Total Cost of Care Will Define Value Propositions
Understanding where providers and payers are headed is key to pharma sales engagement.
As they move increasingly toward a value-based model, health care systems are also being expected to take on more risk, so every contributor to the total cost of care will increasingly be scrutinized in terms of the value that it brings. Now, life science business leaders have an unrivalled opportunity to learn from senior clinicians and healthcare administrators exactly how these latest trends in the US healthcare landscape are set to impact their commercial organizations.
During an extensive live Q&A session on Friday, February 12, three senior healthcare experts will provide privileged insight into “How 2016 Healthcare Trends will Shape Market Access Strategies” as part of an expert roundtable with CMR Institute. Taking place at 12 noon ET, this live webinar will offer participants the opportunity to put their questions to: Dr Jeffrey Farber, CEO, Mount Sinai Care; Denise Prince, CEO, Keystone ACO; and Gary Rice, Senior Vice President, Clinical, Education and Human Resources, Diplomat Specialty Pharmacy.
New payment model
Dr Farber, who runs a Medicare shared savings program ACO (accountable care organization), sums up the current US healthcare landscape: “The market is moving very rapidly in what I believe is a major transformation from a fee-for-service model that has dominated the landscape for the past 40-50 years to a real change to fee for value. The purchasers – the ones that are paying over $3 trillion a year in healthcare services in this country – are no longer capable or willing to tolerate the poor value that they’ve received for their money.”
He sees three key trends:
1. A blurring of the lines between providers and payers with increasingly sophisticated providers capable of taking on the bread and butter of the insurer world. At the same time, there will be increasing consolidation at the physician and hospital level with more integration among providers, and a move towards models that provide better quality for patients.
2. A very ramped up effort towards physician engagement, partly driven by the way Medicare is going to pay doctors: in 2015, the physician value-based modifier was a radical change which said “Medicare's is no longer going to pay doctors the same rate for the same service which they have done since 1965.” The focus will be on value-based metrics such as patient experience, quality, care efficiency, and total cost of care. Doctors will be paid differently and the new model will be phased in for every doctor who participates in Medicare by next year with the aim of addressing both sides of the value equation: quality and cost/efficiency.
3. Consumer-centricity. “I think that more and more provider organizations will start to think of themselves and behave as a truly customer-centric organization as opposed to the very traditional system where it has been about the providers.” Patients will have more access to useful information and choices about where to go and what to do.
Way ahead for pharma companies
What can life sciences companies do to adapt to this new environment? In short, less pitching and more active listening. “What I would do is ramp up the effort and time that I’m spending studying and understanding my market.” Healthcare is very local and also very different along the continuum of fee-for-service and fee-for-value. Questions to consider include: what type of governance structure there is – who’s making the decisions? What are their focus areas and what are their pain points? Instead of coming with an agenda “I’ve got a product to sell”, sales organizations need to figure out how their product, service, technology, medicine or device fits in.
This includes understanding what’s driving the providers, for instance, shared savings opportunities or the need to promote adherence for common chronic conditions – that way, patients do better, providers get paid for achieving certain benchmarks and pharma companies will see better results and improved market share. Relevant information is already available publicly through annual reports, filings and other public documents.
The sale is becoming increasingly sophisticated as providers consolidate and themselves become more sophisticated. This may involve a switch away from an emphasis on talking to individual primary care physicians toward procurement organizations and ACO leadership teams, where the CEO and CMO are important.
It’s vital for sales to get a real understanding of what type of organization they are approaching and what it’s focusing on. “Then if there’s a potential fit, if you’re in that space, you’ll want to have a conversation. If you’re not then, frankly, you don’t and you want to move on and see who else might be. I’d want a very focused ‘I understand this is what you are doing’ and then a lot of listening, and then a very focused ‘Here’s what we can do.’”
The concept of shared risk is also important. “I think ultimately what’s going to be attractive and acceptable and catch the ear of a population of health executives is someone from life sciences who comes and says ‘I’m willing to take on the risk with you.’ There are a lot of people who come and want to sell a service or product and say ‘You’ll pay for it with the money you get in your shared savings.’ That’s not a sound proposition and I’m not interested. There may or may not be shared savings after the risk that I’m taking and someone who wants to come in and have a piece of some virtual money that doesn’t exist with the assumption that we’re going to get it, that doesn’t work for me; but someone who is interested in saying ‘I’ll work with you on a risk arrangement and I’ll put my own money at risk or figure out a more creative way to structure a deal, then I’m more interested.’”
Quality and cost pressures
In addition to her role leading the Keystone ACO, Denise Prince is System Vice-President, Value-Based Care for Geisinger Health System. An expert in alternative payment models, Prince anticipates a number of trends this year in relation to fee-for-service Medicare, particularly in the context of the ACO and bundled payment environment. The focus remains on challenging organizations to improve the quality of care provided to Medicare beneficiaries while also reducing the cost; meanwhile, providers can benefit from improvements against those metrics.
With many ACOs renewing their contracts and new ACOs being formed, the number of ACOs is growing. At the same time, CMS is seeking improvements to a model in which the benchmarking currently favors ACOs from high-cost areas that are rewarded for improvements despite continued high utilization, for instance by slightly reducing previously very high utilization. In contrast, providers that are already low cost receive no incentive for adhering to their low-cost models.
“Just last week CMS released a new benchmarking proposal to try to address some of these concerns,” Prince tells eyeforpharma. “And so the industry will be looking very carefully at those benchmarking proposals to see if that will stimulate more growth and interest in ACOs in general.”
Pharma and device companies should anticipate further pressure on cost and be able to understand the impact that use of its product will have on cost and quality. “A pharma or device company has to show that it can deliver meaningful change in the total cost of care in order to get the attention of the ACO.” This is particularly relevant in the case of more expensive drugs or devices that affect many beneficiaries.
“If it’s a drug or device that many people use and there is evidence that use of the drug or device reduces use of hospital services or improves the quality of care, then that is going to be meaningful for the ACO.”
Well-documented value propositions
“It’s more true than ever that the value proposition – the cost-benefit – of a drug or device has to be very well documented and has to be of significance in terms of number of patients affected or the total spend.” Products that only bring marginal incremental value combined with a hefty price tag are likely to be discouraged, according to Prince. “The concept of stewardship of resources will matter more this year and in the coming year.”
How does this translate into the approach that companies should take? “I think they need to understand the population that is being managed and be able to articulate what the impact of that drug or device is on that population.” This might include evidence that the product reduces uses of the emergency room or readmission, helps avoid surgical procedures, or improves compliance, for instance.
At the same time, companies should note that there is a lot of uncertainty in the sector for physicians in the face of numerous mergers and acquisitions, changes to regulations and compensation, with future compensation based less on productivity measures and more on management of care. Pharma sales teams need to be sensitive to this complex business environment as it affects doctors.
Despite these changes, the system nevertheless remains a mixed model: there’s still a lot of fee-for-service activity alongside the move to a value-based model. “It’s the proverbial ‘having a foot in two canoes,’” Prince stresses. This means that pharma and device companies need a value proposition that works in both domains.
Going forward Prince sees opportunities for companies in the post-acute phase of care. “I recommend companies expand their contacts outside of the acute care hospital and physician office and include the entire healthcare continuum. We’re expecting more models around post-acute episodes from CMS,” she concludes.
Spotlight on specialty
2015 saw 28 FDA approvals and this trend looks to accelerate through 2016, according to Gary Rice. We’ll see approvals around hepatitis C, oral oncolytics, immunology – rheumatoid arthritis, psoriasis and Crohn’s – and, multiple sclerosis. Other innovations include a new emphasis on orphan drugs to address less well-known conditions such as Duchenne muscular dystrophy, and there will likely be an emphasis in progression on the way a drug is administered, from IV to a sub-cutaneous to an oral medication.
The spotlight is firmly on speciality pharma: by 2018, 50% of all drug costs are going to be speciality costs and these will be incurred by just 3-5% of total patients.
In this context, Rice anticipates continuous pressure for payers to try to look at more and more value. Specialty pharmacies can support value-based initiatives by providing programs that engage, educate and help patients be adherent and persistent on their medications. Therapy effectiveness then demonstrates efficacy shown on the medication’s pivotal trials.
More generally, Rice reinforces the emphasis on value and differentiation; inevitably as you get more therapeutic drugs in a class there is a greater need for differentiation. “Payers want to understand the value and they also want to understand the offset; there should be cascading medical costs offset.
Help me identify the patient population that will truly benefit from this new, innovative product.
“Payors are additionally looking at specialty, especially in classes that are becoming increasingly crowded – they really want to understand the sub-population that can really benefit from these newer therapies. What the payers want is: ‘Help me identify the patient population that will truly benefit from this new, innovative product.’”
For certain disease states, there will be more emphasis on how manufacturers and physicians help with the way drugs should be sequenced to maximize outcomes, so if one therapy fails, HCPs know when to prescribe another: “We would like pharma to work with the Key Opinion Leaders in disease states like MS where therapy guidelines need to be established.” When there are limited to no guidelines within a therapeutic area, payers are able to use their interpretations on how best those medications should be managed and covered under the patient’s drug benefit, Rice suggests.
“How 2016 Healthcare Trends will Shape Market Access Strategies: An Expert Roundtable with Audience Q&A”, Friday, February 12th, 12 pm ET,
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