The Value Wave: How Pharma Marketers Can Catch It
By Jeremy Schafer and Maureen Hennessey, Precision for Value
The Centers for Medicare & Medicaid Services (CMS) projects that by 2026, healthcare will make up 19.7% of the US economy, up from 17.9% in 2017.1 The increase will result in $5.7 trillion being spent on healthcare in 2026, with government financing 47% of that spend.1 CMS predicts that drugs will be a leading factor, with increases in cost of 6.3% annually.1 Drug rebates will slow in growth and level off by 2026.1
The projected growth in spend makes the shift of the healthcare marketplace from volume to value inevitable. Initiatives like the Oncology Care Model (OCM), Medicare Access and CHIP Reauthorization Act (MACRA), and the utilization of drug cost-effectiveness assessments are already beginning to shape the market. Pharmaceutical marketers need to adapt to the value-centric marketplace and deliver the desired messaging and adjunctive, innovative services that align their products with the value perception the new marketplace demands.
Manufacturers may have been caught off guard with initial forays into value. Value frameworks like ICER were little known at first. Although measuring value is new in the US marketplace, adoption by payers, including the Veterans Administration (VA), is now common and manufacturers are faced with tough questions.
Payers took another step with outcomes-based contracting. One of the first such arrangements, in osteoporosis, was followed by agreements in a diverse range of diseases such as rheumatoid arthritis , cardiovascular disease, and diabetes. The current trend is that manufacturers may announce outcomes arrangements at launch. Gene therapies such as Kymriah (tisagenlecleucel) and Luxturna (voretigene neparvovec-rzyl), arrived on the market with outcomes arrangements in hand. Manufacturers without such agreements are being grilled by payers.
The government has also evolved value-based reimbursement (VBR) models. Quality incentives have expanded with models like the CMS Five-Star Quality Rating System.2 CMS also developed the 2015 value-based MACRA, which offers payment adjustments through the Quality Payment Program (QPP).
The QPP aims offer two choices for participation:
- The Advanced Alternative Payment Models (APMs) such as the Medicare Shared Savings Program Accountable Care Organizations (MSSP ACOs) and the risk-bearing OCM; and
- the Merit-based Incentive Payment System (MIPS), which offers providers payment adjustments based on multiple performance factors, including quality and cost3
These programs, and others emerging in the private sector, place greater emphases on cost and quality performance and are driving stakeholders to foster “care creativity” to better manage the total cost of care (TCOC).2
Thus, the ability of pharmaceutical manufacturers to support a customer’s performance on key quality metrics (particularly those impacting TCOC) will grow in significance. Demonstrating value through favorable product performance and adjunctive services becomes progressively important, particularly as the healthcare marketplace continues the transition from volume to value.
What can pharmaceutical manufacturers do?
- Tell a “complete” story
Sharing clinical data and price may not be enough any more. Payers want to see the potential population impacted, real-world experience (if any), and a drug’s impact on other medical costs. Manufacturers able to harness these in a presentation have an advantage. Manufacturers must also craft their story for more stakeholders than before. The value points for an IDN, a health plan, a PBM, a specialty pharmacy, vary. Telling the same “story” to each will likely not resonate completely with any of them. The broader story should highlight salient callouts that are unique to the stakeholder.
- Be realistic
Payers are under cost pressure like never before and need practical information. The marketing message should reflect the real-world situation. For payers, the impact on short-term health outcomes is key, as payers generally only have members for a few years. When presenting a drug’s benefits, focus on outcomes that show up in claims data, such as hospitalizations, readmissions, emergency department visits, additional drug use, and adherence. Economic and population models should be tailorable to a payer’s region and internal data. The more realistic and practical the points, the better.
- Form strategic alliances
A recent survey conducted by Precision for Value suggests that IDNs, ACOs, and plans are currently engaged in (or willing to consider) value-based alliances with pharmaceutical manufacturers. These alliances encompass value-based partnerships and collaborations, and value-based contracts. Value-based contracts may include sharing financial risk if products are not effective. Survey respondents expressed particular interest in collaborations with pharmaceutical manufacturers on medication adherence/side-effect management, remote care delivery (eg, telehealth, virtual care, apps), real-world evidence demonstration projects, and patient-reported outcomes initiatives. Pharmaceutical manufacturers should selectively collaborate with customers on initiatives that meet their mutual strategic interests.
The evolving marketplace presents challenges and opportunities. The value wave is on the way, and manufacturers that are prepared will have the opportunity to tell new value stories that resonate and align with the needs of all stakeholders.
- Medpage Today. National health spending at $3.5 trillion in 2017, CMS says. February 14, 2018. https://www.medpagetoday.com/publichealthpolicy/healthpolicy/71168. Accessed March 12, 2018.
- Hennessey M, Blandford L. “Care Creativity” innovations transform Medicare Advantage Five-Star Plans. J Clin Pathways. Published December 13, 2016. https://www.journalofclinicalpathways.com/article/care-creativity-innovations-transform-medicare-advantage-five-star-plans. Accessed March 12, 2018.
- Centers for Medicare & Medicaid Services. CMS Quality Measure Development Plan: supporting the transition to the Quality Payment Program. 2017 Annual Report. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/MACRA-MIPS-and-APMs/2017-CMS-MDP-Annual-Report.pdf. Accessed March 12, 2018.