Drug companies are beginning to base the prices of their products on how well they improve patients’ health, according to the New York Times.
Today, health insurer CIGNA and drug maker Merck announced the latest agreement that pins the prices of drugs to their effectiveness. The deal could increase discounts to patients who use oral diabetes medications Januvia and Janumet.
Last week, Procter & Gamble in Cincinnati, Ohio, and France’s Sanofi-Aventis — the two companies that sell osteoporosis drug Actonel – said they would experiment with reimbursing insurer Health Alliance for the cost of treating non-spinal fractures among women who take the medication, according to Reuters news service.
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Some experts hail such deals as a step toward outcomes-based medicine, which the Obama administration and others hope will limit the nation’s skyrocketing health costs. Such agreements could — in theory — better align incentives for drug companies, insurers and employers that pay for health care with improving people’s health, the Times said.
As part of the latest deal, CIGNA would review lab results for people taking any diabetes drug — not just Merck’s drugs — in a year. If certain of the patients’ laboratory values have improved, Merck would further discount the prices of its two diabetes drugs to CIGNA customers.
The insurer also would review lab data for people who use Januvia and Janumet to tell whether the patients are taking the drugs as prescribed by their doctors. If they are, Merck also would increase its discount on the drugs.
What would CIGNA get out of the deal? If anti-diabetes drugs are deemed effective, the insurer (and its customers) would pay less for Merck’s drugs, over time. In addition, the drugs — when used with diet and exercise — could lead to better control of diabetes, a chronic disease that has reached epidemic proportions in the United States.
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If diabetes is better controlled, it could mean fewer complications for patients, and fewer hospital stays, procedures and other care for which the insurer pays.
What would Merck get out of the deal? If its drugs are better at controlling diabetes and it lowers their price, CIGNA would have an incentive to keep patients on the drugs.
As part of the agreement, Merck also would get better placement of its diabetes drugs in CIGNA’s formulary, meaning lower co-payments for patients than for some other branded drugs, the Times said.
Other stories worth a read:
- Health plans lose members to layoffs (Wall Street Journal;, subscription required)
- New Medicare bidding rules for medical equipment take effect, stir up industry (Cleveland Plain Dealer)
- Health agencies fight AIDS, syphilis online (Columbus Dispatch/Associated Press)
- Michigan State researcher develops vaccine for strain of E. coli (MSU News)
- Reworking the broken R&D model (Motley Fool)
- Clinical testing firm that approved bogus medical experiments will go out of business (Minneapolis-St. Paul Star Tribune/Associated Press)
- Could hospital lending be picking up? (FierceHealthFinance)
- Canton hospitals battling in court (Akron Beacon Journal)
- Ingenious Med gets $1 million (Atlanta Business Chronicle)
- Recession hits large hospitals hard (FierceHealthFinance)
- University Hospitals plans center in Medina (Akron Beacon Journal)
- Hospitals battle over newborn intensive care (Dayton Daily News)
- Cleveland Clinic: Beauticians learning cancer prevention (WKYC-TV)
“Magic Pills” photo illustration by Flickr user e-magic.