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Posted on May 3rd, 2017 by Betsy Davis in Pharma R&D
When we purchase clothes that don’t fit right, we can typically return them to the store for a refund. If your new electronic gadget doesn’t work right, you get your money back. There’s even a brokerage firm that will return fees if a customer isn’t satisfied. So why shouldn’t the same philosophy apply to one of the most expensive, high-stakes purchases we make: pharmaceuticals?
In an article in STAT, Rita E. Numerof explains that to reign in growing health care costs, purchasers of drugs (hospitals, insurers, etc.) are becoming less tolerant of price increases and insisting on better proof that they actually work. “At the same time, drug and device makers need new ways to convince skeptical payers that their products are worth the price,” writes Numerof.
Amgen is one such drug maker, who, finding purchasers wary of the cost of their PCSK9 inhibitor Repatha, is enticing customers with money-back guarantees. John LaMattina of Forbes explains that the cholesterol-lowering drug can cost about $14,600 a year. As if the expense wasn’t enough, a recent study showed the drug wasn’t quite as effective as hoped. So Amgen came up with a solution that is standard in many industries, but is still rather novel in pharma: “Basically, if a patient has a heart attack while on Repatha,” says LaMattina, “the payer is eligible for a full rebate from Amgen for the drug’s cost.”
Seems reasonable, doesn’t it?
In Bloomberg Businessweek, John Tozzi contends that the government and private insurers have long wanted to get away from the fee-for-service system and instead turn to contracts that actually reward better outcomes. “The changes in the reimbursement model are rippling out to manufacturers of drugs and devices. The shift could help address a long-standing problem with medical advances: The benefits observed in carefully designed clinical trials don’t always materialize when a treatment is deployed in the real world.”
Tozzi notes that many private insurance firms are pressuring drug companies to offer a guarantee that their costly medicines will work as expected. UnitedHealth Group’s OptumRx, for example, has negotiated “pay-for-performance” deals for hepatitis C drugs that can run as high as $1,000 for a single pill.
In the UK, GlaxoSmithKline decided to include a “warranty” with Strimvelis, a gene therapy for the rare disorder known as ‘Bubble Boy syndrome’. “Healthcare providers have been reluctant to pay for it, as it costs around £500,000 per patient,” reports Sarah Knapton in The Telegraph. But, in this case, GSK has reason to be confident in their offer, as over a decade of trials have shown all patients appearing to be cured.
These are notable examples of recent money-back guarantee medicines, but is it really a trend? Back in 2005, MM&M suggested it might be, noting that Novartis, Eli Lilly and Bayer had tried offering such guarantees. And yet, ‘money-back madness’ did not appear to take the industry by storm back then. Could this just be another mini-trend that companies will experiment with, then abandon?
It may depend on how well drug makers are able to handle the challenges of this model. For instance, not all patients follow directions correctly, which could reflect badly on the drug, making it necessary for companies to find ways to monitor patient use. And putting a money-back plan into place can also be more complex. In the case of Amgen’s Repatha, LaMattina explains that there is no one-size-fits-all arrangement, and that the guarantee is not a ‘lifetime’ guarantee either. “There is a time limit set in each contract as to how long Repatha is expected to protect the heart patient,” writes LaMattina, and that time limit is negotiated with the individual payer.
A guarantee based on positive outcomes is sure to be popular with consumers and purchasers, but whether or not pharmaceutical companies will embrace outcome-based pricing on a larger scale remains to be seen. When it comes to pharma forecasting, there are truly never any guarantees.
All opinions shared in this post are the author’s own.
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