Strategies for more effective payer interfaces
The relationship between drug companies and payers is becoming more symbiotic.
By on Dec 3, 2009The relationship between drug companies and payers is becoming more symbiotic. In todays environment, payers are willing to work closely with drug companies to inject better health outcomes research into the drug development process.
Alternately, companies are using their increased interactions with payers to learn how to improve their products value statements. Regardless of a companys product mix, there are several steps that its managed markets department can take to improve the effectiveness of its payer interactions. Pharmaceutical and biotechnology companies managed markets teams must be wholly focused on listening to payer needs and developing strategies to meet them.
1- Conduct Early-Stage Health Outcomes Research to Meet Payer Needs
From a business perspective, no company, whether it is a drug maker or a widget manufacturer, wants to spend more than it must to get its product into the marketplace. Payer-driven research has now become a drug industry standard, though; it has become part of the cost of doing business, at least in major markets such as the US, Europe and Japan. Payer companies are much more diligent about how they reimburse for medication. Companies can no longer simply present a new therapy that treats a challenging disease. They now have to justify in great detail why it should cost X amount to administer it to a patient. Payer expectations have unseated physician and patient expectations in this regard.
The focus on earlier collection for health outcomes data is a relatively recent shift within the industry. Previously, companies would conduct post-launch or Phase 4 pharmacoeconomic studies to show that their treatments offset hospital visits or time spent in the emergency room, both costly expenses for payers. Although these types of studies are not always necessary for FDA approval, they can make or break a drugs reimbursement profile. But in todays environment, payers demands are becoming more stringent, and the Phase 4 studies of yesterday are now part of companies regular registration trials.
2- Develop Strong Value Statements to Gain Formulary Access
The conversation between drug makers and payers has changed since the mid-1990s. Over time, one of the biggest changes to market access strategies is that they focus on value. In the past, drug makers competed for payer access by offering contract advantages to provide payers with better prices. But engaging in a price war between products is no longer enough to gain competitive reimbursement status.
In the current reimbursement environment, payers require drug makers to compete on value and product attributes backed with hard data instead of offering competitive contracting.
Long-term communication between companies and payers can more effectively shape a products value statement and position the drug for competitive formulary access. The best time to start communicating with payers is early in development, so that companies can keep payers apprised of market changes that could affect the drugs value at launch.
3- Change Focus of Contract Negotiations to Improved Value Propositions
Although competitive contracting is less of a focal point in negotiations between payers and companies, changes to contracting dynamics are affecting payer conversations. Tier positioning, for example, has evolved to become much more sophisticated, especially regarding access contracts or performance contracts. To competitively negotiate with payers, however, drug makers must develop sound value proposition strategies based on a broad understanding of the disease state. Discussions related to contracting continue, of course, but contracting discussions have taken a back seat to value statements and improvements in health outcomes as the main focus of payer conversations.
Companies must start developing payer relationship strategies that encourage communication between the two parties. The managed markets teams most successful at building strong payer relationships do so by developing win-win strategies that call for increased communication. To improve payer relationships, managed markets teams should encourage account managers to communicate with payers early in development and as often as possible.
This is an excerpt adapted from a study conducted by pharmaceutical intelligence firm Cutting Edge Information. To know more about the study, download summary here: http://www.cuttingedgeinfo.com/market-access/