Creating Partnerships — Balancing Priorities
The healthcare industry continues its shift to outcomes-based payment models. As a result, health plans and providers embrace evidence-based clinical approaches and system metrics as a means of measuring practices against identified benchmarks. This shared focus creates a partnership that reflects the confluence of cost efficiencies to support market stability and the professional commitment to patient-centric care, ensuring the best possible clinical outcomes. As a result, integrated networks, new interface technologies and, in some cases, difficult negotiations successfully stimulate financial and clinical benefit.
Inviting a Third Partner to the Party
Pharmaceutical manufacturers, which have traditionally maintained personal interactions with hospitals and individual providers, and negotiated relationships with health plans and their pharmacy benefits managers (PBMs), are also actively engaged in what has become a three-way partnership. As an integrated partner, pharma contributes outcomes research from clinical trials, provides enhanced educational materials that can affect patient compliance, and negotiates pricing and formulary positioning. Building on this shared commitment can mean the difference between covered/not covered and preferred/non-preferred status for drugs, which is particularly relevant when introducing new therapies and establishing initial market access.
Competition Drives Negotiations
It is a common axiom in any business enterprise that competition increases when resources are scarce. Recently, Mark Merritt, president and chief executive officer of the Pharmaceutical Care Management Association (PCMA), expanded on this truism as it related to drug therapies and pharmacy benefit plans.
“While PBMs can negotiate significant discounts and rebates when drugs are subject to competition, the options to achieve lower prices are limited when there is an absence of it,” Merritt said in written testimony for a hearing of the House Oversight and Government Reform Committee.
PBMs are less successful negotiating discounts and rebates when a new drug enters the market with limited, if any, competition. However, the power drastically shifts to health plans/PBMs after the patent expires and the U.S. Food and Drug Administration (FDA) approves a generic version or another drug with similar clinical results. With much of the variability dependent on an outside agency, such as the FDA, pharmaceutical manufacturers and payers invest in flexible strategies that seek to balance the power.
Negotiating to Equalize Priorities
Finding a common footing and clearly identifying shared goals, rather than waiting for FDA actions to affect negotiations, can be a preemptive approach that benefits PBMs, providers and pharmaceutical manufacturers.
As PCSK9 inhibitors, such as Repatha™ and Praluent™, entered the market as therapies for high cholesterol, Express Scripts looked to its pharma partners to ensure appropriate access, while delivering affordability. Its Cholesterol Care Value ProgramSM, which was launched prior to U.S. Food and Drug Administration (FDA) approval of the first PCSK9 inhibitor, uses a rigorous clinical documentation process to preserve access to statins or the new therapies to the right patients, while minimizing unnecessary risks and wasteful spending.
Programs, like the one developed by Express Scripts reinforce that, in reality, payers, providers and pharma share a common goal. Payers seeking reduced costs, providers focused on improved clinical outcomes and pharma pursuing profitable outlets for therapeutics want improved access to the right therapies for the right patients. Through robust three-way partnerships, that goal is achievable.
Understanding Leads to Positive Positioning
In an ideal world, products that differentiate themselves from a clinical perspective achieve the best positioning. A product’s ability to deliver effective patient outcomes for providers as well as medical-necessity supporting data that for payers greatly affects their formulary positioning.
On the other hand, when multiple competing drugs are available to address a specific set of clinical indications, overall market access is more difficult to negotiate. Additionally, the compensating use of drug rebates and coupons can negatively impact the financial viability of a particular drug. Novo Nordisk is witnessing this challenge with several of its diabetes medications, and is expecting increased administrative and sales costs associated with introducing Tresiba® and other pipeline drugs. They determined that defining the appropriate balance between market access, pricing premiums and infrastructure (sales and marketing) funding is critical to their continued market growth.
It is only through strong partnerships with common understandings that all facets of healthcare — providers, payers and pharma — are able to adapt to this new paradigm in which outcomes drive clinical endeavors, market-growth strategies and value-based reimbursements.
Stay tuned for more perspectives on driving payer engagements and what it means for your business.