“As we look over the next decade, the climb is going to be steep, it's going to be challenging, but success is still possible,” said Luke Greenwalt, vice president of market access at IQVIA, during his session at Asembia 2023.
In his day 1 session at Asembia 2023, “State of the Payer: Payers, Patients, Policy, and Pressure in 2023,” Luke Greenwalt, vice president of market access at IQVIA, guided the crowd through trends affecting demand and margin and led the discussion on the path toward success over the next decade.
“As we look over the next decade, the climb is going to be steep, it's going to be challenging, but success is still possible,” Greenwalt said.
He first highlighted the significant margin compression that has occurred in the industry over the past 10 years, including a striking trend in which the collective discounts paid by the top 15 pharmaceutical manufacturers have increased by 265% between 2012 and 2021. This growth rate of discounts is 7 times faster than gross sales, which grew by 36%, and 13 times faster than the rate of inflation, which grew by 21%.
In terms of percentages of gross sales during this time period, discounts increased 114%, while selling, general, and administrative expenses (SG&A) dropped by 29% and operating profit dropped by 30%. Investment in research and development remained fairly consistent, only dipping by 1% over the decade. This investment is crucial for the development of innovative therapies, which Greenwalt expects to enter the market in greater numbers than ever before over the next decade. According to him, this is reason for optimism in an industry facing significant pressures.
He also noted that the 340B program, which is used to offer discounted products to covered entities and hospitals, is growing rapidly, with $105 billion moving through the 340B channels in 2022—more than the entirety of the Medicaid drug outpatient program. Starting at $57.6 billion in 2018, 340B total dollars increased between 9.9% and 14.6% annually, growing more year after year. In the next 5 years alone, Greenwalt anticipates this number could hit $200 billion, creating even more pressure.
Greenwalt then went on to discuss trends in compound annual growth rate and how they affect the industry. There has been major growth in the industry over the past decade, with top-line drug spending increasing from $418 billion in 2013 to $858 billion in 2022. However, margin pressures are also increasing, with a projected 44% margin in 2027. This decline in net sales is happening for several reasons, including increased rebate pressures and increased co-pay card offset costs.
Additionally, high-cost product launches have doubled in the last 4 years. Recent launch brands are also 5 times as likely to fail to hit $10 million in the first year of sales, with only 1 in 4 patients new to the brand who attempted to fill the brand being successful, largely due to payer controls. Also, as many as 70% of newly launched brands are supported by manufacturer assistance, and co-pay cards are becoming increasingly important to the success of a launch. The launch window is now between 18 and 36 months, and capitalization and investment are required to find success.
There is also a rising trend of launch products priced greater than $200,000 per year per cost of treatment, with a total of 53 products launched in the past 3 years alone at this price point.
“The question that this begs isn't whether or not one of these products is worth it,” Greenwalt said. “Oftentimes, these are lifesaving products where there are no other alternatives for a patient to turn to for treatment. The question becomes, how does the system pay for all of this? That's where we see the rising controls happening not just on these products, but broadly, as the system struggles to get in front of these rising trends.”
He also stressed that payer control of new launch products continues to increase over time, making it harder for brands to turn patient demand into volume and making patient access to medications more and more challenging. According to Greenwalt, it is “becoming much more difficult to have a successful batting average today than it has been at any other point that we've ever measured.”
Market data show it is now twice as difficult to achieve the same patient demand as it was in 2015. Manufacturers are consequently turning more frequently to patient support programs, with some giving away up to half of the market value of their launch products. According to Greenwalt, payer controls are a major factor, with 85% of patients facing them in the commercial market on United Caremark Express Scripts. There is also evidence of pervasive controls in classes such as HIV immunology, oral oncology, multiple sclerosis, and hepatitis.
Formulary exclusions leave 90% of patients unable to access the medications they require, and patients now are 22% less likely to fill a prescription after 30 days compared with only a few years ago.
Greenwalt advised a shift in focus from patient centricity to patient forward, recognizing that patients face a series of hurdles, and that their journeys must be better understood and segmented in order to intervene effectively.
The health care industry invested a record-breaking $19 billion in co-pay programs in 2020 to help patients manage affordability challenges. A third of this investment, nearly $6 billion, came from accumulator adjusters and co-pay maximizers, which prevent patients from adjudicating as a standard patient. Without these programs, the co-pay costs would have been significantly lower. The industry's investment in these programs has resulted in increased utilization of free goods, which cost over $2 billion in full cost items in 2020. A recent report examined these programs through a health equity lens and found that patients who are least able to afford their co-pay programs are the most exposed to accumulator adjusters and co-pay maximizers. Notably, non-Caucasian patients were found to have a 30% higher probability of being exposed to these programs compared with Caucasian patients.
"This is a health equity claim that everyone in the industry needs to be aware of,” Greenwalt emphasized.
Data suggest that patients who use co-pay accumulator adjusters and maximizers experience negative impacts on their health and that understanding patients' journeys is essential to identify barriers to treatment adherence. In one data set, financial hurdles were found to be the primary obstacle for a third of patients from the start of their treatment. Intervening early in a patient's journey has a significant impact on their ability to adhere to prescription treatment.
Policy changes, such as the Inflation Reduction Act. have a significant impact on the health care industry, as brands may move toward price discounting due to net negative pricing and Medicaid, high margin pressure in commercial channels, and the potential to be selected for negotiation of maximum fair price from CMS. The impact of these policy changes can be seen in the real market, and it is essential to keep an eye on these trends.
"We need to challenge ourselves and challenge the vendors that we work with to bring together some of these new innovative ideas on how to address some of these changes,” Greenwalt said. “We can change the trajectory and the path of where we're going.”