Where forecasting and reimbursement intersect
Mary Bordeaux, managing director of Mary Bordeaux Consulting, on why it's essential for forecasts to address changes in the payer environment.
By on Mar 16, 2010Mary Bordeaux, managing director of Mary Bordeaux Consulting, on why it's essential for forecasts to address changes in the payer environment.
Increasing volatility in the payer environmentcoupled with more pricing regulations and expenditure controls, plus the prospect of sweeping healthcare reformhas made pricing and forecasting medicines extremely difficult for the US pharmaceutical industry.
Never before has it been quite so critical to address the changes and nuances of the payer environment if a company wants to be reimbursed effectively down the road, says Mary Bordeaux, managing director of Mary Bordeaux Consulting.
Theres a huge need to intersect forecasting requirements with the managed markets and the payer and the reimbursement, says Bordeaux. Where we are today with healthcare reform, it makes it all the more important that we have that intersection.
Understanding the payer
First of all, its essential for a companys forecasting process to align with its payer policy and reimbursement team, Bordeaux says. One critical area to examine is payer mix assumptions. Is your understanding of the payer pool up-to-date and nuanced?
On the surface, the US payer pool is more streamlined than the European pool. Some 59 percent of the American payer pool is employers/private insurance, 13 percent Medicaid, 12 percent Medicare, and 15 percent uninsured.
But once you open the lid to any one of these pools, you encounter far more complexitywith age demographics, stand-alone trends, Medicare advantage, supplemental coverage, self-pay, Medicare A vs. Medicare B, and so on.
You really have to break [each pool] down to very finite segments to really understand the payer mix for your particular product and your particular disease category, says Bordeaux.
Payer policy trends
Another must is to analyze payer policy trends. For instance, in todays environment the price that patients pay for drugs out-of-pocket is increasing at a faster pace than for commercial payers. The average co-pay for a third-tier formulary, for instance, is $75 out-of-pocket versus $46 for private or commercial.
When we start thinking of our more expensive drugs and biologics, thats a very large consideration: Will the patients be able to afford their co-payments? says Bordeaux.
We need to cap our co-insurance, need to cap our co-pay, otherwise we may drive our patients to non-adherence, she continues. A good number to consider is a $100 cap, she says. If you get to a $200 cap, statistics show that patients are seven times more likely to be non-adherent.
The role of adherence
Adherence is another trend to consider in pricing and forecasting. Current statistics show that one in three patients taking maintenance medications drop off before their first refill, one in two drop off before their first year, and one in four remain adherent.
Its important, therefore, to have patient adherence programs in place.
Likewise, its critical to have contracting strategies to deal with generic dispensing and fill rates. When a product is coming into a generic space, you really need to account for that in your forecasting and the aggressive actions that the payers will take, says Bordeaux.
In some cases, generic companies have begun to offer zero-dollar generics to patients for periods up to four months, or allow for step-therapy protocol with pharmacists, both of which accelerate the uptake rate away from branded medicines.
Healthcare reform
Perhaps the biggest X factor in any forecast today, however, is healthcare reform. Bordeaux says its imperative to build reform into forecasting scenarios to assess and anticipate the impact of a potential healthcare overhaul.
Some of that impact will likely be positive. Theres a huge underinsured or uninsured segment of the US population, and increased coverage for that segment will mean more prescriptions and more revenue.
Latest statistics show that in the recession every one percent increase in unemployment comes with a concomitant 1.1 million increase in the uninsured population. Plus there are about 25 million Americans who are considered underinsured because they cant afford their co-pays, their co-insurance, and often their premiums.
So getting broader coverage here obviously would be an opportunity for our industry, says Bordeaux.
Rebates and discounts
On the flip side, Medicaid rebates likely will increase from 15.1 percent to either 22.1 or 23.1 percent. (The Senate bill has capped the rebate at 17.1 percent for certain clotting factors and outpatient drugs approved for pediatric use only.)
Similarly, CPI penalty charges likely will balloon if reform becomes a reality. In this new world of healthcare reform, we would likely start off with a CPI penalty from day one where normally CPI starts kicking in when we start taking our price increase, says Bordeaux. So as youre doing your scenario planning, this is one you really need to keep a good eye on.
The donut hole amendment
Another proposal that would have a negative impact on pharma is a proposed donut hole amendmenta discount that pharma and bio manufacturers would support to bridge the coverage gap.
The idea is that when patients reach the donut hole, the so-called period when they cant achieve the $4,350 out-of-pocket, pharma and bio will pick up 50 percent of the cost of the drugs. Its another new rebate in a way, says Bordeaux, and a discount that youre going to have to account for.
My concern is that were going to go through sort of what we did way back at the beginning with Medicaid, says Bordeaux, that were going to have Congressional language that has nothing to do with reality and doesnt have a clue about how were going to implement this.
Nonetheless, she says, pharma companies better be prepared to deal with it.