Biogen, Merck Use Predictive Modeling to Better Negotiate Value-Based Contracts

Drug-makers utilizing this strategy to better understand the value of their products

Biogen spent a year building a framework that seeks to predict outcomes for certain patient populations taking its drugs, in an effort to strike better value-based pricing deals with payers, according to a recent MM&M Online article.

Jen Norton, Vice President of Market Access for the drug-maker, explained that the framework was created by analyzing historical claims data to define certain benchmarks that would aid its discussions with payers when negotiating these deals. 

That framework, which the company finished in early 2017, allowed the company to come better prepared for those discussions. “When we came to the table, we had a practical solution in place,” Norton said.

Biogen currently has four value-based agreements with U.S. payers. Norton did not disclose what drugs are covered by those agreements but noted that “we've covered most of our multiple-sclerosis portfolio.”

The agreements tie the drug's value—usually in the form of the rebate provided by the payer to the drug-maker—to a patient's relapse rates. In the future, Biogen plans to “look at other ways we can measure patients’ outcomes besides strictly relapses.”

“As an industry we're still working through ways to truly tie price to that value that's realized by the patient,” Norton said. “Building a model that's thorough, that's measurable, that's objective, and to figure out how to measure that value is the critical step where we're at today.”

Value-based pricing contracts have been heralded as one possible solution to high drug prices, and predictive modeling is one of the newer strategies drug-makers are using to better understand the value of their products. For payers, the benefit of value-based contracts is that they will pay less for drugs that don't work as advertised. For drug-makers, the contracts can help ensure that patients have access to their drugs.

The jury is out on whether the contracts lead to better savings for patients. In 2006, Italy's health system experimented with value-based pricing deals with drug-makers. Doctors tracked whether patients met certain goals tied to a particular drug, and then pharma companies reimbursed the health system based on the drug's performance. But, in 2015, researchers looked at that experiment and said the amount refunded by drug-makers was “trifling.”

That hasn't stopped drug-makers from moving forward with new deals in the U.S., however. And yet, both drug-makers and payers are still struggling with how these deals should be structured and what these deals will look like if they become more widely adopted.

To hear Michael Sherman, Chief Medical Officer of Health Services at Harvard Pilgrim Health Care, tell it, drug-makers are still reticent to take the risks required to truly drive savings. Harvard Pilgrim has 12 value-based contracts with drug-makers, as of June, according to Modern Healthcare, including deals with Eli Lilly for Trulicity (dulaglutide) and AstraZeneca for Bydureon (exenatide synthetic).

“Most agreements are a step in the right direction,” he said during a recent Evercore ISI webinar, “[but] we're going to need more skin in the game [from drug-makers], more of these all or nothing agreements, not just small percentage points.”

So, what does “more skin in the game” look like? Harvard Pilgrim's deal with Repatha (evolocumab, Amgen) is the best publicly available example. If a patient taking Repatha has a heart attack, Amgen refunds the full cost of the proprotein convertase subtilisin/kexin type 9 inhibitor, which has a wholesale acquisition price of $14,100. The likelihood of a patient having a heart attack while on Repatha is estimated to be 3.5%, according to Memorial Sloan Kettering's Drug Pricing Lab.

Why Amgen's deal with Harvard Pilgrim for Repatha is the exception and not the rule is that drug-makers still don't fully understand all their options when negotiating these deals, experts say. 

To that end, Merck, which said it has more than 10 value-based contracts with U.S. payers, partnered with pharmacy benefit manager Optum to simulate the outcomes of various reimbursement models in value-based contracts. Merck first started engaging in value-based contracts in 2009 with Cigna for its diabetes drugs Januvia (sitagliptin phosphate) and Janumet (metformin hydrochloride/sitagliptin phosphate). This is the drug-maker's first long-term collaboration using predictive modeling to design and test different value-based contracts.

“This is not a new and emerging field,” said Susan Shiff, Senior Vice President and Head of Merck's Center for Observational and Real-World Evidence, “but we still didn't feel like we had a really good handle on what the optimal ways to structure these contracts were [so that] we're improving patient outcomes with rational resource optimization.”

Merck's simulated models, like Biogen's, are also informed by claims data—specifically, Optum's integrated claims and clinical records. Through the collaboration, Merck aims to develop and use predictive models to better understand the different types of contracts it may want to strike with payers. Merck and Optum also plan to share their learnings with publications once it's finished, with a goal of sharing early results by the end of 2018. “We want to move this field forward,” Shiff added.

While payers and drug-makers say they both want these contracts to lead to better patient outcomes, the chance for the pharma industry to regulate itself—before possible executive and legislative action on the issue of drug pricing does it for them—is a significant incentive, according to Harvard Pilgrim's Sherman.

“[Drug-makers] are worried about regulation,” he said during the webinar, when asked what's driving pharma to the negotiating table with payers.

Over the last year, lawmakers and President Donald Trump have floated ideas to allow pharma and payers to initiate more of these contracts as well as with other measures that would more directly seek to control drug prices.

In June, Politico reported that the White House was working on an executive order to take “action on the high cost of drugs.” The Senate Health, Education, and Labor Committee also held the first of three hearings on drug pricing on June 13, though the two subsequent hearings were postponed due to the fiery debate around repealing the Patient Protection and Affordable Care Act at the time. BioCentury also wrote that a possible executive order would “instruct executive agencies to use value-based contracts for drug purchases.”

In Sherman's view, value-based pricing agreements will continue to engender more support from both payers and drug-makers. They aren't a “radical [idea]” he said. “It's about paying in a way that is commensurate with what is provided… we have a broad agenda of trying to manage cost.”

Source: MM&M Online; August 15, 2017.