Recognizing payers as key customers is critical to product positioning.

As the rules for success change, pharma companies must rethink their approach to the market. One critical element that requires transformation is product positioning. Historically, a product’s “value” was determined by clinicians as they made decisions about which products to use for their patients. Yet, there is growing awareness that decisions by payers and hospital administrators can make a significant difference in clinical acceptance, market penetration rates, and overall product profitability. In order to position products for optimal market access, manufacturers must understand the pressures these stakeholders are facing, how they are responding, and the kinds of data that will influence their decision making.

Understanding the Payer

Across the globe payers are experiencing escalating healthcare cost inflation, and demands from consumers, governments and employers for increased transparency, improved outcomes and lower overall costs. Public and private payers alike recognize that they need to change the models for healthcare delivery and payment and are actively pursuing different options to accomplish this goal. To be effective, payers feel they must reduce their risk, manage their costs and improve overall quality. They recognize that getting the right patient the right product at the right time will help them achieve their goals. But gathering the data to determine what the right product is for a given situation has been a challenge for them.

As a result, payers are demanding data that demonstrates not only a product’s clinical value, but also its economic value. In addition, they are mining their own databases to understand treatment effectiveness, and using this data to influence their decisions.

Payers are also exploring oppor-tunities to shift risk to providers or manufacturers in the form of pay-for-performance or outcomes-based agreements. Reference-based pricing1, internal price comparisons, and price-volume agreements have already been adopted in some countries. As costs continue to rise, it is expected that these measures will only grow in popularity.

One area where payers have felt as if they had a “lever of control” was managing their spend on pharmaceutical products. For a while, generics have provided a source of budgetary relief, as payers have been able to encourage adoption of these significantly lower-priced alternatives. They thought biosimilars would present a similar opportunity for the premium-priced biotherapeutics market, but there is growing evidence that this will not be the case. It is expected that biotherapeutics will receive greater payer scrutiny than ever, and a strong economic and clinical value case that differentiates the product from the current standard of care will be increasingly necessary.

What Payers Want: Real World Evidence

Randomized Controlled Trials (RCTs) have been the gold standard for product research. Manufacturers have historically relied on such studies to establish product safety and performance parameters for new products. The problem is that the results of RCTs with narrowly defined populations have been extended to much broader populations, sometimes resulting in adverse events or simply less robust outcomes. The result has been an increase in demands for post-market surveillance, Risk Evaluation and Mitigation Strategies (REMS), and product withdrawals and recalls. RCTs typically only involve the experimental group and a placebo control group. Payers increasingly want to see comparative data against the current “gold standard” treatment, and such data is often more available in the context of real world evidence (RWE) studies. Not only does this information help payers understand which patient the product works best with, it also provides insight as to adverse events that may occur.

Interest in RWE is growing because it includes data from non-interventional observational studies, retrospective database studies (registries), and review of data from medical records. While many in the global industry are increasing their use of observational studies, American companies frequently lag behind their counterparts in Australia and the European Union in the use of RWE.

Although there has been a recent rush to create partnerships to develop RWE (e.g., Pfizer/Medco, AstraZeneca/WellPoint, Mayo/OptumInsight), there is a caution for manufacturers. “Big data” and health IT have a tendency to be viewed as “silver bullets” that will illuminate potential risks and opportunities.

But this is not always the case. With so many companies trying to understand the data and what it means, there is a risk that organizations will develop large databases without considering what they are really seeking, and could end up with lots of data that doesn’t help them identify how to improve outcomes and reduce costs. Manufacturers must determine what indicators will provide the most insight, and evaluate potential partnerships to determine where they’ll get the most valuable, credible and usable data. Having the data is not enough; knowing how to use it is what’s critical.

 Rethinking the Definition of Comparator

The standard for clinical trials has been to compare products versus placebo. While this has been acceptable for regulatory review to demonstrate safety and efficacy, payers want to understand how the product compares to other currently available treatments. For a late-entry product, there is an expectation that the manufacturer will have some studies of it against the market leader. Without this comparative information, it will be difficult for the product to get any significant formulary placement or preferential pricing.

But being first to market doesn’t preclude a manufacturer from needing comparative data. Although the comparative effectiveness research norm has been head-to-head comparisons with similar therapies, it also includes research into which treatment protocols work best, and can include comparisons with non-interventional approaches such as alternative treatments and watchful waiting. Manufacturers that can pick an appropriate comparator to demonstrate economic and clinical value of their product over one of these will be best positioned for success.

Identifying the Right Treatment for the Right Patient at the Right Time

As drug development costs rise and payers try to further restrict reimbursement, finding ways to ensure that a patient gets the most appropriate therapy can help payers deliver better outcomes. In other words, taking a personalized medicine approach can ensure greater likelihood of success. Another method is to build a market from multiple small segments. This “rolling blockbuster” approach can identify specific patient criteria, and give the payer confidence that the treatment will work for a particular patient.

Similarly, companion diagnostics that reliably demonstrate a patient’s likelihood of treatment success are of great interest to payers, as they can provide some assurance that costly therapeutics are being used with the right patients. Dako’s two assays recently approved for Genentech’s newest breast cancer treatment are an example of these products.

Price Is Part of the Value Story

Value is often defined as a product’s benefits (outcomes) divided by its price. With pharmaceuticals, the focus has been on defining the clinical benefits, but economic benefits (e.g., reduction in office visits, elimination of an adjunctive therapy) are also part of the equation and must be considered. When it is believed that the price is higher than the clinical and economic benefits received, payers will limit product use and distribution by refusing product approval or creating prior authorizations and other formulary restrictions.

And even clinicians have begun to question prices in some cases. One such example occurred late last year when oncologists at Sloan-Kettering, a large purchaser of oncology drugs, refused to order Zaltrap for colorectal cancer use within its hospitals. The doctors cited research that found that the product’s benefit was no greater than another comparator at half the price. In order to gain access, the manufacturer dropped the product’s price by 50%.

 Needed: A Close Manufacturer Relationship with R&D

To build an effective economic and clinical value case, companies must begin thinking about the payer earlier in the product development process. This means the commercial and R&D organizations need to communicate earlier and more effectively. R&D groups should actively seek payer insights and input as they think through product development opportunities. This collaboration can have a great impact on the company. By discussing and incorporating payer needs early in the product development cycle, manufacturers can make better “go/no go” decisions earlier in the process. In addition, they can build studies that incorporate certain data points (e.g., health outcomes), thereby reducing later spend to develop information to address payer concerns.

 Develop New Relationships Based on Data

Interest in how products work and are used in real world settings is growing—not only by payers, but also providers and other organizations. As mentioned earlier, these organizations are mining data to support treatment protocol development, identify comorbidity implications and evaluate comparative effectiveness.

While RCT data is important, it’s just as important that manufacturers understand how patients will respond to their products in a real-life environment. Since this kind of data is held elsewhere, manufacturers will need to form collaborative partnerships with payers, providers or IT companies. These relationships can be risky, but may also prevent another Vioxx situation from occurring (and the subsequent cost to settle lawsuits), identify opportunities to further strengthen a product’s position, or find additional uses that might become new indications for the product.

 Rethinking Traditional Marketing Strategies

Payers want to ensure that patients get the products they need, but have become increasingly critical of DTC marketing efforts, particularly broadcast advertising and couponing. Significant media efforts that drive use cause payers to evaluate a product’s economic and clinical value that much closer and demonstrates a lack of consideration for the payer’s cost. However, offering samples that clinicians can use to ensure the product works for the patient is viewed more favorably.

Recognizing payers as key customers is critical going forward. As companies take payers’ needs and requirements into consideration in their product development and commercialization processes, they’ll be able to deliver the economic and clinical value payers are seeking. In return, they’ll be able to achieve optimal market access for their products.

FOOTNOTES

1. Reference-based pricing assumes that medications within a certain therapeutic class are interchangeable. A product is picked as the “reference” and its price is used to set the reimbursement level for the product class.

  • Kimberly E. White

    Kimberly White, MBA is Vice President, Pharma and Device Practices at Numerof. Kim specializes in market access strategies and commercialization approaches that work in the new healthcare.

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