Insurers are raising their expectations of the value of new therapies, says PwC

That insurers are looking closer at the clinical and economic benefits of new therapies relative to existing branded and generic drugs is not news. But a new survey, conducted by the Health Research Institute of PwC (New York), presents a stark, harsh view of today’s relationship between insurers and PBMs, and the pharma industry. Advisers to the drugmakers have been telling them for several years now that better outcomes and cost efficiencies are necessary elements in presenting new therapies to insurers; now, a picture is being painted that insurers don’t put much credence in what the industry says anyway, and that they don’t feel confident of their own tools for evaluating comparative effectiveness either.

Interest in novel contracting models among insurers.

Credit: PwC HRI payer value survey 2012

The report, “Unleashing value: The changing payment landscape for the US pharmaceutical industry,” is based on a survey of 100 insurers and PBM managers, with followup interviews of some respondents. One baseline finding from the survey is that three out of four respondents view their relationship with the industry as “transactional” versus “collaborative.” And nearly 60% of them expect no change in their relationship with pharma in the future.

Starting with that level of distrust, it’s no surprise that just over half of respondents do not rely on industry-developed economic data, preferring their own or that of third parties. Fully 44% of health insurers “aren’t at all confident” in industry-supplied data. Industry has been responding to these attitudes; a different PwC survey found that 35% of manufacturers have opened “clinical informatics” offices—but that leaves nearly two-thirds of industry without this function.

The report also notes that the business models of insurers are changing. The Affordable Care Act brought affordable care organizations (ACOs) into the picture; and Medicare is encouraging their development for bundled payment of healthcare providers, meaning that Medicare will provide either a set fee for specific therapies, including the drug, as well as medical interventions in the reimbursement, or allowing for incentive payments based on cost savings in overall reimbursement. This is a double-edged sword; while pharma companies can point to lower cost of healthcare via increased use of appropriate therapies, it must also demonstrate the economics inherent in a new therapy.

Empowered patients?

The ultimate course of therapy for any given patient is not solely in the hands of insurers; it usually represents a convergence among the wishes of the patient, the provider and the payer. PwC’s survey points to a future scenario where insurers might return to being the “bad guys” of healthcare, or at least where insurers will compete by balancing the breadth of their service with the price they charge insureds. This point is reinforced by one of the “forces of change” PwC cites that affect future pharma marketing: that “increased transparency of health information is empowering patients to make better decisions about therapeutics.” Whether this empowerment will enable patients to demand non-preferred formulary drugs—and get them—remains to be seen.

But one area of overlap between insurers and patients (and one that the pharma industry will be glad to see) is that medication adherence is becoming better recognized as an important goal for both improving quality of care, and for reducing the costs of chronic care. Healthcare reform rules have made better adherence one of the quality measures of CMS, which in turn is affecting healthcare provider practices and insurer actions.

Finally—although direct evidence is scanty in the US—PwC sees the insurance industry moving away from a “unit-based payment model” and toward outcomes-based payment, “which will start to affect prescribing patterns.” Unit-based payment is simply conventional trade relations, with rebates or discounts attached to unit sales. Outcomes-based payment is the variety of systems where pharma companies agree to pay only for those patients who benefit from a particular therapy (a type of risk-based collaboration), or who get incentives based on how well patient conditions improve (one contract even specifies the achievement of a certain adherence level, tying in that objective, too).

There are only a handful of well-publicized risk-sharing agreements; Merck entered into one a couple years ago for its Januvia diabetes treatment; and more recently, EMD Serono has a pair of agreements for its multiple sclerosis drug, Rebif. Results of how the programs are progressing are expected in the next year.

Survey respondents are quite optimistic about the future progress of outcomes-based payments. Fully 37% of respondents expect that to be tried in their organization in the next three years (see chart), along with bundled payments and risk-sharing arrangements. PwC notes that US insurers might be casting an eye on what is occurring in the UK and Germany, which are both single-payer systems where the government is the primary buyer of drugs. The UK’s National Institute for Clinical Excellence (NICE) has been setting a cost-based bar on drug formulary recommendations, and will be establishing a value-based system in 2014. In Germany, the pricing system established last year allows manufacturers to set an initial price for the first year, and then that price is revised, based on clinical outcomes, to match the prices of generic or alternative therapies if no clear clinical benefit is seen.

PwC sees trust derived from shared data as a solution to the transaction-oriented nature of the manufacturer-payer relationship. “If payers demonstrate good faith that they will use pharma-supplied data to inform formulary decisionmaking and reimbursement, pharmaceutical companies may be encouraged to more closely follow evidence standards, such as those outlined by the Academy of Managed Care Pharmacy,” says PwC. “For their part, pharmaceutical companies that gain access to claims data will need to be transparent in their methods of utilizing the data and in how the data improves understanding of the disease or reduces development cost.”

The full study is available at PwC’s website, www.pwc.com.