Novartis' deal with insurers could signal new wave of drug pricing

The recent performance-based deal that Novartis cut with two insurance giants could signal the beginning of a new approach to drug pricing, according to a Bloomberg editorial.

Novartis struck a deal with Cigna and Aetna that allows the insurers to pay based on how well the heart medication--Entresto--improves the health of customers. Entresto sales fell far short of expectations in 2015, Bloomberg Gadfly columnist Max Nisen points out. Instead of simply raising the price of the drug to make up ground, Novartis opted for a pay-for-performance approach in an effort to reach more patients and gain a better foothold in a market in which payers are often leery of new, expensive heart medications.

Novartis isn't the only manufacturer that could benefit from this approach, Nisen adds. Regeneron has experienced similar sales shortfalls with its cholesterol drug Praluent, and Amgen already has a "small-scale" value-based deal for its cholesterol medication, Repatha.

If the Novartis deal works out, it could kick off a new wave of value-based drug deals. Novartis CEO Jim Jimenez has been an outspoken proponent of a pay-for-performance structure, arguing that the current payment approach does not have long-term viability. Although payers and providers have shown a willingness to adopt a new drug pricing model, Jimenez has said the industry still faces barriers such as resistance from physicians and concerns about medical privacy. There also must be improvements to the IT infrastructure to accurately measure outcomes.

To learn more:
- read the Bloomberg editorial

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