Five major forces are dramatically altering the pharmaceutical industry’s revenue models and creating new notions of value. These forces are hastening the arrival of an outcomes-based world in which the value of a drug tracks more closely with its impact on patient health. Significant barriers remain, particularly between drug manufacturers and health insurers. This report explores possible paths for pharmaceutical companies to unlock value, improve clinical and economic evidence, and continue to build transparency with other health organizations.
Companies in the pharmaceutical and life sciences sector face a fundamental challenge in the United States: demonstrating the fully realized value of their therapies in the face of intense competition from generics and rising total medical costs.
Branded pharmaceutical companies spend about $50 billion per year in drug development. And while the next-generation therapies are more targeted, they’re also more expensive. Health plans and providers, meanwhile, are becoming more sophisticated buyers and focusing on total cost of care, quality outcomes, and how drugs influence that.
Relationships among health insurers and pharmaceutical companies are as unsettled today as they’ve ever been. To determine insurers’ views on topics such as quality of evidence submissions, contracting strategies, and relationships with pharmaceutical companies, HRI conducted interviews and surveyed US health insurers and pharmaceutical benefits managers (PBMs). One theme that emerged from the research is a broad consensus that drug manufacturers and health plans need to accelerate efforts to deliver better outcomes for patients.
This report explores possible paths for pharmaceutical companies to unlock value, improve clinical and economic evidence, and build trust with other health organizations and pharmaceutical companies.
Among the findings:
In this new environment, health plans and health systems may demand that a drug first demonstrate significantly more clinical benefit than existing treatment options, sometimes over a long period. Additionally, insurers and hospitals alike want to see how a drug reduces the total cost of care, reduces unnecessary or ineffective treatments, or improves quality of life. New ways to quantify these changes will impact how drugs are researched, marketed, manufactured, and priced.