Unleashing value: The changing payment landscape for the US pharmaceutical industry

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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.

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Key findings

  • Insurers are not confident in pharma formulary submissions. Just 5% of respondents in the HRI survey indicated they are very confident in the economic data provided by the drug industry when making coverage and formulary placement decisions. Only 7% are very confident in the information to evaluate a drug’s comparative effectiveness.
  • The availability of generics, physicians’ expert opinion, and regulatory guidance are the three most influential factors in formulary decisions by private insurers.
  • Among insurer respondents, 60% strongly agreed that pharma must demonstrate a significant clinical benefit compared to current branded and generic treatments to be considered for formulary placement. Forty-five percent (45%) agreed that a clear cost savings argument was necessary.
  • Novel payment and contracting models, such as those based on patient outcomes, are in nascent form but represent a way forward. Only 16% of health plans use this approach today, although 37% expect to support one or more alternative payment models in the next three years.
  • Lack of data infrastructure and concern about increased negotiating complexity are the top two barriers in implementing novel contracting strategies.

Contact us

Kelly Barnes
US Health Industries and Global Health Industries Consulting Leader, PwC US
Tel: +1 (214) 754 5172

Benjamin Isgur
Health Research Institute Leader
Tel: +1 (214) 754 5091

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