In the current healthcare landscape, physicians, health insurers and patients want to know how well a drug will work and affect total medical costs. However, according to a report published May 17 by the Health Research Institute (HRI) at PwC US, information provided by the biopharmaceutical industry no longer suffices.
Pharmaceutical companies that are among the first to meet healthcare's new expectations of value could have an advantage in the competition for market share and brand differentiation, the report noted.
As the basis for payment shifts to improved patient outcomes, health organizations are looking for more robust evidence of clinical and economic comparative effectiveness. Drug makers that have faced challenges with formulary acceptance or reimbursement levels will need to speed their efforts to create and reliably demonstrate better outcomes for patients, said PwC.
The report, titled "Unleashing value: The changing payment landscape for the U.S. pharmaceutical industry," was based on a nationwide survey of 100 U.S. health insurers and pharmaceutical benefits managers.
Detailed findings included the following:
- To be considered for drug formulary placement, 82 percent of health plans said a drug manufacturer must demonstrate a clear clinical benefit compared with current branded and generic treatments, and 78 percent demand clear proof of cost savings.
- Only five percent of health insurers are very confident – and 44 percent aren't at all confident – in the economic data provided by the drug industry when making coverage and formulary decisions. Only seven percent are very confident in the information to evaluate a drug's comparative effectiveness.
- Obtaining more useful information through collaborative data sharing has been hampered by a history of distrust and misalignment between insurers and drug companies. By a three-to-one margin, insurers characterize their relationship with pharmaceutical companies as "transactional" versus "collaborative." Nearly 60 percent of insurers expect no change in their relationship with pharma companies.
- Consequently, more than half (52 percent) of insurers rely on independent data to evaluate drug effectiveness. The three most influential factors health plans use when making formulary decisions are the availability of a generic equivalent, physicians' opinions and regulatory guidance.
- Sixteen percent of health insurers have adopted new payment and contracting arrangements such as outcomes-based payments, risk-sharing agreements and bundled payments with pharmaceutical companies. Of those that haven't, 37 percent expect to adopt them within the next three years.
"Pharmaceutical and life sciences companies are now collaborating with payers and providers to achieve better patient outcomes and bend the healthcare cost curve. Those that can effectively demonstrate value in non-traditional ways have an opportunity to gain market share in a very competitive market for prescription drugs," said Douglas Strang, PwC US pharmaceutical and life sciences advisory co-leader. "Meeting new expectations of value in healthcare affects how drugs will be researched, marketed, manufactured and priced in the future, and first movers will have an advantage."
According to the report, brand-name drug makers are fighting for a shrinking share of "premium real estate" on prescription drug formularies as generic drug competition and medical costs continue to rise. A shift in consumer and prescriber drug preferences could hurt revenues for pharmaceutical and life sciences companies that don't accelerate efforts to prove value and build trust with doctors, hospitals and health plans, the report concluded.
"As the U.S. health system undergoes significant change regardless of legislative or legal actions, a new definition of value is emerging, one that places patients and their desired outcomes at the center of the universe," said Karla Anderson, partner, PwC pharmaceutical and life sciences advisory services group. "Leading pharmaceutical companies are increasing their alignment with the rest of the 'four P's' in healthcare -- providers, payers and patients. They are creating new expectations across their organizations to re-orient their definition of value for each of these groups."
You can access the full report here.