External Factors

Payer Trends:

1. Vertical integration among large payers/PBMs increases the bargaining position of a few key players

  • Recent mergers and acquisitions (such as Cigna’s deal with Express Scripts or the Aetna/CVS deal) are evolving the payer landscape to be comprised of a few dominant players. These players make coverage decisions and have higher control of a large percentage of total lives. This provides them with incredible negotiation leverage with manufacturers seeking access for products on formularies covering giant swaths of the country’s population.

2. Horizontal and vertical integration of Integrated Delivery Networks (IDNs)

  • This has driven the centralization of formulary decision-making across diverse networks of care settings. This integration serves to control the total cost of care for patients across the care continuum and improve patient outcomes.

3. Increasing number of formulary tiers and use of co-insurance

  • Payers are typically enacting a new-to-market block on new branded entrants for 6 months until P&T committees review the product/category. Unless there is a high unmet need for therapies in certain categories, payers show a general lack of awareness around the burden of disease, leading to more restrictive access for new products until clinical benefit is demonstrated. Payers are creating benefit designs with more tiers and higher patient copay/co-insurance amounts to shift the burden of increasing pharmacy costs to patients.

4. Use of copay accumulators shifts cost burden to manufacturers and patients

  • These can negate any hard work a manufacturer has done in priming the market for a new product if a patient suddenly experiences higher OOP costs than they are used to. Patients are more likely to switch to another product or abandon therapy altogether, leading to worse clinical outcomes.

Implications for manufacturers:

  1. Clearly define your organization’s access goals for the first 12 months of a launch for important national and regional accounts to help shape your access strategies. The increased leverage of the payers and IDNs will raise the stakes for your product’s value proposition to be clearly defined and aligned with your contracting strategy at the customer level.
  2. Manufacturers will have to be ready for payers to place new-to-market moratorium (NDC blocks) for new products in established categories with existing competitors.
  3. The biggest implication of copay accumulators for manufacturers is increased copay card program costs. Due to these programs, manufacturers may soon realize a sharp increase in their copay card program costs, which will impact a brand’s financial performance. Manufacturers should assess the risk level these programs pose and identify potential tactics to overcome them. Read more on copay card accumulators and potential tactics by reading our white paper on Copay Accumulators & Maximizers.

Competitor Trends:

1. Increased interest in value-based contracting to secure preferred access for high-cost specialty products

  • In 2018, 85% of surveyed health plans showed “some” or a “great deal” of interest in outcomes-based or value-based contracts with pharma manufacturers, up from 67% in 2017¹⁰. The vast majority of interest is in disease areas that incur high costs to payers, such as cardiovascular disease, infectious disease (i.e. Hepatitis C) and oncology. While only 23 publicly disclosed agreements have been signed to-date, estimates put the number closer to ~90¹¹. This demonstrates an increased desire from payers to engage with pharma in innovative ways to lower costs and improve patient outcomes.

Implications for manufacturers:

  1. If manufacturers can demonstrate that connected drug delivery devices are consistently used and generate high-quality data, payers may view this favorably and potentially provide preferred access relative to competitors. Furthermore, connected devices may complement value-based reimbursement models.
  2. Without these points of differentiation, we have observed that companies are received favorably when they better understand where their products stand in a disease’s treatment algorithm and articulate the product’s value story to payers accordingly. Too often, manufacturers seeking access for a product that is third or fourth to market tend to overstate the potential value of a product to a payer and are met with frustration. This often translates into products being excluded from formulary.

Policy Trends:

  1. The Institute for Clinical and Economic Review (ICER) is emerging as an influential player in drug pricing by rallying public opinion, and pharmaceutical manufacturers have increasingly engaged with the organization with varying degrees of success. Pharmaceutical manufacturers are increasingly anticipating ICER reviews early in clinical development to ensure health economic data is available to support pricing decisions.

Implications for manufacturers:

  1. Manufacturers should continue to engage with ICER to understand and inform the value assessments of new launch products:
  • Review ICER protocols and analysis techniques to understand process
  • Ensure alignment of ICER analysis and forecasts with internal HEOR team analysis and forecasts
  • Hire an external expert to conduct “mock” ICER review of a launch product’s data package prior to ICER review