Novartis Strikes Pay-for-Performance Deals for Heart-Failure Drug Entresto

When Novartis’ new heart-failure treatment Entresto was approved in July, the pharmaceutical company said the plan was to offer outcomes-based payments to insurers. Well, that plan has finally come to fruition as both Cigna Corp and Aetna Inc. have announced deals with Novartis that will allow them to pay for Entresto based on performance.

Neither insurer released extensive details about their respective plans, but Cigna revealed in a statement that the primary metric they will use is the reduction in the proportion of customers with heart failure hospitalizations. Meanwhile, Aetna told Reuters that their value-based agreement “is based on the drug replicating results that it achieved during clinical trials.” In clinical trials, Entresto reduced the rates of hospitalizations and cardiovascular death related to heart failure.

David Epstein, Division Head and CEO, Novartis Pharmaceuticals, hinted that the drug company had pay-for-performance deals in place with two insurers during an investor call on January 27, but he didn’t reveal who at the time. He did, however, explain the basics of such plans.

“The way that works is pretty straightforward,” Epstein explained in the call. “We agreed to a base rebate for the product that’s actually fairly modest and then, depending upon whether or not we achieved specific goals around reduced hospitalization and savings to the plan, the rebate would either go up or go down. And we think that’s going to become something that becomes more and more popular in the U.S. and around the world.”

Though pay-for-performance contracts are rare, they are not unheard of, especially in countries outside of the U.S. Last January, Johnson & Johnson’s Janssen agreed to a deal with England’s National Health Service (NHS) for its Hepatitis C treatment Olysio, in which the NHS would only pay if patients were cured after 12 weeks of treatment, according to FiercePharma. Gilead Sciences previously negotiated a deal in France that included money-back guarantees for several of its medications, according to FiercePharma. Other U.S.-based examples include Amgen’s value-based partnerships with CVS Health for Repatha in which the net price is linked to LDL cholesterol reductions as well as another outcomes-based deal from Novartis for its MS treatment Gilenya.

“When you buy other goods that don’t work you either take them back or get your money back,” Epstein told Reuters. “Our industry is a bit unique because historically if the drug doesn’t work it still gets paid for. I think that model will have to shift.”

Outcomes-based Pricing Has its Critics

Not everyone believes that performance-based contracts are the wave of the future. When Novartis first floated this idea back in July, Steven Miller, Chief Medical Officer of Express Scripts Holding Co., told Bloomberg Business that these types of deals are difficult to manage since so much is left up to the patients.

“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?” Miller told Bloomberg in a telephone interview. “If the patient isn’t adherent with taking the drug, is it the drug’s fault or the patient’s fault?”

Furthermore, Miller explained that the U.S. currently lacks the infrastructure to collect patient data. Additionally, Miller said it is not clear who would be responsible for collecting this data. He explained that he was having those very discussions with Novartis to try to determine how this could be achieved without being a burden to patients, payers, or pharma.

That challenge is something Novartis was well aware of back in July when the company started discussing these deals. The company told the Wall Street Journal that it was looking into remote monitoring and other digital health monitoring avenues to bundle with Entresto in order to help measure the drug’s performance. However, nothing about remote monitoring was mentioned in the company’s deals with Cigna and Aetna.

Can Entresto Overcome Its Struggles?

Entresto was projected to be a blockbuster for Novartis, but so far sales have not matched projections. The drug earned just $5 million in the fourth quarter of 2015, but Epstein feels the tide will soon turn.

During his conference call with investors on January 27, he mentioned that Entresto had been blocked by federal Medicare insurance for seniors, as well as from commercial insurers, as they evaluated the drug post-approval before adding it to their formularies. He said that Entresto has recently been added to the list of drugs covered for 70% of people covered by Medicare and 77% of patients on U.S. commercial plans.

“By mid-year, we’ll see this product is on a much better track and continues to have strong blockbuster potential,” Epstein told Reuters.

Entresto currently costs about $12.50 a day, or $4,560 per year, which is higher than analysts expected. According to the Institute for Clinical and Economic Review, an independent group that analyzes drug prices, the price should have been 9% lower.

But now that Entresto has finally being added to formularies and new pay-for-performance deals are in place that will offer the drug at a lower cost, we may soon learn if the drug can still meet its high expectations.


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