Drugmakers’ Money-Back Guarantees: an Answer to Rising Prices or a ‘Carnival Game’?

This article was produced in partnership with The New York Times.


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."


Robert Zirkelbach, a spokesman for the Pharmaceutical Research and Manufacturers of America, the industry trade group, said the approach was in keeping with a trend toward paying doctors and hospitals for the quality of care they deliver rather than the number of services they provide.


"We recognize that as science is moving forward, the way we pay for medicines needs to evolve as well," Zirkelbach said. The group has been promoting the idea in an advertising campaign.


To understand how these deals work, consider the one that the drugmaker Amgen made with Harvard Pilgrim Health Care, a nonprofit insurer in Massachusetts and one of the insurers to most aggressively test the concept. It has entered into at least eight such deals over the past two years. This spring, Amgen agreed to pay a full refund to Harvard Pilgrim if patients who took its pricey new cholesterol drug, Repatha, suffered a heart attack or stroke. Repatha is intended for patients with very high cholesterol levels, for which cheaper drugs, known as statins, do not work.


As part of such deals, insurers eased restrictions on which patients could gain access to the drug, said Dr. Joshua J. Ofman, a senior vice president at Amgen. Sales of Repatha and similar drugs have disappointed in part because insurers have been reluctant to pay for them given their price. Repatha can cost up to $16,000 per year.


If Harvard Pilgrim patients taking Repatha have a heart attack or stroke, they share in the refund, getting back all out-of-pocket payments that they have made toward the drug, said Dr. Michael Sherman, chief medical officer at Harvard Pilgrim.


Doctors who prescribe Repatha said the deals do not affect how they treat patients. "We're completely agnostic to it," said Dr. Frederic S. Resnic, chairman of cardiovascular medicine at the Lahey Hospital & Medical Center in Burlington, Massachusetts, who sees patients with Harvard Pilgrim insurance. The drugs are so costly that doctors still only prescribe them when patients really need them, he said.


Dr. Peter B. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York, is skeptical. He said the pharmaceutical industry is conflating setting drug prices based on the value they bring to patients and the health care system, which he supports, with negotiating givebacks when patients don't respond to drugs, which he sees as too little, too late.


The arrangements, he said, carried "bells and whistles" that made them look good in theory. "But as long as you control all the contract terms, it can be a lot of optics but no substance," he said.


Bach and others say the pharmaceutical industry is using this approach to justify seeking major changes to federal regulations that could benefit them even more — including rolling back a requirement that Medicaid programs for the poor get the lowest drug prices, and another that bars companies from giving kickbacks to health providers. The industry says the changes are needed to allow more flexibility in the type of deals they can offer.


Drug companies and insurers touted these contracts when they were announced, but participants in several deals either declined to comment recently or provided little information about their programs.


At a conference last month in Virginia, a senior director with Prime Therapeutics, a pharmacy benefit manager, offered a blunt assessment of such contracts, saying they were not cost-effective. But in a phone interview, his boss, David Lassen, the chief clinical officer, was a bit more measured, saying that though the deals carry promise, the work to track patient outcomes is expensive and burdensome. "In their current state, where they're falling short is where you look at the return on investment," Lassen said.


Sherman at Harvard Pilgrim said the deals would not work for every drug and that drugmakers typically showed no interest when there were no competing brand-name drugs that worked in a similar way.


Some pharmaceutical executives acknowledge the model should not be seen as a panacea. Leonard S. Schleifer, the chief executive of Regeneron, questioned how such pricing would work for a drug like Dupixent, an eczema drug his company makes that was approved this year.


"Are we going to start calculating the surface area of the rash that's improved?" said Schleifer, whose company has entered into some outcomes-based deals for Praluent, a competitor to Repatha.


Other drugmakers said proof that the concept works can be seen in the interest they are getting from insurers. "No one is going to enter into these contracts if they don't believe the prices they are paying are of good value," Ofman, of Amgen, said.


Italy's experience is instructive.


Beginning in 2006, the Italian National Health System negotiated deals with drugmakers for certain medicines. It required doctors to track whether their patients were meeting certain goals, and if they were not, the pharmaceutical company would reimburse a share of what it was paid.


In 2015, researchers studying Italy's experiment concluded that the amount of money refunded by the companies was "trifling."


"The performance of this system was very, very poor," said Filippo Drago, director of the Department of Biomedical and Biotechnological Sciences at the University of Catania in Italy and an author of the study. He attributed the low savings to the administrative complexity of tracking the results and said drug companies fought efforts to reimburse for bad outcomes.


Italy now asks drug companies to provide some of their products for free — at first. Manufacturers are only paid once results are demonstrated.


"This system is working very well," Drago said.


Correction, July 10, 2017: An earlier version of this article referred incorrectly to deals between drugmakers and health plans for coverage of drugs like Repatha. The deals made it easier for patients to gain access to Repatha through their insurer; they did not ease restrictions on which patients were prescribed the drug.


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Technical glitch not an after-effect of cyber attack: NSE
The National Stock Exchange of India (NSE) on Monday said that a technical glitch which impacted intra-day trading on some of its segments was not the result of a cyber attack.
"It is clarified that no such attack was observed leading to the technical glitch," said the stock exchange major adding that it did not shift the trade to the BCP (business continuity plans) website, as the preliminary assessment of the glitch pointed to a software problem.
"BCP mechanism is normally invoked during any disaster, hardware failure, connectivity-related issues. Preliminary assessment indicated a software problem. Secondly, the system was expected to be rectified quickly and shifting BCP site would have taken longer time."
The stock market regulator Sebi had earlier issued guidelines for all exchanges and depositories to have a BCP and disaster recovery site in the event of a natural calamity.
The technical glitch occurred during the early-morning trade session on Monday and impacted trading on the Cash and Future and Option (F&O) segments. The glitch was noticed after the NSE stock rates were found not in tandem with BSE (Bombay Stock Exchange) scrip prices.
The NSE's first two attempts failed to fully reopen the market. Finally, the third attempt resulted in resumption of full-fledged trading during the mid-afternoon session at around 12.30 p.m. in the cash and F&O segments.
However, stock brokers contacted by IANS said that though normal trade resumed after 12.30 p.m., some minor issues in the cash segment remained before being fixed at around 1.00 p.m..
"It restarted around 12.30 p.m. but some minor display issues on the cash segment remained till 1.00 p.m. The Futures segment operated seamlessly after the restart," a stock broker told IANS here.
After the incident, NSE referred the matter to its internal Standing Committee on Technology which comprises of public interest directors and technology experts to review "the problem" and approve measures to prevent recurrence of such glitches.
"The matter is being examined by the internal technical team and external vendors, to analyse and identify the cause which led to the issue and to suggest solutions to prevent recurrence," the NSE said.
Later in the day, Sebi directed the NSE to submit a "detailed report" on the technical glitch.
"Sebi has directed NSE to submit a detailed report on the matter. SEBI has also asked NSE to have a review of their business continuity plans and to submit a detailed plan as to what measures are going to be taken to avoid such recurrences," the regulator said.
"Sebi is also looking at the matter comprehensively and will interact with different stakeholders to explore as to what more needs to be done to avoid such recurrences."
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


Amarnath pilgrims leave Jammu for Valley despite attack
A fresh batch of 3,289 Amarnath pilgrims left Jammu for the Kashmir Valley on Tuesday despite a terror attack the previous day on a bus which left seven worshippers dead.
"A fresh batch of 3,289 yatris left Bhagwati Nagar Yatri Niwas in an escorted convoy of 185 vehicles around 3 a.m., on Tuesday for the Valley", officials said here.
On Monday night, seven pilgrims -- six women, one man -- were killed and 19 others injured when militants attacked an unescorted bus from Gujarat at Khanabal, Anantnag district on the Srinagar-Jammu highway.
The victims were travelling in the bus which was neither part of the escorted yatra convoy nor registered with the Shri Amarnath Shrine Board (SASB).
"The attack occurred at 8.20 p.m. All yatra movement which is protected by the security forces on the highway stops at 7 p.m. after which no movement of pilgrims is officially allowed," said a senior police officer.
The ill-fated pilgrims had performed the yatra and had boarded the bus at north Kashmir's Baltal base camp.
The officer said the militants first attacked a police bullet proof bunker at Khanabal and later a police check point.
"After retaliation from the police, the militants started firing indiscriminately. The bus of pilgrims, according to police, was caught the ambush," a police spokesman said.
The last known terror attack on the Amarnath Yatra was the killing of 30 persons, mostly pilgrims, in the base camp in Pahalgam in 2000.
The 40-day long yatra started on June 29 and will end on August 7. 
So far, nearly 1.40 lakh pilgrims have reached the cave shrine located at 3,888 metres above sea-level.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


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