UnitedHealth and Merck strike a deal to explore linking payments to drug performance
UnitedHealth Group's (NYSE: UNH) Optum unit has signed a multiyear agreement with Merck (NYSE: MRK) to develop a better way to reimburse drugmakers based on how well their drugs improve a patient's health.
"The aim is to identify opportunities where we can align value and payment," on high-cost treatments, said Curt Medeiros, president of Optum Life Sciences. "There's a lot of focus on high-cost specialty areas like oncology, but also in chronic conditions that affect a broad set of the population like diabetes."
UnitedHealth and other insurers have been pushing hospitals and doctors toward new value-based reimbursement contracts for more than five years. In the last 18 months, the health insurance industry has begun to focus more on new payment deals with drugmakers to enter outcomes-based risk sharing agreements, or OBRSAs.
Medicare plan provider Humana (NYSE: HUM) has more than a dozen agreements with pharmaceutical companies covering nearly two dozen drugs. Aetna (NYSE: AET) announced a deal with Merck earlier this year. Cigna (NYSE: CI), Humana and others have deals in place with Swiss drugmaker Novartis (Swiss Exchange: NOVN-CH) for its high-cost heart drug Entresto.
UnitedHealth is targeting signing another five to 10 outcomes-based deals this year.
"The level of interest in our pharma and our biotech clients has increased significantly, so the amount of opportunities out there has really grown," said Medeiros. "Cost pressure ... is probably the largest driver."
While the future of federal funding for health programs like Medicaid remains up for debate in Congress, one thing is clear — the health industry is going to come under greater pressure to lower costs. And rising specialty-drug prices have put pharmaceutical companies in the crosshairs of private payers and the government.
President Donald Trump has said he would like to see federal programs such as Medicare have the ability to negotiate lower drug prices. It is an issue that has seen some bipartisan support. For the pharmaceutical industry, OBRSAs could be a way to get out in front of potential drug-price controls.
"The collaboration between Merck and Optum will help advance both organizations' common goals of improving patient health outcomes, expanding access to innovative therapies, and ensuring the best use of health care spending," said Susan Shiff, senior vice president at Merck, in the companies' announcement.
The actual returns on the program could still be years away, but UnitedHealth and Merck say they will share their data publicly with others in the industry to develop better payment models.
"The ability to drive down the cost — ultimately to the consumer — is the long-term objective," said Medeiros. "How much, at this time, we don't know."
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