Beyond Price Negotiation—What Really Matters to Payers

We’ve all heard the adage “cost is what you pay, value is what you get.” Today’s reimbursement landscape has shifted from one of volume to one of value, and as a result, payers and population health managers are more closely scrutinizing the clinical and economic aspects of current and emerging pharmaceutical treatment options to better understand product differentiation. However, “value” may be one of the most overused and misused terms in marketing and pricing today. “Value pricing,” for example, is often code for low price or bundled price, when in fact, the essence of value revolves around the tradeoff between benefits (i.e., outcomes) from a product that a customer receives and the price the customer pays for it.

Demonstrating the value of the benefits versus the price has long been recognized as a core component of the marketing of pharmaceutical products. And, on the payer and healthcare system side, formulary decision makers have used value analyses to make their own assessments for years, but today this practice is even more front and center as healthcare costs and reimbursement pressures continue to rise.

Payers and population health managers have historically conducted value analyses as part of the examination of a product’s value proposition. These analyses have encompassed clinical (e.g., safety, efficacy) and financial (e.g., rebates, budget impact, cost-effectiveness) information, in order to make informed coverage decisions. But, today the stakes for optimal formulary coverage are higher than ever, with payers and other population health managers demanding more than registration trial data and robust rebates. Payers realize that how a product “performs” outside of a well-controlled clinical trial can be very different from how a product performs in their population. So, they are more closely scrutinizing not only the clinical evidence based on the products’ approved labels, but they are looking to find out how products work in the real world.

What Payers Expect and Demand

As a result, payers now expect and are demanding real-world evidence (RWE), preferably versus the standard of care or top competitors. Questions such as “How will product X perform in our population?” and “Will the potential improved safety and/or efficacy result in total (not just pharmacy) cost savings?” need to be addressed with consistent, evidence-based results. As one payer recently told me, “A problem we face is product labels are so broad with respect to indications and dosing. That’s why we are seeking more information to help manage use of medications for the most appropriate patient types.”

The lines between payers, health systems, and providers continue to become increasingly blurred; outcomes across difficult-to-manage patient populations determine organizational and individual performance (i.e., guide bonuses/penalties) under value-based care. All have skin in the game—from the C-suite, to the D-suite, to front-line prescribers—so any clinical or real-world information that can be provided to support product value is very beneficial. From survival rates for oncology products, to quality measures for type 2 diabetes, to hospital-related endpoints for cardiovascular conditions such as heart failure and other therapeutic areas, key healthcare decision makers and influencers are looking for insight into patient outcomes and cost so they can redefine the definition of value related to healthcare delivery.

Marketing and Data Integration is Critical

To that end, data generation beyond clinical trials and integration of these data into the marketing mix of pharmaceutical products need to be prioritized as a part of product commercialization, from pre-launch planning through lifecycle management. It’s no longer good enough to only generate robust randomized controlled trial (RCT) data. Products must have a well-defined plan for data generation in order to demonstrate how they can move the needle toward meeting business goals related to improved outcomes and reduced costs. Equally as important is the transparency (e.g., inclusion/exclusion criteria) and quality of the evidence—the methodology used to generate the data. All of these factors will impact the credibility of a product’s value proposition.

The passage of the HITECH Act and the Meaningful Use program drove widespread adoption of electronic health record (EHR) technology to improve quality, safety, and efficiency. As a result, there is greater access to clinical and financial outcomes data. Access to these types of RWE can be points of differentiation for products and that’s why manufacturers seek to generate them. Analyses of large EHR databases provide insight into patient populations and patient subpopulations. They allow for a look into endpoints that are beyond those studied in clinical trials (e.g., length of stay, rates of hospital readmissions, etc. These add to the value equation and help shift the focus from price-oriented discussions to outcomes-related discussions. With better access to RWE, manufacturers can create strategies to differentiate their products, and therefore engage in more robust dialogue with payers when it comes to determining and demonstrating the value of current therapies or even the newest therapeutic advancement.

And with the 21st Century Cures Act, new opportunities now exist for information exchange with formulary decision makers (, paving the way for manufacturers to provide payers with the type of information they truly want and need—communication of healthcare economic information (HCEI). With the 21st Century Cures Act, proactive communication of clinical data and RWE—including information not in the approved label—to payers, formulary committees, population health decision makers, and similar entities with knowledge and expertise in the area of healthcare economic analyses is now permitted. Before the introduction of this act, communication of this type of information had been limited to reactive use—restricted to when requested (pre-launch and post-launch), or commonly supplied in standardized formats such as the AMCP dossier at launch. However, decision makers found that this approach does not always meet their needs for informed, cost-effective decisions, especially in the case of new promising (e.g., new MOA) agents and/or investigational drugs. With the 21st Century Cures Act, HCEI may be used to provide cost/information to payers regarding investigational products which may help plan and budget for future coverage and reimbursement as long as a statement is provided that the product is under investigation and/or what stage of the product development cycle the product is in.

MLR and HEOR Offer Marketers More Leverage

Commercial marketers, in conjunction with their medical, legal, regulatory teams and HEOR, now have an opportunity to leverage this guidance. The key is to determine how to strategically plan and execute what, how, and who will communicate this impactful product information that is relevant and meaningful to formulary decision makers. We recently conducted qualitative research with dozens of payers, and they expressed a strong desire for RWE/HCEI with a level of skepticism regarding the scientific rigor of the data. They were adamant that manufacturers apply the same rigor and evidence-based medicine principles to HCEI as they do to clinical trial information. According to the 21st Century Cures Act, HCEI related to an approved indication must be based on competent and reliable scientific evidence and must be developed using generally accepted rigorous scientific standards and methodology. When HCEI is used in a promotional manner, it is subject to FDA’s requirements for submission of promotional material. All supporting information for HCEI should be referenced and be made available upon request.

In addition, who delivers HCEI also impacts their perception of the quality and rigor of the evidence. The consensus among the payers we spoke to is that using the information communicated by trained outcomes research personnel or scientific liaisons well versed in health economics and outcomes “carries more weight” than those same analyses delivered by account managers.

Potential Risks vs. Potential Market Opportunity

Similar to communication allowed under FDAMA 114, what brand marketers decide to proactively communicate comes down to the level of potential risk they are willing to take and the potential market opportunity that exists, and these risk-benefit analyses vary across products and manufacturers. Topics that can be proactively communicated include, but are not limited to, the following:

  • Planning for the generation of RWE can potentially differentiate products versus standard of care (SOC) and other competitive agents by providing population health data based on clinical management in the real world. These data can include data on clinical outcomes, quality measure achievement, hospital-related endpoints, adherence/compliance, etc.
  • Pre-launch communication of indications being sought, study endpoints, population size, and preliminary study results are now more commonly being proactively shared 12 months prior to launch.
  • Within the post-launch timeframe, post-hoc analyses and meta-analyses of clinical trial data vs. the competition can be leveraged to provide positive differentiation.
  • Data related to transitions of care (i.e., readmissions, length of stay, ER visits, etc.) continue to be an increasingly important product differentiator due to the “promise” of helping to support value-based care from an economic perspective.
  • Patient-reported outcome measures are becoming an integral part of clinical care (e.g., Triple Aim, patient experience). Providers can use these measures to demonstrate improvement of an individual patient’s care and decision makers/influencers can use them in aggregate to improve the care of a population.

The world of RWE and HCEI is a frontier that many manufactures must discover and conquer to remain competitive and meet the needs of their payer and population health customers. Because without the RWE that payer and population health decision makers are demanding, how will they truly know whether they (and their members) are getting what they are paying for?