
“There’s just an inability to define, at the patient level, how that patient is doing and whether the product returned the clinical value it said it would, or did it reduce other costs or increase other costs,” said Vineis.
He went on to say that “the ultimate best practice” would be absolute visibility to patient-level data and outcomes and what he termed “a patient-level price point.” Indeed, access to data is improving dramatically, integrating things like test results, medical care and pharmaceutical care into a clear view on how the patient is doing. “At some point, the technology will get us there.”
Next, brace yourself for a game of chicken. Even when the two sides agree on an economically justified price, and drug makers push carriers to remove obstacles like prior authorization, payers are justifiably nervous about allowing unencumbered patient access.
That’s probably why health plans put in place onerous prior authorization requirements on Entresto. Physicians, for their part, were initially reluctant to switch patients from other medications. The combination sunk the early launch effort.
It comes down to “Who’s gonna put their gun down first?” said Vineis, because whatever a payer offers the first drug maker will affect the volumes of the next population it’s trying to treat.
Third, push the envelope on risk. Look for real two-sided risk: if the product performs better than forecasted, net price should be higher. If it performs worse, net price should be lower. Current best practice are those value-based deals that look at total cost of care as some aspect of risk for both parties, integrating as much of total measurable clinical outcome and clinical cost from that patient as possible.
But most value-based agreements have weak upside and almost no downside component. In fact, several industry insiders I’ve spoken with say today’s performance-based deals are not yet delivering beyond the initial positive feelings generated by their press announcements.
That said, Vineis added, “Over the past year, we’ve started to see real value agreements—and I would call Entresto a best practice—those value-based agreements with national payers demonstrating that use of the product has reduced overall medical spend. We haven’t been able to translate that to our price point, so we’re still not there.”
Finally, think of ensuring the perception of value among all involved as a matter of finding the right balance.
“We’re still in a little bit of a nihilistic, zero-sum game where what the insurer, payer or manufacturer can negotiate is what’s called ‘price,’” said Vineis. “And from my personal experience, probably 90% of the pricing for pharmaceuticals is [based on] how much leverage does the payer or PBM have and how much leverage does the manufacturer have in its clinical class, and that determines some sort of agreement … We can do a lot better as an industry.”
After the conference, Vineis told MM&M by email, “It is fundamental for industry and payers to reach a positon of value-based pricing for value-based access, thereby sustaining innovation and society’s ability and willingness to pay for it.”
That’s ultimately where we have to go, or we may see a breakdown in society’s willingness to pay for future innovations. Amidst an iterative process as dynamic as value-based contracting, the rules of engagement are still being written.