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Perspectives on Payer Contracting

Posted by Matt Breese on Oct 18, 2016

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Pharmaceutical manufacturers face several ongoing challenges when deciding if they should contract for access, selecting geographies, and partnering with PBMs and payers. While contracting doesn’t apply to all therapeutic areas, geographies or payers, it can be highly effective in certain situations. Manufacturers need access to accurate data to manage risk and assess contract opportunities.

Common questions pharmaceutical contracting and marketing teams face are:

  • With which payers and PBMs should I contract and what positioning should I achieve?
  • Which payers and PBMs are effective at controlling or driving product use through formulary positioning and controls?
  • How much contract value am I willing to leverage?
  • What are the utilization tradeoffs of having a preferred position within a market basket?

Sharing Risk between Drugmakers

Contracting strategies are important in traditional pharmaceutical pricing models, but they are critical in value-based contracts. According to the Department of Health & Human Services, by 2018, they intend to link 80% of Medicare payments to value, and 50% to alternative payment models. Especially in the hepatitis C and oncology fields, outcomes-based contracts are becoming increasingly popular, according to FiercePharma.

New blended payer/provider entities formed to reduce risk and lower costs are starting to expect pharmaceutical manufacturers to join in evaluating risk against the total cost of care. Data and analysis innovations are on the verge of supporting a risk sharing-based approach to pharmaceutical product and medical device contracting. This requires pharma manufacturers to be transparent by sharing data and pricing models.

A recent specialty reimbursement report from EMD Serono revealedabout 14% of U.S. payers have at least one pay-for-performance pricing arrangement.” It is expected that more payers will implement outcome-based arrangements in upcoming years.

Specialty and non-specialty pharmacy treatments are being considered for outcome-based contracts today. Dan Mendelson, President at Avalere, recently stated, “The growth of outcomes-based contracts between plans and manufacturers is a clear response to the health system’s call for cost-containment without restricting patients’ access to new, breakthrough therapies.”

Leveraging Accurate and Timely Data

Pharmaceutical access teams need the right set of timely data to understand their market, identify competitive contracting strategies, and partner with the right payers and PBMs where a contract is both realistic and valuable for their brand’s access.

Syndicated third party data sources and contract agreements provide data on product use. With this increased access to data, opportunities for payer contracts are growing. However, these data sources must be reliable, timely, and consistent to accommodate an indication-based drug contract. When a manufacturer evaluates an indication-based contract, it is important to seek the right data, operational, and invoicing terms.

Contracting Before and After Launch

While many pharmaceutical manufacturers wait until after launch to implement contracting strategies, cutting-edge data, modeling, and analysis tool exist to assess the impact of contracting in a therapeutic area or relevant analog before going to market. Today’s data access allows manufacturers to examine the implications of an indication-based pricing model on the design of a value-based contract. After executing a contract, measures and metrics should be monitored to ensure optimal contract performance from both parties.

Assessing Contract Opportunities

Taking advantage of the wealth of data available to inform the timing and makeup of contracting strategies, manufacturers can overcome challenges. Accurate data enables manufacturers to manage risk, assess opportunities, and prepare for payers and PBMs contracting requests. 


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Topics: Market Access, Provider, Branding & Marketing