Novartis will sell its new heart failure treatment in the US for almost 80 per cent more than some analysts expected.
It will also come with a provision for insurers to pay less if the drug failed to keep patients out of the hospital.
Entresto, approved on Tuesday by the US Food and Drug Administration, would cost $12.50 a day or about $4,500 a year, according to David Epstein, head of the company's pharmaceuticals division. Analysts at Barclays and Berenberg had predicted the costs at $7 a day.
Novartis planned to offer a "pay-for-performance" plan in which insurers would initially pay a lower price, followed by an additional payment if the drug succeeded in keeping patients out of the hospital and cutting associated costs.
It comes as part of a broader effort at Novartis to move to conditional reimbursement by using digital technology for monitoring patients.
McKinsey & Company said in a report that such outcomes-based efforts could save $1-trillion in US healthcare costs over a decade.
"Our industry is going to move in a pay-for-performance and eventually an outcomes-payment direction," Epstein said on a conference call. "It seems like something at least some payers would consider. We can't make them do this. My guess is many won't even want to bother, but it is part of the offering."
Novartis, based in East Hanover introduced its drug Entresto (LCZ696) after it passed a trial conducted on around 8,500 patients. The drug belongs to a new class of drugs, called angiotensin receptor neprilysin inhibitors, for the condition and is a tablet that is taken twice a day.
For the trial named PARADIGM, the doctors administered Entresto to half of the patients, while the other half were given enalpril (an existing drug).
Entresto was found to have had a 20 per cent reduction in risk of death or hospitalisation.
With the drug having passed the litmus test it was granted fast-track designation by the FDA. The drug consists of a combination of 'valsartan' and 'sacubitril' elements, which together worked to regulate blood pressure and fluid balance in the body.
The drug would benefit patients suffering from class II-IV chronic heart failure, who would be able to secure the drug with a prescription. It would cover about 2.2 million of the 5.1 million US citizens suffering from heart failure currently.