NEW YORK, April 23 (Reuters) - Drugmaker Merck & Co (MRK.N) will give discounts on its diabetes drugs to Cigna Corp (CI.N) if the health insurer's diabetic members stay on their medicines and show improvements in their blood-sugar levels, under an agreement announced on Thursday.
The deal comes as the industry and U.S. government grapple with new ways to combat chronic disease and its enormous costs.
Cigna, one of the largest U.S. health insurers, said the deal represented its first such performance-based contract with a pharmaceutical company.
"A drug manufacturer is recognizing work that we do to move adherence and is improving discounts as adherence is improved," said Eric Elliott, president of Cigna's pharmacy benefit management business.
Keeping patients on their medicines is a major issue for diabetics, whose symptoms may be mild but who can face serious complications such as kidney failure and heart problems if not treated.
The agreement involves Merck's Januvia and Janumet, two key growth products for the drugmaker that are used to control blood sugar in adults with Type 2 diabetes, the far more common form of the disease.
Under the agreement, Merck will provide discounts on Januvia and Janumet to Cigna if a greater portion of the insurer's diabetic members reach blood-sugar goals, even if the patients are taking drugs other than Merck's.
Cigna will also receive discounts if patients do better at staying on Januvia and Janumet.
Cigna has assigned the two Merck drugs preferred status on its drug coverage lists, meaning co-payment levels are generally $20-$25 less than brand drugs without such preferred status.
Cigna applies a range of programs to help patients improve compliance with their medicines, including phone calls to patients to see why they are failing to take their treatments.
The insurer says its medicine adherence programs have helped diabetics reduce emergency room and other hospital visits by 50 percent for those reaching blood-sugar goals, and reduced diabetes-related costs by 24 percent.
Elliott said Cigna is in advanced discussions on three other performance-based contracts.
"We think the announcement of this contract will create its own momentum," Elliott said. (Reporting by Lewis Krauskopf; Editing by Richard Chang)