Until recently, comparative effectiveness research (CER) was a term that only surfaced in conversations among health policy specialists, academicians, and other observers of the healthcare marketplace. No longer. The allocation of $1.1 billion to CER in the American Recovery and Reinvestment Act (ARRA, 2009) represented a paradigm shift. And the inclusion of CER in every healthcare reform bill introduced since, including the final Patient Protection and Affordable Care Act (PPACA, 2010), suggests that it’s seen as a key solution to healthcare cost containment. With PPACA’s establishment of the Patient-Centered Outcomes Research Institute (PCORI) to fund research into the relative health outcomes, clinical effectiveness, and appropriateness of different medical treatments, CER has gone from a policy theory to a standing institution.
The implications of the recent increase in focus on CER for pharma are many. With a set of guidelines in place that specifies what drugs will be prescribed for whom and in what sequence, backed by the threat of non-reimbursement, the ability to change physician behavior through education efforts will be limited. This doesn’t mean that detailing will end, but it will be limited to specific providers who have shown a willingness to buck reimbursement guidelines either by justifying exceptions or by catering to patients who are willing to pay out of pocket for premium drugs. Nevertheless, the prospects for large sales forces of recent years are dim.
Health economics groups are being integrated into marketing, because the need to build the economic and clinical value case and the need to explain it to multiple constituencies will become increasingly intertwined.
This redefined marketing group will need to be closely integrated with R&D and clinical research, so that the expected cost effectiveness of a potential product can be assessed on an ongoing basis during its development. What many in the industry fail to appreciate is that going forward, demonstration of cost-effective superior outcomes will be table stakes for reimbursement. Competition from generics will accelerate, and with the introduction of biosimilars over the next several years, the biologics sector—historically immune from such competition—will experience significant pain.
The ultimate impact of each of these changes for pharma will be a redefinition of value. To fully identify the potential value of products, manufacturers will need to look beyond product attributes, such as physician ease of use. Instead, they will need to evaluate new products on how they potentially improve current treatment regimens for the condition addressed, save costs and improve outcomes. For comparative purposes, determining the potential of a new drug to take the place of multiple drugs in a current therapeutic regimen could be important. Demonstrating equivalent efficacy (vs. superiority) may be sufficient—and of interest to payers—if the product has an improved dosing frequency (and improved patient compliance) or some other benefit, such as reducing the number of medications required for treatment or the number of physician visits.
Given these trends, a new infrastructure within pharma is needed. The problem is not as simple as creating the new plan for collaborative research or presenting R&D with a new prioritization scheme. It requires creating an infrastructure with accountability and with new competencies. The need to appropriately define the positioning of a new product within treatment guidelines prior to conducting clinical trials will require deeper up-front analysis of the potential risks and benefits of various evidence-generation strategies.
Pharmaceutical manufacturers must recognize that the drugs in the laboratory today are those that will be commercialized in 2020. They will very likely be launched into a market that demands evidence of economic and clinical value as the price of entry. Guidelines based on cost effectiveness developed by payers or providers will increasingly determine market access. Consideration of economic and clinical value must be integrated into the entire product development and commercialization process, and this is not happening quickly enough. Manufacturers need a deeper understanding of patient, provider and payer needs in order to build in value from the beginning of the development process. The failure to deliver real value could mean winning the battle for approval, but losing the war for market access.
ABOUT THE AUTHOR
Michael N. Abrams, MA, is managing partner at Numerof & Associates, Inc. (NAI; St. Louis). NAI is a strategic management consulting firm focused on organizations in dynamic, rapidly changing industries. For more information, visit the website at www.nai-consulting.com. He can be reached at email@example.com; 314-997-1587. This article is adapted from Abrams’ new book, Healthcare at a Turning Point: A Roadmap for Change (CRC, 2013). The book outlines a market-based business model that aligns incentives with the goals of prevention, improved quality and reduced costs across the entire healthcare industry.