Specific strategies that may be used include:
• Develop “service wraps” around products/portfolios that provide more complete solutions across the continuum of care.
• Create strategic sales teams directed at evolving healthcare delivery models (ACOs, bundled pricing, population health) and payers. Ensure this new sales team is capable of strategic conversations and joint problem solving (versus feature and benefit discussions).
• Consider developing at-risk payment models with employers and payers based on achieving a certain outcome.
• Ensure the early development of a strong economic and clinical value message relevant to all stakeholders for all new products.
• Ensure that the comparative value proposition for a new product is as clear as possible.
• Consider alternative clinical data sources in addition to RCTs such as post-market longitudinal studies, patient reported outcomes, and other sources of real world evidence.
• Generate evidence that delivers the net benefit of biopharmaceuticals in the broadest “real world” context (i.e., clinical, economic, quality of life, and productivity measures) in addition to generating evidence that satisfies the needs of regulatory agencies.
• Invest in targeted therapeutics/personalized medicine based on biomarkers with the goal of drug-diagnostic companions with the ability to demonstrate high value in small subsets of the population.
The New Reality
The implications for the industry are clear: incremental innovations will be closely scrutinized. Unless there is clearly demonstrated value, new products are unlikely to command premium pricing. As “generics as standard-of-care” firmly settles in, biopharmaceutical companies will need a higher degree of clinical and economic differentiation to be successful. In today’s market, differentiation is more important than ever. Key stakeholders include payers, large employers, and increasingly, patients who care about health outcomes and affordability. In addition, it’s wise to remember that it’s a much more transparent marketplace. Government agencies are funding cost-effectiveness studies; payers and large providers are investing in health technology assessments and forming alliances to analyze real world data; and most information is available on the Internet.
This new reality has a number of implications for innovation in biopharma companies, most of which point to the need to produce cost-effective, tangible health improvements. The business reality is that close to 11% of the US healthcare spend is on branded pharmaceuticals (5). However, the perception is that it’s drug prices that are driving healthcare costs. If generics were good before, they are even better now with multiple players in the decision-making process, including patients facing escalating co-pays and deductibles. The incentive is to select a generic over branded unless there is clear and compelling economic and clinical value.
Despite these challenges, manufacturers must continue to innovate; significant unmet medical needs remain. Changes already taking place in healthcare are resulting in market access challenges for new technologies that, in turn, can be expected to impact innovation investment decisions. The exact magnitude of the impact remains hard to predict.
References
1. Kaiser Foundation, Health Care Costs: A Primer (2012).
2. DA Squires, The U.S. Health System in Perspective: A Comparison of Twelve Industrialized Nations (Commonwealth Fund, July 2011).
3. D.I. Auerbach and A.L. Kellermann, Health Affairs, 30 (9) (September 2011).
4. MGMA 2012 report based on 2011 data. Englewood, CO Medical Group Management Association (2012).
5. R.E. Numerof, Eyeforpharma (August 2013).
–Jill E. Sackman, DVM, PhD, is a senior consultant, Michael N. Abrams is managing partner, and Rita E. Numerof, PhD, is president ofNumerof & Associates, Inc. (NAI).