Pharma turns to pay for performance pricing amid criticism on drug costs

Pharmaceutical giants are turning to a new method to address high prices: refund some money to insurers if a treatment doesn't work as expected, reports Bloomberg.

Here are five things to know.

1. While the concept of pay for performance in the drug industry isn't new, the number of these agreements between drugmakers and payers has grown in the past year amid growing scrutiny of drug prices, according to the report.

2. Cigna Corp. has entered seven outcomes-based deals since 2009, according to the report. Danish drugmaker Novo Nordisk recently signed its first pay-for-performance contract with Humana for the diabetes treatment Victoza. Novartis, Merck & Co., Amgen, Sanofi and Eli Lilly & Co., have also signed similar contracts with various insurers in the past year, according to the report.

3. Bloomberg suggests the model is a way for drugmakers to avoid President Donald Trump's threats of implementing cost-lowering strategies, such as forcing drug companies to bid for government business.

4. Pharmaceutical Research and Manufacturers of America, the industry's largest lobbying group, will introduce the pay for performance idea later this month as one of its proposals to address high drug prices, reports Bloomberg.

5. While outcomes-based pricing could prove useful for drugs treating easily-measured conditions like diabetes or high cholesterol, there are many obstacles to applying the concept to diseases with subjective measurements, such as those involving the nervous system, reports Bloomberg.

"Everyone likes the idea of outcomes-based contracting, but the contracts themselves are really complicated," said Mark Fendrick, director of the Center for Value-Based Insurance Design at the University of Michigan in Ann Arbor.

More articles on supply chain:

Express Scripts: Drug spending slowed in 2016
Study: Amgen's Repatha lowers risk of heart problems
Government subpoenas Biogen over MS drug prices

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