US health care is exponentially more complicated today than just 5 years ago. Even the most competent, experienced marketing teams may not anticipate or clearly understand the complex forces that are changing how we select, dispense, and reimburse for drugs and devices.
Changes in Traditional Customers
Pharmacy Benefit Managers (PBM) are your primary contracting conduit into commercial and Medicare Part D plans to assure formulary market access. The FTC approved the $29.1 billion ESI-Medco merger, further consolidating the PBM group. If your new product is not granted preferential access on a national PBM, you may be losing access to 70 million patients.
Manufacturers are starting to understand that contracting for preferential placement is not always effective, even if very deep discounts are offered. Many PBM formularies and payer benefits essentially allow brand coverage as only a last resort.
For example, if you pay the required rebate for listing a product as a Tier 3 brand (Non-Preferred Brand-Name Drugs and Preferred Specialty Drugs), your revenue may not be sufficient to meet anticipated sales projections, and you may not achieve a reasonable “return on contract” investment.
So, while traditional contracting methods are still important (depending on the product), they may not be enough.
New Customer Categories
Many new kinds of customers are emerging as the ACA dust settles, including Accountable Care Organizations (ACOs), plans offered on the Health Care Exchanges, Integrated Delivery Organizations (IDO) or Networks (IDN), or Medical Services Organizations. As a pharma or device manufacturer, you will need to understand what it takes to gain these new customers. Each one renders or coordinates patient care under arrangements with a health plan or payor in a way that transfers some financial risk for patient care to these customers. This financial risk gives them incentive to avoid costs, including costs associated with new pharmaceutical products and devices.
You will have to engage with these new customers at local and regional levels to understand how your products affect their costs and quality metrics. Keep in mind that discounts, while important, will be overshadowed by the product’s demonstrated effect on health care outcomes.
Your marketing teams know the traditional channel and reimbursement barriers and how to overcome them in contracts. However, there are new barriers that are often invisible and potentially lethal to product uptake and share growth:
- Electronic Prescribing Systems (EPS) – The clinician will prescribe from a list of product alternatives, but these may not reflect your contract or even feature your product. You will need to understand the vendors, technology, and processes for client’s EPS (typically a part of Electronic Medical Records software), and these vary widely.
- Member Benefit Design – Benefits are more complicated than ever before. Out-of-pocket expenses for plan members vary during the year because of deductibles and maximum coverage levels. Some plans essentially restrict patients to generics by setting high prices for branded products whether or not the products are tiered or rebated. For example, the cost difference between a Tier 1 Generic Drug and a Tier 2 Preferred Brand-Name Drug can exceed $100.
- Coupon Access – Patients and doctors may not know about your coupons.
- Referral Channels – Some products depend upon the adoption by or recommendation from specialists. Traditional referral patterns may change with the changes from health care reform, though, and you will need to understand these shifts.
- Stocking Policies – Purchasing and inventory patterns of ACOs and IDNs may change as they become more cost-focused.
- Comparative Effectiveness Research & Applied Clinical Pathways – Clinical decision-making is increasing done using formulaic decision trees that apply the findings of “best practices” (based on clinical research) to individual clinical practice. The doctor uses these “trees” to decide the treatment for a given patient. If a your product does not occupy the place in this pathway that you anticipate, then it may never be selected for patient use or it may be selected for a smaller segment of available patients than you expect.
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