Novartis AG has agreed to pay-for-performance compensation from Cigna Corp. and Aetna Inc. for Entresto (sacubitril/valsartan), a combination therapy the Food and Drug Administration approved last July as a treatment for heart failure with reduced ejection fraction. 

Cigna said its agreement with Novartis ties pricing to how well Entresto improves “the relative health” of its members. The primary metric Cigna will use in determining what it pays Novartis is the reduction in the proportion of members who are hospitalized with hearth failure. The agreement covers only members of Cigna’s commercial plans, not Medicare or Medicaid enrollees. Cigna considers Entresto a preferred brand that is subject to prior authorization review. 

Aetna’s contract with Novartis calls for the drug to deliver results similar to those achieved in clinical trials.  

David Epstein, Novartis’ pharma chief, said during a fourth-quarter earnings call that the agreements set a “fairly modest” base rebate amount, which will increase or decrease depending on how the drug performs. 

“Competitive drug prices are important, but equally so is ensuring that customers' medications are actually working as, or better than, expected,” said Christopher Bradbury, Cigna’s senior vice president of pharmacy management. “When pharmaceutical companies stand behind the performance of their drugs through these kinds of contracts, we can deliver the most value to Cigna's customers and clients for the money they are spending.”

Based on clinical trial results, the FDA granted Entresto early approval under the agency’s priority review program.

Our Take: A little more than two years ago, the editor of this weekly briefing wrote the following passage in our annual ACO Outlook (the third edition available by the end of this month):

"We are not advocating for, or arguing against, the ACO concept. Rather, we take the position that suppliers, like drug and device manufacturers, and providers, like home health agencies, should embrace the ACO concept now, when the opportunity is there for visionaries to lead and ACO executives are looking for partners to create solutions.Whether ACOs become the standard model of care or fall as another failed experiment doesn’t matter. What we do know is that power, visibility and resources are being bestowed upon ACOs today and will continue to be for some time to come." 

In other words, carpe diem. Back then, his argument was that the concept of value-based care is here to stay and that it would eventually grow to become a familiar form of contracting.

We have since seen few examples of value-based contracts in the pharma space, largely because of as we point out, the administrative hassle. Two of the more well-known agreements are But the measurement tools are getting better, and when you look under the hood, the deal doesn't appear to be complicated. In fact, it is remarkably similar to Harvard Pilgrim's risk-based deal with Amgen for its PCSK9 inhibitor cholesterol, Repatha.

In our experience, pharma is largely under-engaged with Medicare ACOs and more importantly, the integrated health systems and large physician groups that are running them. We've said it before in this briefing that a lot of opportunity is being left on the table. But pharma has been contracting with payers for decades and today's market access groups have the tools and the skillset to put these kind of value-based deals together. Look for more to follow in 2016.

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