As the healthcare industry moves toward outcomes-based payment models, pharmaceutical manufacturers find themselves in a new, less comfortable position than they once occupied. In earlier decades, drug makers were asked only to prove the safety and efficacy of a new product. Today, they face powerful pressure to also demonstrate both cost-effectiveness and comparative effectiveness, which means they must show their agent is not only better than placebo but also better than other agents.
Comparative effectiveness research is now included in the Affordable Care Act (ACA),1,2 and pharmaceutical manufacturers that fail to prove their products’ value on this expanded set of measures will probably suffer by not cementing trust with physicians, hospitals, and health plans, according to accounts from industry and academia.1,2
“Today many pharmaceutical companies talk about being health-solution or patient-solution companies,” says Judith Goodwin, MBA, a senior vice president at Joslin Diabetes Center. It’s a whole new approach for them, she says, that speaks to their current eagerness to join in shared efforts to improve quality and outcomes by working with various healthcare stakeholders, including payers.
By partnering with payers, pharma can gain access to medical, pharmaceutical, and laboratory claims data. Such data, once identifiers have been removed, can be used to create profiles of the kinds of diabetes patients whose care most drives cost. That knowledge can in turn be used to target patients with certain traits early on, by offering them behavioral and other interventions to reduce costs and improve their health.
Pharma’s New Attitude
A 2009 report by Deloitte, “What Payers Want—Viewing Payers as Customers,” highlights the shift that began the year before the ACA passed. In the years prior, pharmaceutical companies enjoyed “the most desirable position” in healthcare.3 Drug manufacturers generated a steady stream of highly profitable products, maintaining nearly full control over the data about the safety and efficacy of those products and facing fairly low barriers to approval and access to customers. The pharmaceutical sector held considerable pricing power over payers, whom drug company leaders viewed as administrators and intermediaries. In short, Deloitte reported, “If pharma products were safe and effective, physicians could prescribe them, patients could fill their prescriptions, and payers would reimburse.”3 Today, the balance has shifted, and payers have gained bargaining power.
Healthcare today is marked by more transparency of information, more crowded therapy areas, and a focus on shrinking pharmacy spending. Payers, who also face new sorts of pressures, are nonetheless gaining unprecedented standing. The pressures on payers include movements to address rising costs, demands for openness, and the prospect of more government involvement. Payers are increasingly establishing evidence-based clinical guidelines, managing access more tightly, and examining drug pricing.
As Chernew, et al, wrote last year in Evidence-Based Diabetes Management, diabetes in particular presents a strong opportunity to gain value for what is spent on treatment. Benefit design has been tied to patient behavior, especially adherence; thus, the authors note, payers, including pharmacy benefit managers, have an important role in improving the value of spending on diabetes care.
Ultimately, it is proving to be in the pharmaceutical sector’s best interests to view payers as both customers and collaborators with whom they can work to ensure that new drugs are not only safe and efficacious but that they also fulfill other key requirements. As John LaMattina wrote last year in Forbes, “The commercial landscape has shifted dramatically.” A firm bringing out the fourth or fifth agent in a class, years after the first appeared, must, in its new drug application (NDA) package, demonstrate not only safety and efficacy for the FDA, “but also significant improvements over existing agents to justify formulary acceptance and pricing for payers.”4
Pharmaceutical executives acknowledge these new requirements. In the 2009 report by Deloitte, 75% of the executives surveyed agreed that “major changes are needed by some or all parts of their organizations to address future risks.” Thirty-eight percent said their companies would be dedicating “more resources to proving products’ economic value.” Forty-one percent said that their organizations planned to develop “partnerships in diagnostics, treatment, and prevention…with academics, providers, payers, and regulators.”3
Janice Murphy, JD, director of national affiliated programs at Joslin Diabetes Center, says that pharma today has to demonstrate why a particular new diabetes drug is really better than similar predecessors, and partnerships with payers can help. “What will be the lift in terms of outcomes?” is the key question, she says. Answering that question means looking closely at clinical efficacy and doing cost-benefit analyses to determine the most efficient use of dollars and to ensure that payers have essential data.
Humana and Lilly Team Up
Humana and Eli Lilly will use claims data to study how drug interventions affect patients’ outcomes, adherence, and total costs. The firms have signed a multi-year agreement to run diverse studies of various disease conditions, starting with type 2 diabetes mellitus (T2DM). The partnership may also pursue research in the areas of oncology and osteoporosis, according to Lewis Wilkerson, PharmD, collaboration account manager, and Lane Slabaugh, PharmD, MBA, research leader, both with Comprehensive Health Insights at Humana.
The partnership’s efforts will include pharmacoeconomic studies, as well as studies to examine the impact of various clinical interventions on outcomes. Studies will also assess disease management programs and programs meant to increase adherence. An early research project will investigate the types of patient characteristics that are associated with increased healthcare costs in patients with T2DM.5
“Diabetes is a very complex disease,” says Dara Schuster, MD, an endocrinologist and a medical fellow at Lilly Diabetes, adding that some of that complexity is positive. “We have more medications and medications that act differently, so the options are greater for patients. Making the right decisions demands that much more depth of knowledge.” She adds that prescribing wisely for a given patient involves not only clinical decisions but also ones about that patient’s lifestyle and ability to pay for care. “Patients and payers are telling us clearly—help to make this all simpler.”
The combination of today’s growing demands for medical care that suits each patient’s profile and the availability of massive data held by payers creates what Schuster calls “a perfect storm to allow us [payers and pharma] to achieve better insights,” acting as partners.
Representatives of both companies agreed that the “lens” they will use to guide their partnership will be to continually ask what is best for the patients and what will make the healthcare provider’s job easier. Merck and Pfizer are also incorporating input from payers in deciding which drugs will provide the most benefits to patients.5
Pressure From Government Payers
Today’s pharma-payer partnerships confirm the 19th-century maxim first stated by writer Charles Dudley Warner: “Politics makes strange bedfellows.”6 Much of the pressure behind the new payer-pharma partnership reflects policy shifts expressed in the United States by the ACA, and in Western Europe by austerity measures sweeping the continent and in legislation promoting such alliances. For instance, in the United Kingdom, the Health and Social Care Act of 20127 has created a framework to promote joint efforts between the National Health Service and pharmaceutical companies to improve innovation and healthcare delivery through collaboration, according to Pascal King, a global director with the Access Partnership.
The new openness of pharmaceutical companies to work with other stakeholders, such as insurers and even with other drug companies, reflects their evolution as they face “a tsunami of change” in the post ACA environment, says Judith Goodwin. She notes that despite the still strongly divided opinion about the bill, everyone in healthcare must adapt to its demands. “The old paradigm of pharmaceutical reps calling on doctors’ offices and taking them out for nice dinners and offering honorariums isn’t happening anymore,” she says. Now, she says, pharmaceutical companies must work with the larger healthcare system, including payers, and be “way more open to collaboration” than they once were.
Patients and Providers Should Benefit
Pascal King emphasizes that a “consideration of the complete patient’s treatment journey” requires new ways of thinking from all stakeholders. His firm helps drug and device manufacturers develop strategies to enhance the value of their innovations, strategies that include partnerships with payers.
King cites many powerful forces accelerating the move toward partnerships. These include awareness among drug manufacturers that the blockbuster era is over; the sophistication of today’s patients, who come in armed with knowledge from the Internet; and the shift towards even more serious consideration of costs than in the past.
Concerns About Competition
Murphy and Goodwin express concerns about the possibility that payer-pharma partnerships might solidify too much clout in the hands of too few healthcare stakeholders. “Combined power between payers and pharma might limit choices or drive up prices. The partners will be more powerful than any 1 patient or even any 1 patient within a provider organization,” says Goodwin.
Nonetheless Goodwin expresses guarded optimism that the payer-pharma partnerships will help to maximize the usefulness and cost effectiveness of the therapies available to patients. “I would hope and imagine that these kinds of conversations will lead to the delivery of the best therapies to patients. I hope it would be a good thing,” although, she adds, that remains to be seen.References
1. Abrams MN. Pharma’s stake in comparative effectiveness research. Pharmaceutical Commerce. http://www.pharmaceuticalcommerce.com/index.php?articleid=26722&keyword=Numerof-Abrams-comparative+effectiveness-PPACA-PCORI&pg=opinion. Published December 30, 2012. Accessed July 1, 2014.
2. Chernew ME, McKellar R, Aubry W, et al. Comparative Effectiveness Research and formulary placement: the case for diabetes. Am J Manag Care. 2013;19(SP5)SP190-SP192.
3. Heitzman L, Shapurji D, Poulin M, Lesser N. What payers want—viewing payers as customers. Deloitte. http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_lshc_WhatPayersWant_091109.pdf. Published April 2009. Accessed May 1, 2014.
4. LaMattina J. What the Pfizer-Merck diabetes deal teachers about today’s pharma R&D. Forbes. http://www.forbes.com/sites/johnlamattina/2013/04/29/what-the-pfizer-merck-diabetes-deal-teaches-about-today’s-pharma-rd/. Published April 29, 2013. Accessed May 2, 2014.
5. Humana and Lilly form research collaboration to improve health care outcomes [press release]. Louisville, KY, and Indianapolis, IN: Eli Lilly and Company; April 29, 2013. Lilly https://investor.lilly .com/releasedetail.cfm?releaseid=787849.
6. Search Quotes website. www.searchquotes .com/quotation/Politics_makes_strange_bedfellows./10702/. Accessed May 23, 2014.
7. Health and Social Care Act 2012: fact sheets .United Kingdom website. https://www.gov.uk/government/publications/health-and-social-care-act-2012-fact-sheets. Published June 15, 2012. Accessed June 20, 2014.