Volume to Value: A shift in pharma’s business model
As pharma faces transition from traditional business model to a value-based model, identifying appropriate customers and understanding their needs becomes crucial for each organization.
Healthcare reform and industry trends are driving pharmaceutical companies to rethink strategy. Regulatory and market pressures to reduce cost of care without compromising safety or quality means that pharma now needs to think carefully about who their customers are, what they want, and how to meet their expectations. With healthcare spending in the U.S. estimated at 18% GDP (compared to 9-11% in other developed countries), and costs rising at an unsustainable rate, major payers are moving away from paying for volume in favor of paying for value, putting customers at the center of the exchange. For a pharma company that means a shift in mindset. “This is about evolving with our customers, about adapting to their needs as they change,” said Matt Portch, VP Commercial Model Innovation, Pfizer, speaking to eyeforpharma ahead of his presentation at eyeforpharma Latin America in May.
Different customers look for different value propositions. Payer account managers (PAM) are responsible for presenting stakeholders with appropriate offers. For example, on the one hand, insurers or multidisciplinary patient centers, which create their own protocols and formularies, have to be informed about a drug’s effectiveness and safety profile for the substance to be included on the list of prescribable medicines. On the other hand, there are physicians and patients who also make individual purchasing decisions. The first make a choice between different medications available to them through the payers and health systems, while the latter, who cover up to 40% of the cost from his/her own pocket, decide whether to fill a prescription at the pharmacy counter. All those stakeholders are your company’s potential customers who need to be heard and understood.
"The value proposition is different for each of those stakeholders, but in general it is about trying to prove that your product is either clinically differentiated, or safer, or if there is an important quality metric, that it performs better against it. We look at all those things as we put our offers together,” Portch explained.
An example of a comprehensive proposition is an offer designed for a group of providers, which work toward uniform quality of care, and where physicians are employees. Such a group requires information about the efficacy of a drug, what patients it works best in, and the optimal dosage. A pharma company might then go in and differentiate their brand by showing that their product may reduce the length of hospital stay, or the rate of readmissions, or that it may help meet quality metrics required by payers, e.g. getting 90% of the patients to have their cholesterol level under 120. “They’re getting measured on that, so it’s important to have those quality metrics as part of the offer,” Portch said.
Understanding customer needs
In moving from volume to value, your company needs to gain insight into what your customers want. To do that, it is necessary to move on from the one-size-fits-all approach. Step one is to do customer archetyping and market segmentation, work to understand which customers make independent decisions, and what they’re interested in. “Through quantitative and qualitative research, we’ve been able to identify which customers are looking at what metrics, do they employ physicians, are they using EMRs, etc. We were then able to approach them with a business-to-business model that allows us to do a very specific needs assessment and decide how to deliver value to them,” Portch elucidated.
Understanding the entire patient journey is important in supporting people who, for example, go through smoking cessation programs. Having those insights allows for creation of better screeners, as well as for a better integration of those screeners into electronic medical records (EMRs).
“This is about creating broader solutions, where a pill is just a part of the equation. Sometimes it’s improving patient adherence, other times it’s educating providers about a particular protocol, or informing physicians that they need to screen more because they’re underdiagnosing a given problem. It varies by customer, but it’s about looking at the patient holistically and trying to move him/her along a treatment path,” Portch elaborated.
There is quite a lot of variation in physicians enrolling patients in smoking cessation programs. One of the key things to change is knowing whether they ask the right questions, whether the screener they’re using has been incorporated into the workflow, whether it’s easy to use. “Once we know where the problem is, we can bring health technology specialists to help the group incorporate the screener into the EMR, so it’s easier to use and it takes less of the physician’s time,” Portch continued. “Another thing is to educate the medical staff, like nurses and medical assistants, as they’re often the ones implementing some of these strategies. You need to make sure that the entire team is onboard.”
The role of technology
Technology offers a huge opportunity when it comes to creating value-based models. The American government has put US$40 billion dollars into the adoption and implementation of health technologies as part of the Triple Aim Initiative. In the U.S., if a physician wants to see a Medicare/Medicaid patient –half the patients in the country – s/he has to have an EMR system, and use it meaningfully. There are significant financial rewards for that, if you meet a number of criteria. “The government is using financial incentives to drive toward an interconnected EMR system across the U.S. We are very much behind when it comes to the use of technology in healthcare; there is no single-payer system, it’s a fragmented market, and there is no single entity to drive provider behaviors.”
The U.S. government has until today paid out half of the set aside US$40 billion, and about 80% of American physicians now have an EMR system, with 65% using it meaningfully. “The adoption is very good, and it’s more around effective utilization, so some offices just have more resources, like chief medical information officers, chief technology officers, we're very much on track with the implementation of health technologies.”
As pharma is moving from volume to value, understanding customer needs and responding to them adequately becomes critical. Qualitative and quantitative research will play a big part in developing those insights, while technology will facilitate implementation of custom-made solutions. How ready is your company for the transition?
Matt Portch will be speaking at eyeforpharma Latin America, May 22nd-23rd, 2014 in Miami. For more information, click here.