February 9, 2016 / 6:56 PM / 2 years ago

CORRECTED-Insurer Cigna and Novartis set heart-drug price based on health outcome

(Corrects discount Institute for Clinical and Economic Review recommended to 9 percent from 17 percent in eighth paragraph)

NEW YORK, Feb 8 (Reuters) - U.S.-based health insurer Cigna Corp and Novartis AG have agreed on a performance-based price for the Swiss drugmaker’s new heart drug, Entresto, Cigna said on Monday.

The agreement is one of the few performance-based deals that have been made public by drugmakers and U.S. managed-care companies, who say they have been having more discussions about linking price to health outcome in order to cut unneeded drug spending.

Drug prices jumped about 13 percent in the United States last year, spurring a public outcry and moving the issue onto the campaign platform of Hillary Clinton and other U.S. Presidential candidates for the November 2016 election.

Under the agreement, Cigna said its payments to Novartis will be linked to how well the drug - which treats people with chronic heart failure to help prolong lives and reduce hospital admissions - improves the relative health of Cigna’s customers.

Specifically, payments will be based on a reduction in the proportion of customers who are admitted to hospital for heart failure.

Cigna manages health benefits for some of the largest U.S.-based corporations, in which those companies bear the risk of higher medical costs. It also has a small commercial business that includes individual customers on the government health exchanges and it manages government contracts for Medicare and Medicaid.

Entresto, which costs about $12.50 a day or $4,560 per year, was approved by the U.S. Food and Drug Administration in July. Its price is cheaper than those of some other new drugs, but is still more than analysts expected.

The Boston-based Institute for Clinical and Economic Review, an independent group that analyzes drug prices, has said the price should be 9 percent lower.

Novartis Chief Executive Joe Jimenez has publicly discussed the need for the industry to move to a more outcome-based pricing model.

David Epstein, Novartis’s head of pharmaceuticals, said on Jan. 27 during an investor conference call that it had signed deals with two health insurers in which the company had agreed to a base price and a modest rebate.

“Depending upon whether or not we achieve specific goals around reduced hospitalization and savings to the plan, the rebate would either go up or go down,” he said.

Reporting by Caroline Humer; Additional reporting by John Miller in Zurich; Editing by Bernadette Baum

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