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Our Take: Blues plans fund new startup to address high drug prices

Jun 28, 2021

Editor’s Note: Due to the July 4 holiday weekend, Our Take will return on July 12. We’re also taking a break from Health Care Rounds and will return with Season 6 in the fall.

A handful of Blues plans announced Tuesday that they are providing “significant” funding to support the launch of a new, independent venture called Evio Pharmacy Solutions, with the goal of making prescription medications more affordable while improving patients’ experiences and outcomes.

The five participating plans are Blue Cross Blue Shield of Massachusetts, Blue Cross Blue Shield of Michigan, Blue Shield of California, Highmark, and Independence Blue Cross. All are not-for-profit plans, and collectively they provide coverage to more than 20 million members.

Evio will use data from those members’ experiences to compile real-world evidence regarding how specific drugs perform for patients — across all of a given drug’s indications, for different patient populations, and in patients with other comorbidities.

The startup wants to use that evidence to encourage more drug manufacturers to participate in outcome-based contracts, in which the Blues plans would pay based on how well the drugs work.

Hank Schlissberg, president and CEO of the new Denver-based enterprise, said, “[T]he price of virtually every prescription drug is roughly double by the time a patient pays for it at the pharmacy counter,” compared with when the drug was shipped from its manufacturing site.

“We must innovate and begin to transform the pharmacy system,” he added.

Schlissberg, who was previously president of Vively Health, DaVita’s population health group for high-risk, chronic patients, said Evio would form partnerships across the value chain and vendor community to help achieve the company’s goals.

According to Modern Healthcare, Schlissberg said if Evio is successful, the Blues plans would welcome other customers. He also said this new venture would not affect the plans’ relationships with their pharmacy benefit managers.

Modern Healthcare also reported that the plans said they would pass along the savings Evio achieves to their members, in large part through lower premiums.

Our Take: Outcome-based reimbursement agreements between payers and drug companies aren’t new by any means, but they also aren’t as common as they should be.

A PhRMA list of value-based contracts (VBCs) published in February 2020 that included all such agreements publicly announced between 2009 and the end of 2019 showed a total of just 73. The organization acknowledged that there could be “many” VBCs not included on the list because they hadn’t been made public.

We also know from our own research tracking VBCs that the number of publicly reported agreements vastly undercounts the number of actual agreements. In many cases there just isn’t an incentive for the manufacturer to make the contract known.

These types of payment arrangements between payers and drugmakers started back in mid-April 2009, when the Alliance for Better Bone Health, a joint venture between Procter & Gamble and Sanofi, agreed to reimburse Health Alliance Medical Plans for the average cost to treat non-spinal bone fractures occurring in women who took the osteoporosis drug Actonel (risedronate) as prescribed.

A week later, Cigna made the news when it entered into a performance-based contract with Merck for diabetes drugs Januvia (sitagliptin) and Janumet (sitagliptin/metformin). Merck agreed to give Cigna discounts on the drugs if plan members adhered to their medication and showed improvements in A1c. The insurer said at the time that it hoped the agreement with Merck would “become a model in the industry.”

Fast forward about seven and a half years, to October 2016, and Merck signed a risk-sharing agreement for the same two drugs with Aetna. Under that arrangement, Merck agreed to pay a rebate to Aetna if plan members taking the drugs failed to meet certain disease-related goals.

During the years in between 2009 and 2016, other private payers, including Humana, Harvard Pilgrim, and Prime Therapeutics, signed VBCs for a variety of drugs, including the newly approved high-priced drugs for hepatitis C. Cigna signed at least half a dozen more, including those with Amgen and Sanofi/Regeneron for their cholesterol-lowering PCSK9 inhibitors, Repatha (evolocumab) and Paluent (alirocumab), and with Novartis for heart drug Entresto (sacubitril/valsartan).

When Novartis gained FDA approval for the first gene therapy in the U.S. — CAR-T leukemia drug Kymriah (tisagenlecleucel) — in 2017, CMS said it was working on payment arrangements to ensure access to the $475,000 treatment, but a planned demonstration failed to materialize. Some approved treatment centers, however, did sign outcome-based contracts with Novartis.

In 2018, Oklahoma became the first state to sign a VBC with a drugmaker for its Medicaid program (with Alkermes for Aristada [aripiprazole lauroxil], a schizophrenia drug). Under that arrangement, which was designed to encourage patients to continue their treatment for a longer period of time, the price of the drug decreased every other month, as long as the prescription was filled.

The next year, CMS approved Washington’s “subscription” model for hepatitis C drugs. Under that value-based purchasing proposal, the state paid drug manufacturers a fixed rate for an unlimited supply of the drugs for Medicaid patients.

Most recently, Biogen and Eisai said they plan to enter into a VBC with Cigna for Aduhelm (aducanumab), the drug with the $56,000-a-year list price that was just approved for Alzheimer’s disease.

“Given the known infrastructure challenges in the U.S., we are working to ensure that the patients who will benefit most from this new treatment have a clear path to access it,” said Dr. Steve Miller, Cigna’s chief clinical officer.

The approvals of several extremely high-priced specialty drugs over the last several years have sped the adoption of outcome-based contracting, but overall, this type of payment arrangement hasn’t gained the kind of traction we had hoped it would. We’ll see what Evio can do.

Meanwhile, depending on how widely prescribed Aduhelm becomes, that could wind up being more of a catalyst in the move toward value-based contracting for drugs than anything else has been to date.

What else you need to know 
Brentwood, Tenn.-based LifePoint Health will acquire Kindred Healthcare,  a national post-acute care services company based in Louisville, Ky. LifePoint already has 87 hospitals in 29 states, as well as more than 50 post-acute facilities and over 35 outpatient clinics. Acquiring Kindred Healthcare will add 62 long-term acute care hospitals, 25 inpatient rehabilitation sites, more than 100 outpatient rehabilitation clinics, and two behavioral health centers to that list. Together, the two for-profit organizations employ approximately 77,000 people. In the announcement of their definitive agreement, LifePoint committed to investing $1.5 billion in the next three years to improve care for the communities the combined organization will serve. Other financial terms were not provided. If regulatory agencies approve the transaction and other closing conditions are met, the deal is expected to be finalized in the fourth quarter.

In 2018, two private equity (PE) firms and Humana bought Kindred Healthcare, spinning the home health services off into a stand-alone company, Kindred at Home. The PE firms took ownership of Kindred Healthcare’s hospital arm and a 60% stake in Kindred at Home; Humana assumed ownership of the remaining 40% stake in Kindred at Home. Two months ago, Humana signed an agreement to buy the PE firms’ 60% stake for $5.7 billion.

Ochsner Health and Meridian, Miss.-based Rush Health Systems signed a “shared mission agreement” under which Rush will become part of Ochsner and will be renamed Ochsner Rush Health. The transaction, which is subject to regulatory approval and is expected to be completed within a year or so, will add seven more hospitals to Ochsner’s roster of 35 hospitals. The New Orleans-based health system just completed a merger with Lafayette General Health last fall. Larkin Kennedy, CEO of Rush Health Systems, said Rush’s new agreement with Ochsner is “the next step” in a strategic partnership agreement the two nonprofit organizations signed in 2019. Financial terms were not disclosed.

Mechanicsburg, Pa.-based Select Medical will add seven hospitals to its network of post-acute care facilities. The company said in a press release that it signed a definitive agreement with Acuity Healthcare to acquire four long-term acute care hospitals and a satellite hospital serving patients in New Jersey and West Virginia. The other two hospitals will join the Select Medical network through joint venture partnerships: One is with Northwest Healthcare for Curahealth Tucson, a long-term acute care hospital in Tucson, Ariz. The other is with Ascension Saint Thomas in Nashville, Tenn. Under that agreement, the two organizations will establish a new critical illness recovery hospital inside Ascension’s St. Thomas Hospital West. Through a separate joint venture agreement, Select Medical will partially own and manage eight HealthWorks Rehab & Fitness outpatient clinics in West Virginia. All of the transactions are subject to regulatory approval and are expected to close by the end of 2021.

Amazon Web Services (AWS) launched an accelerator for health care startups. The new program will accept cohorts of 10 startup companies at a time to participate in a four-week accelerator focused on cloud-based solutions such as remote patient monitoring, voice technology, analytics, patient engagement, and virtual care, according to an AWS blog post. AWS and KIdsX, a digital health accelerator dedicated solely to pediatrics, will select the first cohort of startups. Applications are due by July 23, and applicants can target any patient population. Eligible companies will be U.S.-based or have U.S.-based operations and will have “an established product-market fit with existing customers and revenue.”

About a third of health care organizations were hit by ransomware in 2020, a report by Sophos indicates. The survey included 328 respondents from health care organizations globally. Of those, 34% said they had been hit by a ransomware attack last year, and of that group, 65% said the attackers were successful in encrypting their data, making the files inaccessible. Among the organizations whose data was encrypted, 34% paid the ransom, though on average just 69% of the encrypted data was restored, according to the report. Another 44% of those whose data was encrypted used backups to restore their data. Based on the survey responses, 89% of health care organizations have at least a partial recovery plan in place for malware incidents.

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