Performance-based pharma pricing comes to US payers

An agreement that bases Merck’s diabetes drug pricing on how well patients’ blood-sugar control (A1C levels) improves has been signed with Cigna (Bloomfield, CT). In an interesting twist, though, this pay-for-performance agreement gives Cigna bigger discounts for better patient health—in effect, Merck patients’ better health will cost Merck money.

Pay-for-performance agreements between drugmakers and insurers are being tried in Europe, where newly introduced drugs from GSK, among others, have been offered. But there, the dynamic is that the insurer pays a higher price when the drug has successful results, and the drugmaker receives less or no reimbursement when the drug doesn’t work.

According to the agreement, Cigna will review available A1C lab values for people taking any oral anti-diabetic medications, and, if at the end of the year, A1C values have improved, the discounts Merck offers on Januvia and Janumet will increase. In an effort to help improve medication adherence, Cigna will also review claims data for individuals with Cigna pharmacy benefits who are on Januvia or Janumet during that same time period to determine if these individuals are taking the medications as prescribed by their physicians. If they are, Merck will increase the discounts it offers Cigna on these medications even more.

Through the agreement, Cigna has an incentive to get its members to improve medication adherence (and to exercise and do the other actions beneficial to diabetes care); Cigna also has programs for patient wellness (one is called Diabetes Outcomes Improvement Program). The lower pricing “can be shared in various ways with Cigna’s customers,” Cigna says—but doesn’t specify any direct benefit. For its part, Merck appears to be betting that the health improvement of its drugs will lead to greater use of them, which is a fairly conventional arrangement to increase discounting based on volume.

“Merck should be recognized as the first major pharmaceutical company to offer increased discounts on its oral anti-diabetic products, supporting CIGNA's efforts to reduce A1C levels for individuals with diabetes, regardless of what medication they may be taking,” said Eric Elliott, president of Cigna Pharmacy Management. “Improving people’s health comes first for both Cigna and Merck. We hope this agreement will become a model in the industry.”

“Merck is pleased to partner with Cigna on this novel program to help encourage people with diabetes to achieve their blood sugar goals. We are confident in the value of both Januvia and Janumet, and the benefits they offer to the individuals that Cigna serves,” said Sethu Reddy, MD, Merck, regional director for scientific affairs.