Drug companies like to say that their most expensive products are fully worth their breathtaking prices. Now one company is putting its money where its mouth is — by offering a money-back guarantee.

Johnson & Johnson has proposed that Britain’s national health service pay for the cancer drug Velcade, but only for people who benefit from the medicine, which can cost $48,000 a patient. The company would refund any money spent on patients whose tumors do not shrink sufficiently after a trial treatment.

The groundbreaking proposal, along with less radical pricing experiments in this country and overseas, may signal the pharmaceutical industry’s willingness to edge toward a new pay-for-performance paradigm — in which a drug’s price would be based on how well it worked, and might be adjusted up or down as new evidence came in.

“I think payers will say, ‘If the product works and it creates value, we will reward you for it,’ ” said Anthony Farino, a pharmaceutical industry consultant at PricewaterhouseCoopers. “ ‘If not, we won’t reward you.’ ”

It is far too soon to tell whether such a pricing paradigm can actually work, in particular because it can be difficult in many cases to measure how well a drug is working. And the approach would probably be most feasible in countries, like Britain, where the government is the primary payer.

But even here in the United States, Medicare and private insurers are already experimenting with new ways to create cost-justified payment systems for medical treatments.

The potential benefits might go beyond simply saving money. Pay-for-performance pricing could make it easier for patients and their doctors to try expensive treatments without busting the bank or forcing insurers to make all-or-nothing decisions about reimbursement.

That was the rationale behind another experiment that is already under way in Britain. Four makers of multiple sclerosis drugs have agreed eventually to lower the prices of their drugs — which can currently cost as much as $18,000 a year — if the medicines do not fully meet expectations.

GlaxoSmithKline also says it has made similar agreements with two European governments, although it declined to identify either the countries or the drugs involved.

Such “risk sharing” deals, as they are being called, would be harder to arrange in this country. “There’s no way we could ask for it and have any leverage,” said Dr. Lee N. Newcomer, senior vice president for oncology at the large American insurance company UnitedHealthcare. He said that state regulations and marketplace pressures make it virtually impossible for an insurer to refuse to pay for a drug that has been approved by the Food and Drug Administration, regardless of its price.

Yet UnitedHealthcare is trying a risk-sharing experiment with Genomic Health, a company that sells a $3,460 genetic test meant to help determine whether a woman with early-stage breast cancer would benefit from chemotherapy.

The insurer has agreed to pay for the test for 18 months while it and Genomic Health monitor the results. If too many women are still receiving chemotherapy even if the test suggests they do not need it, Dr. Newcomer said, UnitedHealthcare will seek to negotiate a lower price on the ground that the test is not having the intended impact on actual medical practice.

“The point is to try to make the manufacturer responsible for how their product is used in the medical marketplace,” he said.

Genomic Health said it could not comment on individual contracts but acknowledged it was working with various payers on performance-based contracts.

The pharmacy benefit management arm of Cigna, another big American insurer, has a more audacious idea. It is trying to persuade the makers of cholesterol-lowering pills to agree to pay the medical expenses of patients who suffer heart attacks even though they have been steadfastly taking their medicine.

“It’s their opportunity to show they stand behind their medication and are confident of the results,” said Thom Stambaugh, the chief clinical officer for Cigna Pharmacy Management. He said that the drug companies seemed interested in at least considering the proposition.

Pfizer, which makes the best-selling cholesterol pill Lipitor, said it did not comment on confidential discussions with individual managed care organizations, though it was always receiving proposals.

Medicare, meanwhile, has agreed to pay for certain expensive products or procedures — like some implantable heart defibrillators and the use of PET scans to detect dementia — only if the patients participate in studies to assess the long-term benefits.

Medicare could eventually use such data to decide whether to pay for the product or procedure. However, it does not have the authority to negotiate prices, said Dr. Sean Tunis, a former chief medical officer of Medicare and a major architect of the evidence-gathering policy.

Some companies that sell expensive drugs — including Genentech, which makes cancer treatments, and Genzyme, which makes drugs for rare diseases — said they were not involved in or considering any risk-sharing plans. They said they already helped make their drugs available to patients who cannot afford them. Genentech also said it was working on tests to better determine which patients should get a drug in the first place.

But drug companies might need to be more flexible in countries like Britain, where drugs are paid for only if they are deemed cost-effective — as measured by how much the health system must pay to achieve certain gains in the length and quality of patients’ lives.

“If we didn’t enter into the risk-sharing scheme, we wouldn’t really have a market here in the U.K,” said Pete Smith, a manager in Britain for Biogen Idec. The company makes Avonex, a multiple sclerosis drug that costs the equivalent of about $18,000 a year in Britain and is covered under the risk-sharing arrangement.

Paula Tran, a senior at the University of Wisconsin-Madison, relies on her school’s health center for affordable birth control pills. Even though she doesn’t have insurance, she bought a year supply from the clinic for only $7 per pack last fall. But when she goes back for more this September, she’ll be hit with a bill five times that amount, something she says will definitely affect her spending. "It will cut into the kinds of notebooks I buy to the kind of groceries I get to the cable package that I order," she says.

For decades college campus health centers have been a resource for budget-conscious female students seeking birth control. Because of agreements with pharmaceutical companies, most campus clinics were able to distribute brand name prescription contraceptives, from pills to the patch to a monthly vaginal device like NuvaRing, for no more than a couple of bucks.

That all ended earlier this year. Health experts say the price bump for college students was inadvertent — a byproduct of the Deficit Reduction Act of 2005, a federal law that went into effect in January. The law alters how drug makers calculate Medicaid-related rebates paid to states, but it ultimately made it expensive for companies to offer schools such deep discounts on birth control. As a result, brand name prescription prices for campus clinics rose from about the $3 to $10 range per month to the $30 to $50 range. Organon, the maker of Cyclessa and Desogen birth control pills and the NuvaRing, says the company is not happy about having to increase prices for colleges. But Nick Hart, Organon’s executive director of contraception, says they were forced to make "a business decision" after the law went into effect.

Although the law has been in place for months, students will start paying more now because stockpiles that let most university health centers delay the price increase ran out in the spring. "At the end of the semester we started getting notes on our packages of birth control saying that they were running low and as soon as they ran out of the old stock we could expect to pay $40 a month," says Jessica Faerman, 20, a junior at the University of Texas.

Many schools even had trouble stretching their low-cost birth control supplies through the spring. Jason Walker-Crawford, managing pharmacist at the University of Wisconsin-Madison’s health clinic, says he found out about the change in prices when he went to place an order on Jan. 2, the day after the new law went into effect. He discovered that most brand name prescriptions for the clinic went from $8 to $42 per month. Walker-Crawford says the clinic was forced to ration what they had on hand, limiting students to buying only one prescription pack at a time instead of sets of three or more. "We tried to make some time so that everybody had some chance to look into some other options," he says, which include getting students on an insurance plan, either through their parents or through an income-based state family planning waiver program.

So the solution is that insurance will cover the price upsurge, right? Health care providers and experts are saying it’s not that simple. The problem is that many students pay for their prescription birth control out-of-pocket because they don’t want to involve their parents’ insurance for privacy reasons. Others don’t want to deal with hassle that comes along with getting and maintaining health insurance, which can require co-payments that are more than what students were originally spending on birth control in the first place.

A 2006 survey conducted by the American College Health Association (ACHA) found that 39% of undergraduate women use oral contraceptives. Many providers are afraid that if the convenience of free or cheap birth control on campus is taken away, female students might just get turned off by prescription birth control methods altogether and use other less effective ones like condoms or Plan B, known as the morning after pill. Even switching to generic medications, most say, while better than nothing, isn’t ideal because of the side effects that sometimes come along with them. "We do know that high fees act as a barrier to obtaining care. That is classically understood in campus health services," says Claudia Covello, director at the University of California-Berkeley’s health center.

Prescription birth control — which includes the pill, the patch and NuvaRing — is 99.7% effective, according to Planned Parenthood, and many worry if students skip out on it or move to a method they’re not as comfortable with, it can lead to more unwanted student pregnancies. "I think there are some who will just try to wing it and see how it goes. They’ll say ‘Well I go to school here, my boyfriend is in another city and I only see him once or twice a month and I won’t use anything’ rather than pay for something they can’t afford. That’s absolutely dangerous," says Dr. Nancy Jasper, an assistant clinical professor at Columbia University’s medical school.

While Tran from the University of Wisconsin-Madison says she’s going to stick with the health center and work out the pricing in her budget, she knows many students who are opting out. "I have friends who refuse to talk to their parents about it, they’re unable to get under their insurance, can’t afford to get their own insurance and are already working just to pay tuition," she says. "Some have stopped already and are taking stock in Plan B and having that around because they don’t have regular intercourse."

Companies are already seeing an increase in Plan B, although they are unsure if it’s connected to the rising price of prescription birth control. Barr Pharmaceuticals reported in July that their Plan B sales have doubled — going from $40 million a year to what will probably be about $80 million in 2007. Walker-Crawford says that at the University of Wisconsin-Madison, he went from selling it mostly on Mondays to having it purchased by students every day. Health officials say they discourage using Plan B as a regular form of contraception because, although there’s no physical risk to doing so, students will be missing out on the menstrual cycle regulation and the required annual exams that come along with a regular oral contraceptive prescription.

The health clinic at Bowdoin College in Maine has elected to stop offering birth control to students altogether because of the price increases, says Sandra Hayes, the center’s director. Prescription birth contol used to be free of charge, but starting this fall all the clinic will provide patients with is a written prescription and the directions to the nearest CVS or Walgreen’s, where they’ll have to pay standard price. However, Plan B is still available to students for free and Jessica Walker, a Bowdoin junior and member of the school’s women’s association, says the group is planning to hold clinics in the student union a few times during the year where women can get birth control pill packs for $10 to $20.

AHCA, a college health advocacy organization, says that since it became aware of the Deficit Reduction Act they have been doing everything they can to fight for an exemption in the law for college health centers. The group’s advocacy chair Mary Hoban says that while she’s pretty sure the impact on college students was unintentional, their only recourse for the time being is a legislative fix from Congress. "We are contacting members in Congress to make sure they understand what the impact of the Deficit Reduction Act has on their campuses and asking for their help when they see an opportunity to legislate a solution to this," she says. But so far she says she hasn’t had much luck.

Likewise, college health clinics are finding that they can do little except refer students to Planned Parenthood, where clinics are working to keep prices low despite some being affected by the law too. Clinics also warn that students could see increases in prices for other prescriptions and products at student health centers since the price jumps are also damaging to clinics’ profits. Because the health centers used to receive prescription contraceptives at a nominal, or base price, they could tack on a few dollars to the student price to put back into the clinic in other areas. "This has definitely had an impact on our bottom line to the point where we are going to have to raise our fees to compensate for the loss of revenue," Walker-Crawford from the University of Wisconsin-Madison says. "Which means prices will go up on everything for everybody."

No one much noticed, but thousands of family-planning clinics across the country went into a tailspin last month. They were reacting to a drastic price increase by Ortho-McNeil, a major supplier of birth-control pills and maker of the popular contraceptive patch. The company used to charge publicly funded clinics as little as a penny a pack for the pills. Then, as of July 1, the price of some pills jumped to more than $18 a pack. Ortho’s move was apparently legal under federal pricing rules. But it’s anybody’s guess as to why the company chose to do this now, without giving the clinics any real notice.

As a result of the price hike, publicly funded clinics from Maine to New Mexico are running short on popular contraception products, scrambling to find reasonably priced generics, and scaling back on the choices they offer low-income women. Chronically underfunded, the clinics are in no shape to absorb this blow, especially now. The number of women in need of subsidized contraception is rising, while new and expensive advances in screening and prevention, like the HPV vaccine, are coming on line. Yet the national press has ignored the story of the Ortho price hike, which the Charleston Gazette in West Virginia broke in late July.

Ortho-McNeil has historically offered birth control to public clinics at a far lower price than it retails to women with private insurance, allowing the clinics to offer free or low-cost pills to many patients. The company’s low prices—pennies for a month’s worth of birth-control pills, $10 to $12 for the popular one-month contraceptive patch Ortho Evra—came through the federal program 340B. Using a complex formula, 340B sets upper limits on what companies can charge to clinics that receive funding from Title X, the federal family-planning initiative. There are about 4,500 Title X clinics serving around 5 million patients. The current funding is $283 million a year—an amount that’s supposed to cover not only birth control but also treatment for sexually transmitted diseases, screening for breast and cervical cancer, pregnancy tests, and counseling. (Title X funds may not be used for abortions.)

Under 340B, pricing is confidential. So, we don’t know the highest prices that Ortho can legally charge the Title X clinics and other eligible community health centers. But Ortho’s contraceptive products may have been priced well below the ceiling before the price hike in July, and now they may be right up against it. In some states, more than 70 percent of the birth-control pills distributed at publicly funded clinics were made by Ortho. So, why did the company offer discounts that may have been deeper than required—and then suddenly stop offering them? Ortho refuses to explain itself or even to confirm any pricing information. In a statement, the company says that its products "are comparatively priced with other hormonal contraceptive options" and notes that generic alternatives are available.

Some doctors who work with publicly funded clinics speculate that Ortho previously kept prices low because it hoped to build brand loyalty among women who might one day switch to private insurance. Now that generic substitutes for most Ortho pills are available and most private insurance companies press women to use them, the theory goes, Ortho has little incentive to woo women. But generic birth-control pills have been available for a while, so this doesn’t explain why Ortho chose to stick it to the public clinics now.

Another possibility is that the price hike reflects a change in the prices Ortho charges commercially. The federal formula used to calculate 340B prices takes into account a drug’s commercial price and its Medicaid price, and it can result in low or even negative numbers—in which case, the government goes with a price of one penny, says Jennifer Lockwood-Shabat of the National Family Planning and Reproductive Health Association, which negotiates pricing with Ortho on behalf of public clinics. Lockwood-Shabat says there may have been a recent shift in Ortho’s commercial pricing that in turn allowed it to raise prices for the public sector. Still, the company could have decided to keep prices low or increase them incrementally rather than radically raise them.

To absorb the higher prices, public clinics are contemplating cutting other services, reducing the hours they’re open, or closing some locations. Some clinics are finding that generic substitutes are difficult to afford. Prices for generic birth control pills vary widely, but many seem to cost between $5 and $18 dollars a pack—not bad compared with retail prices, but far more than clinics were accustomed to paying for Ortho. Some clinics say they will have to stop offering certain classes of birth control pills altogether. This is a problem since women respond differently to different hormonal formulations: One kind of pill may cause breakthrough bleeding, bloating, or moodiness, while another causes no side effects.

The National Family Planning and Reproductive Health Association and its members have managed to convince Ortho to relent on one of the price increases—the cost of the Ortho Evra patch initially jumped from $10 or $12 to more than $22 dollars; now it’s down to $15. Maybe Ortho will come to its senses on the pill as well, or maybe state governments will step in with an infusion of cash.