Novartis’ recently approved ENTRESTO impressed regulators with stellar clinical outcomes, including a 20% reduction in the risk of cardiovascular death and hospitalization and a 16% improvement in overall survival compared to the standard-of-care ACE inhibitor therapy enalapril. ENTRESTO is expected to change the management of heart failure with reduced ejection fraction (HFrEF) and drive blockbuster sales in the process.
With such a large patient population and a quoted peak sales of $5 billion, Novartis is likely to face strong payer pushback in today’s drug spending environment. Novartis is proactively discussing with cost-conscious payers creative pricing models that demonstrate value for money. One such offer is reported to be a performance-based pricing scheme whereby ENTRESTO is initially offered at a discounted price with bonus payments expected once the drug meets the expectations of reducing hospitalization costs. Novartis is also considering partnering with companies to offer a remote monitoring technology service that detects early signs of patient deterioration while using ENTRESTO. In the U.S. alone direct and indirect costs for heart failure related conditions exceed $30 billion, $16 billion of which is driven by hospitalization costs, giving ENTRESTO the potential to drive significant cost reduction.
Novartis has agreed to outcomes-based payment models in the past (for instance, an arrangement with Humana Inc. for its MS drug GILENYA), but the likelihood of success for this arrangement for ENTRESTO is under scrutiny. Express Scripts’ CMO, Steve Miller has vocalized his criticism, arguing that with the complexity of heart disease it will be difficult to gauge the success of the treatment in reducing heart failure associated hospitalization events. According to Dr. Miller, what challenges this arrangement further is the absence of the necessary infrastructure to effectively monitor patient outcomes and assess whether ENTRESTO delivers on its promise.
Amid increasing price scrutiny, some in the pharmaceutical industry are attempting to sway payers by moving away from a pay-per-pill model and towards a model based on clinical outcomes and bundling creative add-on services intended to improve patient outcomes and demonstrate value for money. This attempted shift has the potential to increase in frequency in the U.S. in coming years given the number of high-cost drugs in the pipeline, increased budgetary concern, and payer consolidation. UnitedHealth, which now houses the third largest PBM in the U.S., has already agreed to a performance-based arrangement with Gilead for its HCV drugs and plans to do the same for the coming PCSK9 treatments. Despite this progress, schemes such as these and value-added services are unlikely to completely mitigate payer concerns over high launch prices and annual price increases in the specialty drug arena.