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Improving Payer-Pharma Collaboration to Drive Better Healthcare Outcomes June 2013


Overview Healthcare payers (including health plans, large self-insured employers, the government, etc.) are greatly concerned about the healthcare cost, quality and outcome. They are trying to find and pursue innovative ways to better manage costs, and to improve quality and outcomes. Payer-pharma collaboration is one such way of containing costs and increasing efficiency. Payer-pharma collaboration allows a pharmaceutical company to gain patients whose healthcare policy covers the pharmaceutical company’s products under a payer’s healthcare policy guidelines. Payers are required to cover those pharmaceutical products believed to be necessary or “in demand” in their health policy at a competitive pricing from the pharmaceutical companies. Such collaborations also cover an essential marketing channel for the pharmaceutical companies. Need for payer-pharma collaborations Pharmaceutical companies are concerned about rising health expenditures, decreasing R&D efficiency, and increasing market competition. Payers, on the other hand, are being challenged by increasing transparency, greater patient influence, rising healthcare costs and more governmental involvement through new regulations. In 2012, USD325.7Bn was spent on prescription drugs in the United States. The average spending per person on medicines was USD865 during the year. However, 2012 saw a decline in medical expenditure (first time in last 58 years) due to factors such as use of cheap generic pills and people delaying treatment due to high cost of health care. Delayed treatment has resulted in increase in the number of patients admitted to hospitals after coming to the emergency department for the second straight year. This indicates that some people are waiting until they are very sick to seek medical help. IMS’ report notes that out-of-pocket costs, which exclude monthly health plan premiums, are now three times higher than they were five years ago, on average.1 These statistics indicate the need for payer-pharma collaboration to serve patients with affordable and better healthcare solutions, thereby increasing both the entities’ market value in a price competitive industry. Ways of improving payer-pharma collaborations 2 1. Holistic understanding through information sharing – Pharmaceutical manufacturers can help payers understand how the treatment of diseases is going to change in the future. Payers can similarly help pharmaceutical manufacturers with information such as risk pools in their various products, the mix of employer types that are most dominant in their client base, most outrageous cost drivers (pharmaceutical and non-pharmaceutical), diseases and conditions they are most focused on addressing, and new product and service offerings that they are planning to roll out.

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CBS News: US prescription drug spending drops for the first time in 58 years IMS Health: Pharmacos and Payers – Achieving Common Ground in a Changing Market

Improving Payer-Pharma Collaboration to drive better Healthcare outcomes

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2. Mutually beneficial engagement in patient advocacy – Some common messages to the patient may be mutually beneficial to the payer as well as the pharmaceutical manufacturer (depending upon the product portfolio of the manufacturer), such as in case of cancer, HIV, etc. 3. Comprehending the impact of diagnostics – Diagnostic costs represent an upfront cost, which is also a huge overall cost to the payer. Exploring the impact that a diagnostic test will have on drug utilization is of great importance. 4. Patient assistance to reduce costs – Certain disease management programs are very expensive to develop and implement by the payers. Manufacturers can opt for co-pay with the knowledge of the payers and help reduce costs. 5. Risk sharing – With some new and very expensive drugs entering the market, payers and pharmaceutical manufacturers can share the annual per patient payment for a drug. 6. Prompt rebate payments – Payers expect to receive their rebate payments more promptly. Manufacturers should look forward to expedite back-office operations. Some examples of payer-pharma collaboration3,4 Year 2011

Pharma Company Sanofi

Payer

Contract Details

United BioSource Corporation (Medco Health Solutions; now a part of Express Scripts)

A global, multi-year agreement between Sanofi, Medco Health Solutions and the latter’s whollyowned subsidiary United BioSource Corporation (UBC) is designed to support real-world evidence assessments during Sanofi’s product development and pre-/post-approval processes, underpinning improvements in the overall quality of patient care.

Major Reasons • Enables Sanofi to more precisely identify consumer populations with the greatest unmet medical need.

• Helps identify the most effective population drugs.

• Generates real-world comparative effectiveness data to support product value.

• Facilitates the development and implementation of novel care models to improve practice of care, adherence and patient outcomes.

2011

Pfizer

Competitive Health Analytics (Humana)

Five-year partnership to initially focus on three chronic conditions: pain, cardiovascular disease and Alzheimer's disease.

• Studies prescription drug use and how it affects areas such as cost and quality of care and patient outcomes.

Challenges Payers are looking for cost containment of drug use, while manufacturers are looking forward to increase revenue with higher price of drugs – this fundamental conflict of interest is one of the major

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Pharma Times: Sanofi plumbs real-world evidence with Medco tie-up Reuters: Pfizer, Humana form research pact on elderly health

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challenges facing the payer-pharma collaboration. Moreover, the conservative nature of the pharmaceutical industry may consume considerable time to build trust in such collaborations. Payers find themselves in the driver’s seat as the healthcare industry evolves. Pharmaceutical companies are required to utilize their disease-based skills to identify partnership opportunities and add value to the payers. Different healthcare plans have different sets of costs and risks exposure. Understanding these exposures and taking fact-based decisions would help both parties enhance their market potential. The collaboration between payers and pharmaceutical companies would pave the way for faster time-to-market for new therapies, bringing more innovative and effective therapies to market.

Improving Payer-Pharma Collaboration to drive better Healthcare outcomes

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Improving payer pharma collaboration to drive better healthcare outcomes