Pay-For-Performance Pharmaceuticals: Satisfaction Guaranteed or Your Money Back

What if drug companies were only paid when their products actually worked?

After a British health advisory group said that cancer drug Velcade was too expensive for the government to cover, Johnson & Johnson -- the drug's manufacturer -- fired back with a plan unprecedented in industry history: if the government bought Velcade, Johnson & Johnson would reimburse them for money spent on patients whose tumors didn't shrink.

Four multiple sclerosis drug makers have offered similar arrangements to Britain's National Health Service, and GlaxoSmithKline has done the same with two unnamed European countries. These and related plans may represent a new paradigm in drug development and pricing, reports the
New York Times. Unfortunately, making such arrangements work in the
United States won't be easy.

Because the UK and other European countries have universal health care, their governments are able to negotiate drug prices from a position of strength. In the US, health insurers have less ability, and less incentive, to do so.

“There’s no way we could ask for it and have any leverage,” said Dr.
Lee N. Newcomer, senior vice president for oncology at the large
American insurance company UnitedHealthcare. He said that state regulations and marketplace pressures make it virtually impossible for an insurer to refuse to pay for a drug that has been approved by the
Food and Drug Administration, regardless of its price.

Nevertheless, some insurers are trying: Newcomer's company,
UnitedHealthcare, is trying a risk-sharing experiment with Genomic
Health, makers of an expensive test to determine whether women with early-stage breast cancer would benefit from chemotherapy.

The insurer has agreed to pay for the test for 18 months while it and
Genomic Health monitor the results. If too many women are still receiving chemotherapy even if the test suggests they do not need it,
Dr. Newcomer said, UnitedHealthcare will seek to negotiate a lower price on the ground that the test is not having the intended impact on actual medical practice.

Another big insurer, Cigna, is asking makers of cholesterol-lowering medicines to pay the medical expenses of people who suffer heart attacks while taking their drugs.'

“The point is to try to make the manufacturer responsible for how their product is used in the medical marketplace,” [Newcomer] said.

Pricing Pills by the Results [New York Times]
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Image: Flyer from the Daily Mail, a UK newspaper that took the side of patients who recently petitioned their government to cover an expensive Alzheimer's drug. *