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Perspectives on Payer Contracting

Posted by Matt Breese on Feb 14, 2017

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During all stages of a product's lifecycle, pharma teams and payer marketers need to determine whether or not to contract. A payer contract is an agreement between pharma and payers to improve advantaged access, to reduce restrictions to be at parity with competition, or to establish a patient support program for lives covered under a payer. While contracting for favorable access can provide enormous lifts in scripts, it is not essential in all situations. 

When is a Contract Beneficial?

In order to develop a contract, pharma teams need to understand when they are in an advantaged or disadvantaged position. This positioning helps determine whether or not a contract is beneficial. If the company has parity, or "good enough" status, a contract is not necessary.

Pharma teams typically use analogs or historical data to understand the impact of a contract. Often, new product launch efforts are centered around understanding payer's new-to-market policies to forecast the access they will have.

5 Ways to Define Your Brand’s Contracting Strategy

In order to remain competitive in a highly managed specialty drug class, pharma must leverage trusted market information to determine what a successful contracting strategy will involve for a new-to-market brand.

Specifically, brand marketers should incorporate the following strategies:

  1. Do understand if your market is open or closed and where opportunity lies
  2. Do evaluate if patient assistance programs at point of sale negate contracts
  3. Do understand competitive contracting penetration and opportunity
  4. Avoid replicating contracting strategy across all disease areas without analysis
  5. Avoid contracting with only the largest players without understanding the landscape

View MMIT’s Payer Contracting Playbook to learn more about contracting strategy.

Value-Based Contracting

One current trend in the pharmaceutical industry is value-based contracting. In this model, the access and price of a drug are based on the true clinical value for the patient.

According to Modern Medicine Network:

“These contracts bring higher payment rates for improving patient outcomes, supplanting traditional contracts in which payment brings rebates based on volume and the right place on the formulary.”

Value-based contracts between manufacturers and payers will likely increase in upcoming years.

Solving Payer Contracting Challenges

MMIT’s market access and data application tools assist in resolving payer contracting challenges. By reviewing historical data, pharma can determine how contracting has impacted similar products. In addition, current data identifies contracting opportunities that need better access. Pharma teams can use both historical and timely data to develop a sales and marketing strategy. Real-time market access data and tool solutions can also be used to ensure that payers are staying compliant with their contract status.


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Topics: Market Access, Payer