July 10
Katie Thomas and Charles Ornstein
More than a decade ago, Italy tried a novel approach to help bring down drug costs: asking pharmaceutical companies to return money to the national health system if some of their medicines failed to work as expected. The effort largely flopped.
The Trump administration is now considering whether to encourage a similar approach. Pharmaceutical executives presented the idea to President Trump at a meeting in January, and the general concept was raised last month in a draft executive order aimed at combating rising drug prices.
A number of drug companies have recently entered into such deals, which they call outcomes-based contracts. Merck has done so for its diabetes drugs Januvia and Janumet, promising to return money if patients’ diabetes did not meet goals for control. And Novartis, which makes the heart failure treatment Entresto, is refunding money if too many patients taking the drug are hospitalized. In more typical deals, drugmakers pay rebates to insurers based on the number of drugs sold and to gain easier access for members to their products.
But there is scant evidence this new approach lowers costs. Pharmaceutical companies still set the drug’s list price and have to agree to the criteria upon which they will be measured. Some experts say such arrangements are a ploy to deflect attention from substantive changes that could hurt companies’ bottom lines, such as allowing Medicare to negotiate drug prices. Moreover, the savings don’t always trickle down to consumers.
“Most of them get launched with great fanfare,” said Dr. Steve Miller, the chief medical officer at Express Scripts, which manages the drug benefits of more than 80 million Americans. “But then you never hear anything about it after the launch because most of them collapse under their own weight.”
In a recent note to investors, David Maris, an analyst at Wells Fargo, described the approach as a “carnival game” and said he did not know of any such arrangements “where a drug company did not consider it a win for them.”
