Drugmakers offer performance-based pricing

Now here's an idea that is likely to win a lot of fans. Under pressure from insurance companies, pharmaceutical companies have begun to adjust what they charge for medications based on how well the meds improve patient outcomes.

First up in the U.S. tourney is Merck, which has agreed to adjust prices for diabetes drugs Januvia and Janumet based on how well they help Type 2 diabetics control their blood sugar. Another case involves two companies behind the osteoporosis drug Actonel, who agreed to reimburse insurer Health Alliance for the cost of treating any fractures suffered by patients taking the medication. (Makers include Procter & Gamble and Sanofi-Aventis.)

This approach stands in dramatic contrast to existing pharma deals, in which discounts and rebates for the drug flow from how much of it is used, not how patients fare. Pay-for-performance is common these days when it comes to paying providers, especially doctors, but for drugs, it's virtually unheard-of.

Perhaps the first deal of this kind emerged in 2007, when Johnson & Johnson agreed to offer a money-back guarantee which rebated payments for cancer drug Velcade if the drug didn't shrink a patient's tumors after a trial treatment. J&J made the offer after Britain's national health system tentatively decided not to pay for Velcade.

To learn more about this trend:
- read this piece in The New York Times

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