Biogen Inc. is piloting approaches to value-based contracting for its multiple sclerosis drugs with four agreements, executed in July.
Three of the agreements are with regional integrated health care systems – Harvard Pilgrim Health Care, Utah-based SelectHealth (part of Intermountain Healthcare) and Moda Health, based in Oregon. Biogen has also contracted with pharmacy benefit manager Abarca Health, which is headquartered in Puerto Rico. They are Biogen's first value-based contracts for MS drugs, a company spokesman said.
The products involved vary based on the individual agreements but each deal includes one or more of Biogen's MS drugs, the spokesman added. The company is not specifying which drugs are covered in specific contracts, he said, but "most of our products are included in at least one of the agreements."
Biogen drugs marketed in the US for MS include the blockbuster Tecfidera (dimethyl fumerate), the interferons Avonex (interferon B-1a) and Plegridy (peginterferon B-1a) and Tysabri (natalizumab). US sales for Tecfidera continue to grow but sales are slipping or flat for the other drugs (see box).
All the products are facing an increasingly competitive market with attendant pricing pressure from payers. Genentech Inc.'s recently introduce competitor to Tysabri, Ocrevus (ocrelizumab), is stirring up the market with a unique indication for primary progressive MS and a list price that is at least 20% less than competitors, according to analysts. (Also see "Roche Set For Disruptive Entry To MS Market With 'Brave' Ocrevus Pricing Strategy" - Pink Sheet, 29 Mar, 2017.)
Biogen's contracts are designed to test two different approaches. Three of them focus on "outcomes-based measures that tie pricing terms to an annualized relapse rate for their populations in exchange for favorable access of our product(s)," the spokesman explained.
"This outcomes-based approach has also allowed our teams to engage in deeper, more meaningful conversations with these payers about MS as a disease state and the impact that our products have on patient lives." The fourth agreement "provides an incremental discount based on patients who discontinue our therapies within the initial weeks of treatment."
The pilot program appears to be aimed more at laying the groundwork for future value-based agreements than for generating savings.
"We believe this pilot will provide valuable information that we can apply to future contracting approaches as we work to tie the pricing of our products to the clinical value and expand formulary access for patients," Biogen CEO Michel Vounatsos explained during the company's earnings presentation July 25.
The amount of risk involved "is fairly small relative to the cost of the drug so I think the main benefit will be…to affirm that we can actually put these types of agreements in place and manage and monitor and do a true up, versus one that will materially impact our spend," Harvard Pilgrim Chief Medical Officer Michael Sherman added in an interview.
The contract with Biogen is Harvard Pilgrim's first for MS drugs, Sherman said, and it involves "multiple" Biogen products.
Pharmacy benefit manager Express Scripts Holding Co. recently announced a value-based program for multiple sclerosis in which the PBM will reimburse its payer clients for the first three fills of a preferred drug dispensed by its Accredo specialty pharmacy if a patient discontinues treatment drug within the first three months. The PBM has not disclosed what drugs are involved in the program.
Novartis AG is also developing outcomes-based contracts (OBC) for its multiple sclerosis treatment, Gilenya (fingolimod), a spokesman said in an email. Gilenya is a "good candidate for an OBC because there is a measurable outcome" – annual relapse rates – and "data to evaluate is accessible," he explained.
Most Value-Based Contracts Still Just 'Window Dressing'?
Biogen's efforts in value-based contracting represent progress in the field but also feed the perception that such arrangements are still a long way from providing payers an effective solution to the problem of rising drug costs.
"Value-based contracts are going to be essential to the pharmaceutical industry going forward," RealEndpoints CEO Roger Longman said in an interview. "It’s the direction that the rest of health care is moving." But "the issue right now is we're not really seeing value-based contracts that are meaningful" in a way that is "going to be required to solve the pricing challenge that this industry is facing."
Contracts should involve more significant risk to revenue in order to be more than just "window dressing," he added. Health plans need to justify to their customers, the employers and pension funds, that "the pharmaceutical expense is actually delivering value." And biopharma companies need to "demonstrate the value of their products to get the kind of prices they are worth." RealEndpoints is a reimbursement and analytics advisory firm.
In addition to aligning prices with value for products already on the market, companies should also think about value-based contracting in the context of drugs in development, Longman pointed out. "Value-based contracts can in fact significantly influence a development program and change directions in interesting ways."
It's "a different way of thinking about drug development from the point of view of appropriate commercialization, and requires companies and R&D execs to look at and understand different kinds of economic and health economic metrics," he suggested.