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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Alnylam Pharmaceuticals, Inc.    ALNY

ALNYLAM PHARMACEUTICALS, INC.

(ALNY)
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Drugmakers Test New Ways to Pay for Six-Figure Treatments

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01/13/2020 | 05:56am EST

By Jared S. Hopkins

Drugmakers are experimenting with new ways to get paid for their most-expensive medicines, as resistance to escalating prices builds and improvements are made in collecting and analyzing patient data.

Now that six-figure price tags are common, drug companies are finding creative ways to get reimbursed, from installment plans to subscriptions to more complex value-based contracts that tie payment to when a drug helps a patient. For years, pharmaceutical companies would typically set a price for a drug and then get paid per pill sold at that price, less any negotiated rebates.

Alnylam Pharmaceuticals Inc. now will charge full value for a nearly $600,000 new rare-disease drug only if a patient gets a benefit akin to what was seen in clinical testing, and it will make the drug cheaper for insurers if they cover more patients than expected. Sanofi SA is offering $99-a-month subscriptions for insulin. Novartis AG -- which sells a gene therapy at $2.1 million, the most expensive drug in the world -- is giving insurers the opportunity to pay over five years.

The drug-reimbursement innovation comes as cries for relief mount. Congress is considering plans to lower drug costs, while the Trump administration has proposed importing drugs from Canada. Earlier this month, drugmakers raised prices of hundreds of prescription medicines, The Wall Street Journal reported.

Meanwhile, health plans are controlling costs by restricting prescriptions for certain high-price medicines to a narrow set of patients.

Drugmakers "understand that if they come to the market with superhigh-cost drugs and aren't willing to share the risk then they are going to face pushback and access challenges," said Michael Sherman, chief medical officer of insurer Harvard Pilgrim Health Care.

It remains to be seen, however, how widely the innovative reimbursement programs will be adopted. Many previous experiments with installment-plan payments, for instance, were directed at drugs for rare diseases, not at more widely used treatments.

Dr. Sherman and other health-insurance officials worry the new efforts might give drugmakers cover to keep raising prices, limiting the overall impact on costs.

Insurer Cigna Corp.'s most popular version of value-based contracts refunds two-thirds of the cost to employers if a patient ends up taking a different anti-inflammatory therapy within the first 90 days -- which happens in 25% of patients, said Steve Miller, Cigna's chief clinical officer.

Value-based contracting is "a great lever to pull, but it's just one more tool in our toolbox," he said. "It's definitely not going to revolutionize the system to make it more affordable."

A big factor driving drug companies to explore new payment mechanisms, industry officials say, is rising employer, patient and political pressure to control health spending, with some prescription drugs costing hundreds of thousands of dollars a year.

Caught in the middle are health plans: They are trying to keep a lid on drug spending for employers while not inciting members by denying coverage.

"For payers, there really is a challenge in wanting to pay for these things," said Walid Gellad, a drug-policy researcher at the University of Pittsburgh School of Medicine. "So if you can somehow make it easier, it's going to be better for the payer and for the manufacturers."

In November, Alnylam said it would calibrate the $575,000-a-year price of newly-approved Givlaari, depending on how patients do on the drug and how many take it. Givlaari treats acute hepatic porphyria, an inherited liver condition in an estimated 3,000 patients in the U.S. and Europe that often requires hospitalization.

Public and private health insurers that agree to participate in the program will pay full value only if patients show a benefit similar to clinical trials, Alnylam Chief Executive John Maraganore said. The company also will charge less if more patients than expected take the therapy.

The concessions may help Alnylam secure reimbursement from health plans that otherwise might recoil at such a high price tag, while maximizing prescriptions, Dr. Maraganore said. "We can work together without creating misaligned incentives around the cost of a new medicine." he said.

Sanofi in June expanded its $99-a-month subscription program for insulins Admelog, Apidra, Lantus and Toujeo. Without the program, uninsured patients taking Lantus might face an annual bill of more than $4,000.

Sanofi said the program was used more than 52,000 times in 2019.

Novartis launched its gene therapy Zolgensma with an option for insurers to pay over five years in equal annual installments. Zolgensma treats an inherited disease called spinal muscular atrophy.

Gene therapies treating just 11 conditions are projected to cost $45 billion over the next five years and are "perfect candidates" for value-based contracts, according to a research report by CVS Health shared with The Wall Street Journal and that will be published soon.

Such contracts, previously used sparingly in part because of problems assessing how a patient fared on a drug, are becoming more popular, industry officials say.

Digitized medical records, combined with technology to analyze data and see how a patient does on a drug, is making it easier for health plans and drugmakers to agree on metrics for pegging payments.

Eli Lilly & Co. signed 15 such agreements with eight payers last year, according to Frank Cunningham, who leads Lilly's managed health-care services. He said some agreements are linked to whether medicines successfully lead to patients showing up for work.

Amgen Inc. negotiated value-based contracts for migraine drug Aimovig that reward the drugmaker for factors like reducing emergency room visits, said Kave Niksefat, Amgen's vice president and head of value & access.

"Tracking multiple metrics across multiple different health-care systems is something that is hopefully the blueprint for the next wave of value-based contracts," he said.

Write to Jared S. Hopkins at jared.hopkins@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ALNYLAM PHARMACEUTICALS, INC. 0.25% 129 Delayed Quote.11.75%
AMGEN INC. 0.57% 222.96 Delayed Quote.-7.30%
CIGNA CORPORATION -0.23% 221.44 Delayed Quote.7.75%
CVS HEALTH CORPORATION -0.31% 71.78 Delayed Quote.-3.08%
NOVARTIS 0.44% 95.82 Delayed Quote.4.05%
SANOFI 0.31% 94 Real-time Quote.4.56%
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Financials (USD)
Sales 2020 471 M
EBIT 2020 -816 M
Net income 2020 -811 M
Finance 2020 863 M
Yield 2020 -
P/E ratio 2020 -18,1x
P/E ratio 2021 -27,4x
EV / Sales2020 29,0x
EV / Sales2021 15,5x
Capitalization 14 523 M
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Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 136,18  $
Last Close Price 129,00  $
Spread / Highest target 51,2%
Spread / Average Target 5,57%
Spread / Lowest Target -41,9%
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Managers
NameTitle
John M. Maraganore Chief Executive Officer & Director
Barry E. Greene President
Michael W. Bonney Chairman
Yvonne L. Greenstreet Chief Operating Officer & Executive Vice President
Jeffrey Poulton Chief Financial & Accounting Officer
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