Emerging Payer Business Trends That Pharmacos Need to Know

Payers have their own business issues that drive their decisionmaking and behaviors. Here we present a general list with some trends that IMS has observed and that can help manufacturers approach payers from a basis of common understanding. The order of, and nuances with, topics on this list vary by payer and will be in a state of flux as payers try to secure a foothold in the shifting sands of the post-reform market.

Cost effectiveness

Payers operate based on a hierarchy of very real economic motivations. They naturally prefer to realize direct, immediate cost savings as opposed to long-term or indirect savings. Even so, some (the proactive payers and those in market-leading and/or near-monopoly positions) are suggesting that they are willing to wait for a payoff in the long-term, especially where it improves patient health and quality of care.

How much this plays out in decisionmaking among commercial payers remains to be seen, as living up to that position will take some financial fortitude. Payers (including Medicare Part D Prescription Drug Plans) have traditionally viewed the benefits of medications with a short-term lens, given that long-term financial benefits are likely enjoyed by another payer, down the road, primarily due to member turnover related to changes in employers’ purchasing decisions. Faced with the economic uncertainty surrounding healthcare reform, it is unlikely that commercial payers will be able live up to their public posture to take a longer view of cost effectiveness.

Efficacy, patient safety & adherence

Manufacturers and payers clearly share an interest in the safety of patients and both parties feel the financial burden resulting from non-adherence. For payers, non-adherence affects the bottom line through:

• Sub-optimal health outcomes with the exacerbation of symptoms, relapse of disease states, and increased morbidity
• Patients’ care being escalated to more potent, more expensive medications based on the assumption that the first line of therapy was ineffective
• Additional physician visits and hospitalizations
• Potential reduction in published quality measures such as the Healthcare Effectiveness Data and Information Set (HEDIS).

Member satisfaction

Payers are struggling to offer pricing and benefit designs that are attractive to employers and members when they themselves are coping with a mix of commodity pricing on generics as well as a far less-predictable biotech business. Their old tools (formulary, benefit design) don’t work the same way in the biotech world.

It is worth noting that to remain competitive and to better serve their customers, payers do recognize that they benefit from the fruits of pharmaceutical companies’ R&D efforts. Without affordable access to new innovations, payers risk disappointing their members.

Regulatory burdens, competitive factors

These are both known and unknown. There are many, yet-to-be understood factors that will impact hospitals and physicians relating to cost-shifting, attrition, and the impact of new reimbursement models on current fee-for-service schedules. And, payers’ own revenue models could be at risk when employer-sponsored healthcare shares the stage with state and/or federal exchanges.

All of these trends may spur warmer relations with manufacturers.