The payment deal for Swiss drug giant Novartis' drew internal HHS scrutiny and is the target of current congressional investigations. | Sebastien Bozon/AFP/Getty Images CMS quit test of pricey cancer treatment amid concerns over industry role

Medicare and Medicaid administrators earlier this year quietly killed a plan to pay for a breakthrough, half-million-dollar cancer treatment based on how well it worked, scuttling one of the Trump’s administration’s first and most highly touted attempts to lower the cost of drugs.

The payment deal for Swiss drug giant Novartis' Kymriah therapy was suspended after it drew internal HHS scrutiny and became the target of current congressional investigations. Democrats want to know if the company got preferential treatment because Novartis paid President Donald Trump's longtime lawyer Michael Cohen $1.2 million in early 2017 for health care consulting work — though there’s no indication Cohen played any role in the Kymriah deal.


The Centers for Medicare and Medicaid Services touted how the “pay-for-performance” arrangement would save lives and cut Medicare and Medicaid spending right after the FDA approved the company’s $475,000 gene therapy to treat kids and young adults with leukemia.

Seven months later, CMS pulled out. Though the agency won’t say why, emails obtained by POLITICO show that administration lawyers expressed discomfort over how much Novartis itself was influencing the arrangement, including giving advice on the payment criteria for Kymriah. The deliberations over Kymriah took place before current HHS Secretary Alex Azar was confirmed. Novartis continues to offer the performance-based deal to private-sector clients.

The demise of the CMS deal, first disclosed in response to questions from congressional Democrats about Novartis' payments to Cohen, illustrates how difficult it is to figure out how much government health programs should pay for expensive treatments whose long-term benefits are still unclear.

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Kymriah is one of the next-generation CAR-T treatments that blur the line between traditional drugs and genetic engineering, by programming patients’ own immune cells to kill cancer. CMS and Novartis discussed paying full price if Kymriah produced results in patients after one month — an unrealistically short timeline for evaluating a complex cancer treatment that virtually gave the company a blank check, according to doctors and clinicians.

Skeptics say the consultations over the Novartis deal are a further sign of cozy relations between the administration and big drugmakers that cast doubt on how serious the Trump team is about bringing down prescription drug costs.

“Coming from an administration which has a stated goal of trying to reduce drug pricing, trying to reduce overall drug spending and health care spending … at every turn this administration has taken steps in the opposite direction and this is one,” said Rachel Sachs, a professor who focuses on health law at Washington University in St. Louis.

Sachs said pay-for-performance deals can give drugmakers political cover to charge whatever they want if the companies can influence performance targets — in this case, with that short one-month timeline.

CMS said it has no formal agreement with any manufacturer for an outcomes-based price in a February letter to Rep. Lloyd Doggett, which came after months of inquiries from congressional Democrats over whether Novartis was getting favorable treatment on regulatory matters after paying Cohen.

Sens. Ron Wyden and Patty Murray — the top Democrats on the Finance and HELP committees, respectively — are questioning whether there is a link between the timing of the Cohen payments and Novartis’ discussions with CMS about the novel payment arrangement.

Novartis says there is no link. “Mr. Cohen did not advise Novartis on its drug pricing strategy, nor did Mr. Cohen advise Novartis as to whom it should speak with in the Trump administration on drug pricing,” Novartis spokesperson Julie Masow said. The company declined to comment on CMS’ decision to back out of the deal.

CMS did not respond to questions on the topic.

But the Kymriah deal was raising comment and concern inside and outside the government virtually from the moment it was announced on Aug. 30, 2017.

Promising a new payment demonstration on the same day as FDA approval was an unheard of practice at CMS’ innovation center, which was created under Obamacare to experiment with ways of lowering health spending and boosting safety and quality. Former CMS officials and others familiar with its work believe it also was the first time CMS had tailored a pilot project to evaluate an individual product from a single company, rather than testing broader changes in health policy.

The Kymriah effort took shape in the summer of 2017, when Novartis approached the Trump administration while the treatment was being evaluated by the FDA. CMS officials were eager to discuss a novel payment arrangement — so eager that a Sept. 28 meeting was deemed "inadvisable" by HHS lawyers, because such discussions should occur in public and could amount to a "pre-decisional commitments" to an external party, according to internal emails obtained by POLITICO. The lawyers said the meeting was “far more collaborative and specific” than was typical with a stakeholder regarding a CMS pilot that had not yet been approved or publicly announced.

The HHS lawyers also said they were “surprised and concerned” with Novartis' interactions with the agency, advising CMS innovation center officials that the agency was “unusually deferential” to the company's recommendations for evaluating the drug, including CMS signaling its intent to implement at least some Novartis’ recommendations. The Sept. 28 meeting involved the HHS general counsel’s office, the CMS Innovation Center, Novartis’ lawyers and others to discuss a possible Medicare demonstration that would pay for Kymriah only when a patient responded positively after one month of treatment.

The innovation center typically doesn’t discuss such targets with companies participating in demonstrations — especially before terms are publicly announced, according to internal HHS emails. HHS lawyers urged officials to “be cautious” about talking to Novartis privately, before the agency formally solicited applications for CMS demonstrations, to avoid the appearance of favoritism. HHS attorneys weren’t aware of specific legal risks, but they wrote that premature discussions could “raise the risk of oversight,” bring “enhanced scrutiny” and “lead to the perception that not all stakeholders are being treated equitably.”

The plan Trump unveiled in May to bring down drug prices promotes such pay-for-outcomes deals, in which a drugmaker only makes money when the medication or therapy works as promised. In theory, this can save money and also prod companies to pursue those treatments that have the most potential to improve patients’ lives. Critics fear the deals provide a roundabout way for drug companies to keep prices high, because manufacturers can structure the agreements with public or private payers in their favor, for example, by boosting the base price to offset the possibility of having to pay rebates for those patients who don’t respond.

Cancer and drug pricing experts said the one-month time-frame Novartis proposed for its $475,000 Kymriah price would have been a giveaway. Many patients appear to be improving one month into treatment, only to relapse within the first year, the experts said. Novartis’s pivotal study of Kymriah in children with acute lymphoblastic leukemia found that at one year, about one out of every three patients the government would be covering would get sick again, said Inmaculada Hernandez, a pharmacist at the University of Pittsburgh.

Physicians and health policy experts say the one-month criteria doesn’t begin to justify relying on the pricey treatment to deliver long-term savings or align with CMS’ stated goal of using the demonstration to pay for drugs in a way “that reflects the value delivered to patients.”

“If the purpose of the reimbursement is to incentivize them to make better drugs, then one would argue that the best way to pay for it is to say, we will pay for everybody and you give us a refund for anyone who passes away or relapses within one year one,” said Vinay Prasad, a hematologist and oncologist at Oregon Health and Science University. For Novartis, the one-month threshold is “very favorable or perhaps the most favorable time point to get reimbursement,” Prasad added. “But from the point of view of the payers is not the ideal.”

Other experts on drug pricing raised concerns about CMS announcing a pricing deal that wasn’t formalized and which appeared to be more about optics than extracting value for taxpayers.

“Outcomes based contracts’ can provide excellent public relations for manufacturers and purchasers’ and are not really a substitute for legitimate, value-based prices,” said Aaron Kesselheim, who leads research on drug regulation at Harvard Medical School.

Some took CMS’ withdrawal from the Novartis proposal as a positive sign that the administration recognized its flaws.

“We’ve seen some good, some bad, and some missing ideas to lower drug prices. It’s encouraging that CMS is potentially undoing the sweetheart deal that would have led to an overpayment for Novartis’s CAR-T drug,” said Ben Wakana, executive director of Patients for Affordable Drugs and a former HHS spokesperson in the Obama administration.

CMS says it isn’t giving up on value-based approaches. In the letter to Doggett that was provided to POLITICO, CMS Administrator Seema Verma wrote that her agency and its innovation center are “exploring the design of an innovative payment model that would involve value-based payment for prescription drugs.”

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