Harvard Pilgrim Health Care has negotiated contracts for a pair of mass-market medicines that will base the insurer’s costs on the drugs’ effectiveness.
The new pacts, set to be disclosed Monday, cover Entresto, a heart failure treatment from Swiss drug maker Novartis AG, and Trulicity, a diabetes drug from Eli Lilly and Co.
Under the contracts, both will be listed as preferred therapies on Harvard Pilgrim’s roster of medicines for which the Wellesley-based company pays claims. enabling its customers to pay less out of pocket in co-pays than they would for rival drugs. Both drug makers also agreed to pay Harvard Pilgrim rebates if their treatment fails to meet certain performance measures.
Such contracts, which are becoming more common for some therapies, are part of an effort by health insurers and consumers to push back against rising prices for the prescription medicines that account for a growing share of health care spending.
While rivals Blue Cross Blue Shield of Massachusetts and Tufts Health Plan hire an outside contractor called a pharmacy benefits managers to negotiate most of their drug prices, Harvard Pilgrim has been doing its own negotiations and taking an aggressive stance on prices.
Early last year, it became the first regional health insurer to negotiate a discount of a costly hepatitis C drug made by Gilead Sciences Inc. That contract, which was not outcomes-based, has saved Harvard Pilgrim and its customers between $5 million and $10 million, said Michael Sherman, the insurer’s chief medical officer.
An earlier outcomes-based contract for a cholesterol drug from Amgen Inc. has yet to result in similar savings, partly because the drug has not been prescribed in large numbers, he said.
Harvard Pilgrim didn’t disclose what it was paying for either drug. Trulicity carries a list price of about $7,400 a year per patient, and Entresto about $4,600 per patient. Insurers typically negotiate discounts, while public payers such as Medicare and Medicaid are given discounts, and insured patients have different co-pays depending on their health plans.
Sherman said Harvard Pilgrim is also negotiating an outcomes-based contract for another drug that he declined to name. He said the contracts protect the health plan and its customers if the drugs don’t work as intended, but he would rather not receive any rebates.
“What we’d like to see is more people moved from the drugs that aren’t higher value to the drugs that are higher value,” he said. “That reduces hospitalization, which is more important than the rebates. We don’t want to go back and say, ‘Your drug isn’t working.’”
Each potential rebate is structured differently. Novartis agreed to refund money if Entresto doesn’t reduce hospitalization for congestive heart failure by a certain percentage. Entresto showed a 20 percent reduction in hospitalization compared with a different kind of heart failure drug in clinical trials. Eli Lilly, meanwhile, agreed to pay a rebate if Trulicity didn’t result in a hemoglobin measure in diabetes patients 8 percent lower than four competing drugs.
Not every drug maker has been open to the kind of value-based pricing contracts pursued by Harvard Pilgrim and other health plans. But in markets where there are two or more rival therapies, such contracts can be advantageous to both parties.
“This provides us with a very innovative way to stand behind the benefits that Trulicity provides,” said Tony Lawson, director for payer strategy at Eli Lilly’s diabetes drug business in Indianapolis. “If we’re successful, everyone wins. We benefit from better contract terms, and Harvard Pilgrim and the patients it covers benefit from improved outcomes.”