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Stakeholders, such as providers and payers, want pharma and biopharma companies to demonstrate that new therapies deliver distinctive value to justify reimbursement, aka value management.

By Jeff Elton on Mar 22, 2013

Have you found that meeting efficacy goals and safety targets for therapeutics isn't all you need to do to ensure a new therapy will succeed in the market? A significant challenge facing pharma and biopharma companies involves substantiating and managing the value of their therapeutics. Here, value encompasses the economic and health benefits realized by the health care delivery system, direct care provider, and patient. As the risks of no reimbursement, constrained conditions for reimbursement, and larger patient-responsible payments increase, value is becoming the dominant framework for the payer and the payee. 

Most pharma and biopharma companies are just beginning to adapt to regulators’ and payers’ shift to using value-based reimbursement criteria when evaluating new and existing therapies. We’ve argued in past articles that the pace of responding to these changes is important. The trend is progressing faster than many prognosticators originally envisioned. Many companies are finding that living in two systems difficult: the traditional system of assuming approval-meant-reimbursable; and the value-indexed approach of showing absolute and relative benefit to the health system and patients.  My suggestion is to manage to the demands of the environment you are moving into, not the one that is dissolving.

“Pharma and biopharma companies should essentially transition away from obsolete clinical trial plans, product commercialization strategies, and reactive medical functions, none of which emphasize total value”

One aspect of this new world of value management is the corporate operating model which includes organizational design, key management processes, performance measures, and supporting technologies and infrastructure.  Pharma and biopharma companies should essentially transition away from obsolete clinical trial plans, product commercialization strategies, and reactive medical functions, none of which emphasize total value. It is our opinion that companies should look to replace their current operating models with approaches focusing on value management from very early points in translation or clinical development through life cycle management in efforts to meet new efficacy standards and gain reimbursement based on value. Key corporate functional groups operating in a traditional siloed manner will now have to interact as part of an integrated strategy utilizing real-world data and analytics.

Real-World Data: A Foundation for Value Management

The challenge involves moving beyond clinical trial data to real-world data and having the processes and infrastructure in place to achieve reimbursement based on value. I’d like to emphasize that pharma and biopharma companies need to recognize the importance of data collected in real-world health environments, including electronic medical record (EMR) data and health data collected through patient care.

As more stakeholders find real-world data available for drugs, corporate strategic plans will have to include real-world data generation as early as Phase IIa, possibly earlier for programs likely to receive accelerated or provisional approvals. Companies will have to nurture the relationships and foundational infrastructure that make these data available and hire the talent and expertise needed for analytics.  

The Value Cores – A framework for Value Management Processes

Innovation, launch, and value-cycle management form the framework of value management.

Innovation encompasses late pre-clinical through approval, with the premise that value is best understood early and initially validated through clinical studies. Launch begins two to three years prior to anticipated approval and registration. It integrates the activities of medical affairs, clinical development and commercial management, supporting comparative analytics and aligning all traditional activities to a value strategy. 

Finally, value-cycle management is a new focus on commercial management and life cycle management. It assumes that new value analyses, both counter and supportive, will constantly be generated by the company and others such as national payers, private payers, and academic institutes.

“Value management is a team sport, demanding a new type of communication”

Value management is a team sport, demanding a new type of communication, one in which the scientific and clinical meet the practical considerations of clinical care and patient benefit.  Models focused on high unmet medical need are often incomplete by not focusing on the needs of the health system. Further, physician acceptance and adoption models are rapidly being overwhelmed by the growing power of integrated delivery systems and single payer systems in which therapeutic options are not always the physician's choice. 

Driving Realignment to Value

The basic system at most pharmaceutical companies must be formally realigned to meet the goals of value management. If the goal is to optimize the value of the therapeutic delivered, but the reimbursement model emphasizes payment only for the highest patient responders, then goals emphasizing market share - relative to competition or a total population of patients within a disease category - may be counter to the value objective. If the data the company uses to assess product performance in the market are derived from transaction systems and not EMRs, the conclusion may be that performance is on target. But there would be no indication that a significant percentage of the targeted patients receiving the therapeutic are low beneficiaries.

“Time was the commercial function focused on sales force and marketing. Now we find that marketing is focused on key customers…”

I’ve found that top executives at pharma and biopharma companies, including chief executive officers, chief strategy officers, chief medical officers, and commercial leads, are beginning to develop roadmaps for managing and measuring to value. These executives are changing the way a company does the following:

• Views new business opportunities – what the company licenses, what services it may offer to complement its therapeutic offerings.
• Brings value through the system from pre-clinical to launch preparation to commercial management.
• Eliminates historical data and metrics unaligned to the goals of value in favor of more outcomes-based and comparative measures.
• Aligns revenue models to value.
• Formalizes relationships with health systems and governments to assure a flow of data and supporting analytics for value substantiation.
• Identifies new talent needed, such as data architects and data scientists, to gather and analyze raw data.

For instance, time was the commercial function focused on sales force and marketing.  Now we find that marketing is focused on key customers, institutional entities, and meeting the requirements of an integrated delivery network. Managed markets are less focused on the pricing of predecessor therapeutics in a category. The strength-of-the-label function is now supporting key studies and analytics on value. Medical affairs is seeing a broadening role, often building the external relationships required for access to data, examining analytic approaches to support value, and making key contributions to the three core value decision-making processes. 

But the required types of enterprise-wide communications are sporadic, and core value processes are just forming. Because the formal demands by payers and risk-bearing providers focused on value are increasing apace, the more progressive pharma and biopharma companies in this new environment will catalyze the formal and cultural changes required to assure their innovations are compensated for the value they deliver.