Pharmaceuticals and medical devices play a pivotal role in health outcomes. But the path from lab to bedside is often long, arduous, and expensive. Today, the final hurdle is no longer regulatory approval; it’s reimbursement.
Physicians, once the primary arbiters of pharma value, now have less say in payment decisions than insurers and large providers. If purchasers don’t see evidence that a new drug fills an unmet need or outperforms similar products at a more reasonable cost, the drug won’t receive preferred formulary placement and may not even be covered by insurance. The industry has largely shielded customers from the price of medication, but as costs shift to individuals, drug and device makers will be under greater pressure to prove value.
Memorial Sloan-Kettering Cancer Center recently refused to pay for a new colorectal cancer drug, citing data that it performed no better than a similar medicine at less than half the cost.1 The manufacturer responded by lowering the price to that of the competing therapy barely two months after launch.2
Outcomes-based contracts help prove the value of drugs and devices. EMD Serono, the biopharmaceutical division of Merck KGaA, has forged separate contracts with insurer Cigna and pharmacy benefits manager Prime Therapeutics to provide adherence-based discounts on Rebif, a multiple sclerosis therapy. Cigna claims data has shown that Rebif helped reduce hospitalizations by 43% the first year of its agreement with EMD Serono.3
Such partnerships could yield substantial savings. A recent study found that medication adherence by diabetics could save between $4.7 and $8.3 billion in annual US healthcare costs.4 However, only 74% of consumers surveyed by PwC’s Health Research Institute (HRI) said they very closely adhere to prescription instructions.5
Interest is growing among insurers to partner with pharma to determine unmet medical needs, and improve medication adherence and clinical outcomes. In a recent HRI insurer survey 43% of insurers agreed that they would benefit from a data sharing partnership with pharma companies.6 Drug maker Pfizer and insurer Humana have formed a five-year partnership focused on improving cost, quality and access to appropriate care. They seek to better understand patient care needs by tapping into clinical evidence and comparative effectiveness research. Specifically, they hope to improve the treatment and management of chronic conditions including cardiovascular disease and Alzheimer’s disease.7
Comparative effectiveness studies can help build pharma’s value case. Britain’s National Institute for Health and Clinical Excellence (NICE), which makes reimbursement recommendations for England and Wales, initially recommended against a highly touted, FDA-approved melanoma medication because it had not been compared with other drugs used for the same indication.8 It recently reversed the decision after the manufacturer offered to discount the drug.9 In Germany, if a company cannot demonstrate that a new therapy provides clinical benefit over established treatments, reimbursement starts at the same level as existing clinically equivalent medicines.10
Collaborating with regulators early in drug development is another approach. For its psoriasis medication, Novartis collaborated with NICE on trial design, product selection for comparative effectiveness, study population, and economic evaluation.11 Following the pilot, NICE established its Scientific Advice program to provide fee-for-service advice to pharma and medtech companies. The agency reviews product development plans to ensure that they produce relevant evidence for submission.
Implications
- The pharmaceutical industry must provide robust and reliable data to purchasers on cost-effectiveness, using mock formulary evidence audits, data-sharing partnerships, and outcomes-dependent contracts.
- Pharma and its partners should monitor costs and outcomes as they aggregate and interpret data. Underused data from electronic health records, patient registries, medical devices, nutrition studies, and social media can often supplement claims and prescription information.
- Drug and device makers can prove value by including a comparative effectiveness component in clinical trials and pairing products with diagnostics targeting patients who can benefit the most.
