Can your drug provide a money-back guarantee?

Specialty drugs have been one of the bright spots in the Pharmaceutical industry, accounting for nearly 30 percent of total Pharmacy spend on the commercial side in 2013 despite accounting for less than 1 percent of all US prescriptions. Spending on specialty drugs increased 14.1 percent that year. At the same time, spending on six of the top 10 traditional therapy classes dropped, primarily because of lower unit costs.
Overall, specialty drug spending is expected to more than quadruple by 2020, CSV Caremark predicts, accounting for about $402 billion a year in sales.

Entering  ‘Money-Back Guarantee’ Era

 
State systems and commercial insurers globally are pushing back against these high-cost drugs. Plans are focused on designing special formularies for specialty drugs, implementing oncology pathways to reign in costs, and shifting coverage from the medical benefit to the Pharmacy benefit, which may put greater financial responsibility on patients.
 
Indeed, 61 percent of commercial plans (75 percent of covered lives), and 87 percent of Medicare Advantage and prescription drug plans, charged a co-insurance rather than co-pay for specialty drugs in 2013. In late 2014, state Medicaid directors sent an eight page letter to Congress urging “an immediate federal solution” to the cost of specialty drugs.
 
Providers are also pushing back. In April 2013, an international coalition of cancer experts released a call to action decrying the ‘astronomical’ cost of certain drugs. The letter followed the actions of oncologists at New York’s Memorial Sloan-Kettering Cancer Center in 2012 who publically refused to prescribed the drug Zaltrap (ziv-aflibercept) for colon cancer because it was twice as expensive as similar therapies. Their outcry eventually led the drug’s manufacturer to slash the price in half.
 
Now, in 2015, we are entering an era of ‘money-back guarantee’. St. Jude’s Hospital started offering its patients a money-back guarantee on an implantable Cardiac resynchronization device called the Quadra CRT system that it introduced in 2011. St. Jude will refund hospitals 45 percent of the Quadra’s cost if a patient needs corrective surgery within a year. However, can this type of money-back guarantee apply to drugs as easily? Payers seem to think so.
 

Nevertheless, as Dr Koop famously stated, “Drugs don’t work in patients that don’t take them”. Patient adherence to all drug categories is notoriously low. Pharma companies currently face an even bigger challenge. Not only must the drug work in everyone it is indicated for, but Pharma must now take responsibility for patients actually taking their drugs so that this barrier to effectiveness is also overcome.

Conclusion

To combat the risk of significant revenue loss from these drugs, manufacturers need to determine pricing and marketing based on more than just recouping research investment and hitting profit goals.
Analytics must include combining efficacy, patient efficacy outcomes, value and patient adherence to determine optimal pricing. The only analytics I can see capable of doing this effectively are Artificial Intelligence powered Pharma analytics… and we know where to get that.


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