Memorandum

Novo Nordisk enters outcomes-based contract with Prime Therapeutics for GLP-1 agonist Victoza – January 3, 2017

Prime Therapeutics, a pharmacy benefit manager (PBM) owned by Blue Cross Blue Shield (BCBS), recently announced a new outcomes-based contract with Novo Nordisk for GLP-1 agonist Victoza (liraglutide). The size of the rebate Novo Nordisk pays to Prime will depend on outcomes seen in patients taking Victoza. The precise details of the contract were not disclosed: Which outcomes will be measured, and when? We’re curious to know how weight loss and CV events are factored in, especially in light of Victoza’s new indication for the reduction of MI, stroke, and CV death.

Novo Nordisk CSO Dr. Mads Thomsen called for more outcomes-based contracts in a well-read WSJ interview last year. He posited that the company’s upper hand in term of efficacy would benefit Novo Nordisk in such a reimbursement setup.

While EVP of North America Operations Mr. Doug Langa shared at Novo Nordisk’s 2017 Capital Markets Day that the company hasn’t seen much success in the US with these types of contracts, we think this is ultimately the direction the field is heading (slowly but surely). This deal with Prime could mean more patients accessing an effective GLP-1 agonist. Based on the powerful glucose-lowering, weight loss, CV, and renal benefits associated with Victoza, this could also mean higher profit margins for Novo Nordisk due to smaller rebates paid. And payers under Prime would presumably have lower costs due to lower complication rates in patients on Victoza. All around, a win-win-win.

Prime strikes us as different from other PBMs. The private company serves 21 not-for-profit BCBS plans and one of every six people covered is through public exchanges. That amounts to >20 million members, which is more sizable than we may have imagined. The company has been utilizing outcomes-based contracts as a cost-cutting measure for payers since 2010 through its CareCentered Contract program. Prime’s CMO argues that this contract will promote affordability, and we hope he means for patients in addition to payers. Admittedly, to date, PBMs have been a bit of a black box from our view (understatement) and we are very interested in researching further their role in determining value for patients and providers and society.

 

-- by Ann Carracher, Payal Marathe, and Kelly Close