N.H. health insurance contract pays less to drug companies if their medicine proves less effective

Monitor staff
Published: 4/4/2017 12:10:58 AM

Harvard-Pilgrim Health Care said it will reduce payments to two pharmaceutical giants if evidence indicates that their drugs aren’t working well, part of a trend to pay for health care based on patients’ outcomes rather than the amount of services used.

“We think it’s a good thing, a positive step,” said Tyler Brannen, health care policy analyst with the New Hampshire Insurance Department – although he noted that many details must still be seen, including what effect this will have on payments made by patients.

Harvard-Pilgrim has signed a half-dozen such contracts in the past year or two, as have several other insurance companies. Aside from potentially cutting pharmaceutical costs, they have the side effect of potentially shaping how and when drugs are used.

Insurance companies “are operating under a number of assumptions represented by research that was often funded by the drug industry. Now it’s being tested in the real world – that’s great,” Brannen said.

“One of the benefits, aside from dollars, is that we’re collecting data,” said Michael Sherman, chief medical officer for Harvard-Pilgrim. “If we find, for example, that a new diabetes drug is more effective, we may change (procedures) … perhaps try drug A before drug B. This gives us more data to do so. That is exactly part of the intent of these contracts.”

“This alone will not solve the challenge of drug costs, but it is one of the tools at our disposal,” he said. “The fact that we (insurers and drug companies) are sitting down discussing how to balance their desire for market access and our wishes for affordability, rather than finger-pointing, I think is beneficial.”

Harvard-Pilgrim has been operating in New Hampshire since 1997 and has 177,000 members in the state.

The two contracts that Harvard-Pilgrim announced in March involve the rheumatoid arthritis drug Enbrel, made by Amgen, and the osteoporosis drug Forteo, made by Eli Lilly. The companies agreed to charge Harvard-Pilgrim less if they don’t meet certain criteria.

For Forteo, which must be self-injected daily for two years and no more, the criteria involves evidence from refill records that patients are taking the drug as necessary. Getting patients to take the entire course of medication prescribed by doctors is often difficult – people tend to stop taking medicine when they start feeling better – and can seriously affect outcomes.

For Enbrel, the evidence involves six measures of patient well-being, including whether they are using more or alternate drugs or are seeing doctors more often.

Details are proprietary, but Sherman said the insurer has signed a half dozen such contracts in the past year and half involve potential cost reductions ranging from 5 percent to 50 percent.

“In health we’ve been moving ... toward paying for outcomes for providers and away from fee-for-service,” he said. “Pharmaceuticals were lagging, getting paid per pill whether or not they had any impact. A couple of years ago we started working on that.”

The goal, he said, was to cut the insurer’s costs and help patients.

“We spend $1 out of every $4 on drugs,” said Sherman. “Reducing our drug costs is one goal, but another positive outcome may be that we redirect dollars from drugs that are not effective to drugs that are effective.”

Other insurers, including giants like Aetna and Cigna Corp., have signed similar outcome-based contracts with drug companies. These often involve relatively new drugs that lack a long track record, which leaves the insurance company with less certainty about the cost-benefit balance of its payment schedule. Also, new drugs tend to have less market share – in particular, Medicare Part D blocks new medicines from its formulary for the first six months they are on the market – which makes drug companies more willing to negotiate.

Brannen said outcome-based contracts could act as extended field trials for drugs, showing whether conclusions reached by researchers apply long-term in ordinary use.

“In published research, the effectiveness may not be all that great, not all that high, and perhaps mainly for a certain age group or a certain condition type,” he noted. Data gathered from thousands of patients can hone those results and might even change how a drug is used – if, for example, patients who don’t follow through on taking the medication have health results similar to those who do.

This benefit, however, faces a complication: Different firms with different goals must share information that they might regard as proprietary.

Sherman said Harvard-Pilgrim was developing procedures for sharing data they gather, particularly with medical researchers.

“We haven’t talked about that a lot. Theoretically, if researchers wanted access to data, we could share it,” he said, adding, “We hope to gain sufficient data to publish ourselves.”

Sherman said insurance and pharmaceutical companies were developing ways to share information from databases without the delay of individual requests and pulling records, while maintaining patient privacy.

One concern raised about these contracts is monetary: Whether financial benefits will flow down to patients.

So far, Sherman said, savings related to these contracts were being used “into keeping premiums affordable for everyone, rather than allocating them to a specific person,” although that might change.


David Brooks bio photo

David Brooks is a reporter and the writer of the sci/tech column Granite Geek and blog granitegeek.org, as well as moderator of Science Cafe Concord events. After obtaining a bachelor’s degree in mathematics he became a newspaperman, working in Virginia and Tennessee before spending 28 years at the Nashua Telegraph . He joined the Monitor in 2015.



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