How to make payers happy

Payers (including insurers, pharmacy benefits managers, government agencies, and employers) have greater influence over pharmaceutical markets today than ever before. They aren’t making purchasing and formulary decisions based solely on price and rebates anymore, but on effectiveness and safety when compared with other drugs in the class, as well as the ability of those drugs to improve outcomes, an increasingly important emphasis in today’s value-based purchasing world.

Payers and Market Access are now critically important for the majority of markets, whether it is the Middle East, Japan, US or almost anywhere. Even markets like Japan where this was not seen as such a big issue, the payers (government in this case) are now mandating that 60% of prescriptions written are generic. In fact, to make matters even more challenging for Japanese marketers, if your drug has had a generic competitor for at least 5 years, on top of the biannual price cut imposed by the payers, an extra price cut is then added. Payer needs are now a critical element in any drug marketing strategy and cannot be seen as a bolt on strategy as many companies used to see it.

What sets your drug apart from the competition? If the differences are minimal, then be prepared to surrender up huge rebates in order to gain formulary placement, or to be left out in the cold. For instance, The National Institute for Clinical Effectiveness (NICE) only approved Astrazeneca’s drug, Iressa, after the company agreed to provide it at a fixed price regardless of treatment duration, and to make it free for patients who used it for less than three months {May 26, 2010 #18}.

The old models of marketing and market access programs are no longer creating strong results in the current, ever changing access environment. You see some companies spending vast sums on payer rebates and discounts, without investing in analytics to understand the needs, drivers and decision-making processes. Some Pharmaceutical companies are reorganizing to meet these challenges, creating regional sales teams to develop closer links with payers. Some are gathering data on payers and their decision-making procedures. Some have experimented with performance-based contract provisions and reference pricing. The three main areas that Pharma teams need to are:

Extraordinary Data
All drugs have data on efficacy, safety and side effects but now they need to demonstrate superior health outcomes for patients and provide payers with health economics data on these outcomes. Obviously the big three (efficacy, safety and minimal side effects) data points are still the top factors in most markets, but coming close behind are cost effectiveness and budgetary impact. These days, payers are looking for factors well beyond approval standards and want the manufacturers to show them why the drug is providing value and superiority to other players on the market, if they want reimbursement. The days of clinical comparison to a placebo are gone and payers want comparison to existing other players on the market when evaluating new drugs. However, there is also a mistrust of data from Pharma companies and some payers are conducting extensive clinical audits on all data received about drugs.

This was done by the Regence Group who operates Blue Cross and Blue Shields plans in the US. They consider evidence-based medicine to consist of a complete search of all worldwide scientific information and reviews, as well as an audit of each study to see if they consider the information to be reliable and then use this to draw conclusions of benefit, harm or value. They consider only 15-20% of Pharma industry conducted studies to be reliable. Pharma teams need to take into account all the aspects that the payers are when they plan their trials and strategies.

Extraordinary Added Services
As is already done with other stakeholders such as physicians and patients, Pharma companies need to consider what additional valuable services they can offer to the payers also. Interestingly, for physicians, Pharma companies started an account management approach but not for payers. However, Novartis does implement an account management approach with payers and has been rewarded by achieving top places in the annual Verispan Managed Care Pharmacy Executive Survey. Their approach involves a tailored value proposition for each market and customer. They then optimize their resources to specifically address that customers needs, then have cross-functional marketing to integrate these. Novartis have achieved significantly improved access with key institutions, profitability, and employee satisfaction.

Superior Contracting
Pay for performance contracts are becoming key now in the payer needs. Top things states as needs are compliance, adherence and disease management. By paying attention to these things alongside other areas of importance such as cost, risk, value based pricing and meeting unmet treatment needs, and performance guarantees, Pharma companies can favorably influence access for their drugs. One example of this being done was the Merck/CIGNA deal in which Merck provided CIGNA discounts for Januvia and Janumet first if the patient’s blood sugar fell, then additional discounts as patients remained compliant. This is a win:win deal as the CIGNA patients who took their drugs have fewer diabetic complications and Merck was able to sell more pills. We are seeing in many countries the shift to value based contracts, and risk share models.

Developing Your Strategy
If Pharma companies are to meet payers’ needs – and their own – they need to do more; they need to reinvent. Specifically, they need to:
    •    Understand the motivations and drivers of all payers, recognizing that what motivates a self-insured employer is different than what is important to Medicare and Medicaid programs.


    •    Continuously monitor the payer’s “pulse” and be alert for shifts in strategy or market conditions that require shifts in pricing. That also means collecting data from day one to justify continued support of your drug on formularies as the market shifts.


    •    Understand the patient populations and competitive environments in which payers exist. What is their business model? Who do they serve? What are their goals? What do their shareholders expect? What is their mission? What is their decision-making process? You can’t develop a payer strategy without this knowledge.
How do you do this? Evidence-based analytics!

There is not one set of drivers for all payers. This will need to be done using analytics examining your payer segments. So for example, you can run analytics on all key payers in your market, against a baseline of economic value, then pull out the different segments and examine the drivers for those payers.

If using Eularis’ AI powered analytics to assist your efforts, you would then examine the payer segments and determine which of the drivers you are doing well on for each segment, and which are hindering your results. From here one would examine where most impact from changes would be made, what models would work with specific segments, what channels are going to be best to deliver your messages, and what impact these changes will have on your payer strategy. Finally, by using the analytics you would be able to start planning the best payer strategy for each payer segment, and test various scenarios to see which will provide the best outcome.
Does your organization need stronger capabilities in any areas? What will you use as your KPI for these? Many decisions need to be made but these should be made using evidence-based analytics to ensure that you are using real world data to make real world decisions. Once you understand the drivers and constraints of payers, the process of reconciling the organization and processes with the realities of this new market environment can be started.