Healthy Skepticism Library item: 11771

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Publication type: news

Whalen J.
Europe's Drug Insurers Try Pay-for-Performance
The Wall Street Journal 2007 Oct 12B1
http://online.wsj.com/public/article/SB119214458748556634.html

Full text:

To overcome European state-run health-care systems’ increasing stinginess about paying for new drugs, some pharmaceutical companies are taking a novel approach: pay for performance.

Johnson & Johnson has promised to reimburse Britain’s National Health Service when patients don’t respond to the U.S. company’s blood-cancer drug Velcade, in a deal expected to start later this month. In France, J&J has made another agreement on its schizophrenia treatment, Risperdal Consta, offering to pay back the French health-care service some of the money it spends on the drug if tests don’t show the injectable medication helps patients stay on regular doses.

And France’s health-care service says it has discussed pay-for-performance contracts with GlaxoSmithKline PLC, but won’t reveal details. A Glaxo spokeswoman says the company has talked with European governments about “pricing-for-value” deals, but declined to provide specifics.

Drug companies are offering these deals instead of simply lowering prices in part because they are fearful of setting precedents that would cause insurance payers world-wide to demand price cuts.
J&J spokeswoman Kate Purcell says J&J decided to offer a rebate on Velcade instead of lowering its price. “We know our drug works” and “don’t accept that our drug wasn’t cost-effective,” she says. British officials had recommended late last year that the NHS not pay for Velcade because they didn’t think the expensive drug was effective in enough people. A full course of Velcade can cost up to $49,000 per patient. J&J then offered to reimburse the NHS, in either cash or product, for patients who don’t respond adequately to treatment.

In the U.S., health-care payers — which include employers and insurance companies — have traditionally been more generous than European health-care services in paying for new drugs. Even so, Hartford, Conn.-based insurer Aetna Inc. is exploring pay-for-performance deals with drug makers, said Ed Pezalla, national medical director for Aetna Pharmacy Management.

“We are very interested and have tentatively started to talk to some pharmaceutical firms about how such arrangements could be structured,” he said, adding that it’s possible Aetna will sign such a deal in the next year. He declined to say which firms Aetna was talking to.

Aetna is considering a model in which pay would be based on how a drug was performing in a large group of patients, he said.

“I think there is definitely potential for [pay for performance] in the U.S. as pharmaceutical companies recognize they may want to take some responsibility for the claims they make on their medications,” he said. However, it would be hard to change U.S. drug pricing quickly because many companies already offer discounts and rebates based on sales volume to win placement on formularies, the lists of drugs that insurance companies cover.

Thom Stambaugh, chief pharmacy officer at Philadelphia-based Cigna Corp., says the insurer is also pursuing ways of making drug companies more accountable. For example, some makers of cholesterol-lowering drugs say their medicines prevent heart attacks. For the past year, Cigna has been asking them to consider paying for heart-attack care for any Cigna-covered individual who has a heart attack while taking the drugs correctly. So far, none has agreed.

“We want them to put their money where their mouth is,” Mr. Stambaugh says.

The increasing demands for drug companies to be accountable come after a rapid rise in prices over the past decade. In Europe, where powerful state-run health-care systems can effectively lock drugs out of the market if they decide not to pay for them, some governments have established strict controls, including examining the cost-effectiveness of drugs before agreeing to pay for them. That frugality has led to flat or declining sales in Europe for many drug companies.

The new type of agreements being tested in Europe raise new questions, such as how to determine when a rebate is in order. J&J proposed measuring the levels of harmful proteins in a patient’s blood after four courses of treatment. Britain’s National Institute for Health and Clinical Excellence, or NICE, endorsed the deal after making it tougher, insisting on rebates for patients who have less than a 50% reduction in blood protein levels associated with the disease.

Companies increasingly “recognize it’s a real challenge for the NHS, as it is for health systems around the world, to afford new health treatments, particularly where they are very expensive,” says Andrew Dillon, chief executive of NICE, part of the National Health Service.

In some cases, countries are asking for lengthy new studies of drugs in patients to prove their worth. When Johnson & Johnson introduced its Risperdal Consta schizophrenia treatment in France in 2003, it said the medication could solve a key problem: that many schizophrenics neglect to take their daily pills and suffer relapses.

Because J&J’s drug is an injection given every two weeks under a doctor’s supervision, the company reasoned the doctor would ensure the patient got his shot, J&J spokeswoman Brigitte Byl says. But J&J didn’t have data from clinical trials to prove this.

In February 2005, France’s health-care system agreed to pay J&J’s asking price of up to €191, about $270, for each injection — on the condition that the company pay for studies in patients to see whether Risperdal Consta really helps patients stay on their medication. If the studies show otherwise, J&J will have to reimburse France some of the money it spent on the drug. The company declined to reveal the amount it has agreed on. The results of J&J’s studies won’t be known for several years.

“We want evidence that new drugs improve the health of patients, that they are better than older drugs,” says Noel Renaudin, president of the French government committee that negotiated the deal.
In 2002, Britain decided that a class of drugs for multiple sclerosis called beta interferons wasn’t cost-effective. Patient support groups and the makers of the drugs — Schering AG, Biogen Idec Inc., Aventis SA and Serono SA — protested, saying the treatments offered long-term benefits that Britain wasn’t taking into account. Aventis is now a unit of Sanofi-Aventis SA and Serono is part of Merck KGaA.

The sides came to a compromise: The drug companies lowered the price of the drugs, and Britain agreed to pay for them and monitor their effectiveness in patients over 10 years. If the drugs don’t work well enough, Britain will pay even less in the future. The studies won’t be completed for another five years.

“We all just accept there is a limited health budget and one has to justify the treatment in one’s disease area as best as one can,” says Mike Boggild, a neurologist at the Walton Centre for Neurology and Neurosurgery in Liverpool who is helping lead the study.

Write to Jeanne Whalen at jeanne.whalen@wsj.com