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Yet another health plan is aggressively pursuing deals with drug makers based on patient outcomes. In the latest instance, Harvard Pilgrim Health Care, which is the second-largest health insurer in New England, has reached agreements with Novartis and Eli Lilly to calibrate payments for two of their most important medicines.

In one deal, the insurer will receive a discount from Novartis if its new Entresto treatment for congestive heart failure does not yield a specified drop in hospitalizations. In the other, Harvard Pilgrim agreed to accept a lower rebate from Lilly if its Trulicity diabetes drug lowers hemoglobin A1c levels — a common way to track the disease — better than rival medicines.


“Paying for value for drugs is an obvious way to go,” Michael Sherman, Harvard Pilgrim’s chief medical officer, told us. “The pharmaceutical industry is recognizing greater potential for regulation [on pricing], so I think they’re thinking more creatively and are more open-minded about how to develop contracts where cost is somehow related to outcome.”

In these arrangements, which have occurred more frequently over the past year, a health plan may get an extra discount from a drug maker if a medicine does not help patients as much as expected. In another variation on this theme, a drug maker may instead receive a credit toward a rebate that is provided to a health plan.

A survey released last week found that most health plans would like to pay for many of the highest-priced medicines, notably hepatitis C and oncology drugs, based on patient outcomes. However, more health plans are wielding these types of contracts for other drugs, according to Avalere Health, a consulting firm that conducted the survey.


Harvard Pilgrim, in fact, reached such a deal last fall with Amgen, which sells Repatha, a new type of cholesterol-lowering treatment. Last month, Cigna reached a similar deal with Amgen, as well as Sanofi and Regeneron Pharmaceuticals, which jointly market a rival medication. Both are injectable medications known as PCSK9 inhibitors that cost roughly $14,000 before any rebates.

The move toward so-called value-based contracting reflects accelerating costs for prescription drugs. Last year, Sherman said these accounted for 26 percent of overall spending, and amounted to between $600 million and $700 million, although he declined to be more specific. Overall, US prescription drug spending rose 12 percent last year to nearly $425 billion, according to IMS Health, the market research firm.

For drug makers, such agreements may make the difference between success and failure in the marketplace. Novartis began pursuing these deals with health plans earlier this year after the Entresto launch foundered over the $4,560 annual list price. Approved just a year ago, the company agreed to value-based contract last winter with Cigna and Aetna, two of the largest US health insurers.

Similarly, Lilly is betting its Trulicity diabetes treatment, a once-weekly injectable, will outshine rival medicines known as GLP-1 receptor agonists. This is a highly competitive category — other companies selling such medicines include Novo Nordisk and AstraZeneca — and so Lilly is willing to go the extra distance by offering insurers discounts on head-to-head comparisons.

“It’s not rocket science to think about paying for value,” said Sherman. “Unfortunately, the pharmaceutical companies have been slow to adopt this. “Until recently, what I’ve gotten back [in discussions] is reasons why they can’t. But now, that’s starting to change.”