Pharma sales, value and payers
Peter Mansell explores how pharma can convincingly demonstrate value to payers
By on Jun 1, 2012Any discussion of today’s pharmaceutical market, and how it can be sustained by healthcare systems under pressure from demographic and economic forces such as population ageing, recession and the growing burden of chronic disease, will invariably get around to the notion of value.
What that value actually constitutes in terms of a medicine, its core attributes, and the price at which it is offered, can be hard to pin down. There is a general consensus that the traditional requirements for regulatory approval—safety, efficacy and quality—are in themselves no longer enough to satisfy a customer base increasingly oriented to long-term health outcomes and cost-effectiveness.
The pharmaceutical industry itself has acknowledged this fundamental and inevitable shift in emphasis. It has done so generally—for example, by restructuring top-heavy sales teams to embrace more ‘intelligent’, relationship-oriented approaches or tapping into new sources of R&D creativity through partnerships and open-innovation platforms.
It has also done so specifically by seeking out ‘real-world’ evidence to validate product offerings or by incorporating value parameters into clinical trials as early as Phase II. There are indications, though, that this kind of thinking is not as widespread as it could be.
What is value?
In a recent survey of biopharmaceutical professionals conducted by Parexel Consulting, some 63% of respondents said their organizations waited until Phase III before they started involving internal commercialization personnel (e.g., reimbursement, market access, pricing, health economics and outcomes research) in product support.
Just 37% of the respondents said they engaged these functions in product support as early as Phase II.
Another inherent difficulty is that value is invariably a subjective and malleable concept. For a pharmaceutical company, it may reside in the ingenuity of the science underpinning a therapeutic advance, the time and money invested in R&D, in giving a cancer patient a few extra months of life, or creating a new paradigm within a well-established disease category.
For a budget holder, value may be more closely aligned to short-term financial objectives and to cost-saving benefits such as keeping patients out of hospital. A patient may regard value not just as the ability to save or extend lives but in terms of ease of use, quality of life, or lightening the load on carers.
In an ideal world, these different perspectives would all be recognized and integrated proportionately into national or local procedures for drug pricing, reimbursement and market access. The reality, though, is more likely to be a set of competing agendas in which the solution lies as much in political and economic expediency as any holistic conception of drug value.
Competing agendas
All the same, industry needs to make the best argument it can to ensure cost-benefit assessments used to control market access and budget inflation really do take benefit (in the broadest possible sense) and not just cost into account.
In the UK, for example, companies face the prospect of a value-based pricing scheme that will front-load the market-access functions of health technology assessors (HTA) such as the National Institute for Health and Clinical Excellence by folding them directly into price determination.
One feature of the proposed value-based system is that it would set higher price thresholds if companies met certain added-value criteria related to burden of illness, therapeutic innovation and broader societal benefits.
Industry has argued for a more liberal, interpretation of these criteria, such as recognizing that innovation can include incremental improvements that enhance the patient experience, such as new modes of action or drug delivery technologies. (For more on value-based pricing, see Is value-based pricing an aid to market access?, The impact of value-based pricing on market access and patience compliance, and Market access: The impact of HTAs on strategy.)
Payer focus
While the pharmaceutical industry must deal increasingly with a broad range of stakeholders in its efforts to move innovation quickly and efficiently into the marketplace, one constituency that plays a growing role in shaping the value equation is payers.
Omar Ali, formulary development pharmacist at Surrey & Sussex NHS Trust, sees three tiers of key customers/influencers in the current environment: the traditional ‘prescribing customer’ (i.e., general practitioners), traditional key opinion leaders (i.e., consultants), and payers. This third constituency is still relatively alien territory for pharma, which “has yet to ascertain how they operate,” Ali contends. (For more on key opinion leaders, see Special report: KOLs and pharma.)
Conventional sales and marketing strategies, such as branding and advertising, are likely to exert significantly less influence on payers, whose main pre-occupation will be cost-effectiveness or simply cost.
Emotional or professional tags like brand loyalty, keeping up with cutting-edge science or doing the best for the patient, will be more meaningful to frontline healthcare professionals.
In some cases, though, such as the UK’s emerging clinical commissioning groups, these two constituencies will overlap and a multi-stranded approach will be needed.
Ali’s interpretation of ‘value’ in the prevailing healthcare climate is “the translation of clinical need and benefit into a fiscal model of health cost-benefit.” That is expressed through measures employed by HTA agencies such as QALYs (quality-adjusted life years) or ICERs (incremental cost-effectiveness ratios). Accordingly, he says, the most important considerations for payers will be:
- Evaluating clinical evidence: Data from clinical trials; the drug’s evidence base; comparator treatments; the standard of care for a particular condition; patient-related outcomes.
- The cost-benefit/value proposition: Cost benefit; cost effectiveness; health utility; health disutility; the number needed to treat (NNT; i.e., to achieve a specified benefit); p-values (as a measure of probability); clinical significance; statistical significance; the QALY gain.
- The drug’s place in therapy: Clinical positioning; financial restrictions; the evidence for positioning; affordability; other limitations.
- Micro-health-economics: A newly emerging commissioning model of financial provider/commissioner internal market dynamics and resource/budget allocation versus disease priority.
Addressing these issues is the way forward for industry if it is to demonstrate value convincingly to payers, Ali suggests. Companies also need to make sure they are using appropriate comparators and relevant outcomes in presenting their value propositions.
Health-outcomes research
While industry may still have some distance to go in grasping and satisfying the real needs of the payer community, the health-outcomes research agenda is on the right track, Ali believes. Research quality is “improving day by day. I am impressed with what I am seeing or developing”, he comments.
But industry also needs to link up with other healthcare providers, such as managed care organizations and payers themselves, so it can develop a more service-oriented value strategy, Ali notes.
Payers, for example, can provide input into the value proposition and the clinical/pharmacoeconomic evidence that backs it up. Indeed, Ali says, companies should be calling on this input when designing Phase II/III clinical trials.
In other words, industry needs to be pursuing value as a shared objective through partnership with healthcare systems. “It’s the only way they will survive,” Ali warns.
For more on payers and value, check out SFE USA on June 12-14 in Somerset, NJ, Emerging Markets USA in June, and Market Access Europe in October.
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