Mind to Market

Wednesday, July 18, 2007

Money Back Guarantee

Well Nordstrom does it, so why not Johnson & Johnson? If a pharmaceutical company expects a patient, or the patient's healthcare payer, to pony up some $48,000 for a cancer drug shouldn't they have assurance that the drug will provide some benefit?

The British National Health Service, the healthcare provider/payer in the U.K., determines which drug treatments they will reimburse. The NHS had been struggling to justify approving the reimbursement of the drug, Velcade, because of its high price. Then the manufacturer, Janssen-Cilag/Johnson & Johnson, approached the NHS with its novel pricing experiment: pay for the drug only if it does its job.

Although the drug development/approval process is intended to reduce the risk and prove the efficacy of a new drug, in reality not all patients will benefit from a particular drug. Whether this is due to genetics of the patient, disease sub-type, co-morbidity or any number of factors is not usually well understood. Despite this knowledge, the pharmaceutical manufacturers still charge all patients the same; the ones that improve as well as those that do not.

With the new pricing model, however, the risk is shared between the payer and the drug manufacturer: the payer only pays when the drug works. Velcade is ideal drug for this model; its efficacy is easily monitored, proven and is known fairly soon after the treatment has begun.

Is this a new paradigm that will soon be sweeping through healthcare? Pay for performance is attractive to consumers but performance is difficult to measure in many cases. Even the case of Velcade is up for debate with Janssen-Cilag calling a tumor reduction of 25% proof of efficacy and the NHS requiring a 50% reduction.

This is certainly an interesting trend and one which could change the pharmaceutical industry; satisfying the FDA is no longer sufficient for drug success, it must benefit the individual patient as well.

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