New survey research from Ernst & Young (EY) finds that the majority of payers in the US and Europe believe that drug adherence solutions and data that pharma companies possess are vital to lowering health care costs and improving outcomes. However, lingering mistrust of the pharma industry is likely to stymie efforts by pharma companies to engage with payers in these areas without a fundamental change from current approaches. These and other findings were released in Progressions: Navigating the payer landscape, EY's annual report on the global pharmaceutical industry.
For Progressions 2014, EY conducted surveys of 30 US payers, 30 European payers and 18 pharmaceutical company representatives from functions such as Market Access and Managed Markets. The survey was conducted in January 2014. EY supplemented the survey with in-depth interviews with over 30 senior executives from numerous countries including the US, Germany, UK, Switzerland, the Netherlands and France.
Costs above all else
Payers are focused on cost containment and budgetary predictability over outcomes-based approaches. While prescription drugs only account for about 10% of health care expenditures, payers see curbing rising drug costs as a more important business challenge than non-drug costs. Eighty-eight percent of payers strongly or somewhat agreed that "drug prices are a major driver of health care cost increases", while only 42% of pharma respondents did the same.
There's a disconnect on data
While payers are most interested in comparative clinical trial data, pharma companies say that the data they use most for demonstrating value is from placebo-controlled trials.
Pharma has a trust deficit
Seventy-eight percent of payers agree that "boosting drug adherence is a critical component of lowering health care costs" and 57% agree that "pharmaceutical companies have data that is vital for measuring and improving outcomes". However, fewer than half of payers (43%) agree that pharma's data is credible for measuring and improving outcomes.
Most payers do not think that pharma companies developing "beyond-the-pill" services can be unbiased between their products and those of competitors, with only 15% of respondents even somewhat agreeing with that statement.
"More than ever, payers today need help with implementing health care reforms. But while pharma companies have useful data and potential solutions in areas such as drug adherence, they are unlikely to get much traction because payers simply don't trust that they have the impartiality required," said Patrick Flochel, EY's Global Pharmaceutical Leader. "The good news is that payers are open to evolving the types of interactions they have with pharma from simple negotiations around access and price to more strategic, enduring relationships around their biggest challenges. To succeed, pharma companies will have to approach payers in a fundamentally different way."
Building blocks for strategic payer engagement
In response to health reforms focusing on outcomes, many pharma companies have been experimenting with services and solutions that expand beyond the pill. In considering the adoption or expansion of such approaches, companies should abide by some guiding principles to engage with payers:
Making the right comparison.
At a time of rapid change, pharma companies should make decisions about moving beyond the pill based on comparisons to the drug business of tomorrow, not the drug business of yesteryear.
Approaching payers strategically and comprehensively.
To move beyond pilots, Progressions suggests four key components: screening payers to identify the best targets; segmenting to customize offers to different payers; sequencing to expand solutions more broadly over time; and building sustained, enduring relationships.
Developing data-driven insights and interventions.
The big opportunity in engaging payers with big data is in building the complete picture and targeting the small percentage of patients who will drive the biggest percentage of costs.
Creating customer-centric solutions.
Payers are interested in solutions that look across disease franchises, span the cycle of care and are unbiased between the products of different manufacturers. Pharma companies need to ensure they are creating solutions that help payers address their challenges — rather than merely to sell more product.
Being transparent to rebuild trust.
Without trust, pharma's data and solutions will get little traction with payers.
Solving complex health challenges will require collaborations among many participants in the health ecosystem – including pharma companies and payers. Thus restoring trust with payers and the public is perhaps the most urgent and important issue facing the pharmaceutical industry today," says Glen Giovannetti, EY's Global Life Sciences Leader. "This is no longer just about doing the right thing — it's about doing the right thing for business. Companies urgently need to become more consistent, proactive and transparent in trust-building initiatives."
Additional findings from EY's report:
Guiding principles for restoring trust
The pharma industry, once one of the most highly regarded sectors around the world, now regularly emerges as one of the least trusted sectors in numerous surveys. The image in the public's mind has changed — from that of the scientist in the white lab coat toiling away to develop life-saving new medicines, to one of companies that are more interested in using aggressive means to boost drug sales.
Restoring trust is perhaps the most urgent and important issue facing the industry today. The world has changed to the point where "doing the right thing" is now the same as "doing the right thing for business." In the world of value-driven health care, data is the currency — and trust is the central bank. Without trust, pharma companies risk devaluing their own data.
So what can companies do to restore trust? EY points to four values or guiding principles that companies should seek to emphasize:
- Transparency and openness. Communicate actions and intentions clearly in an environment where companies may be guilty until proven innocent.
- Patient centricity and proximity. Get closer to patients and act unambiguously in their interests to demonstrate that pharma companies live by the same values as other health care stakeholders.
- Proactive leadership. On trust building initiatives, first movers get the lion's share of the credit. Don't wait to follow the lead of competitors — be the first one out the door.
- Consistency. One misstep can undo years of trust-building work. Implement controls and audits to ensure consistent implementation.
The Pace of Change
- The ways in which healthcare is delivered and paid for have changed rapidly over the last five years. Significant reforms are under way in major markets. Disruptive entrants and initiatives are emerging with novel approaches in data analytics, personalized medicine and PI technologies. The movement toward transparency is accelerating.
- For pharma companies, these trends are potentially disruptive. Companies could consider a range of potential responses — from developing value dossiers to support their products at one end of the spectrum to even moving into health care delivery at the other.
- Despite the scale of disruption, pharma companies' responses have so far mostly been in the form of ad hoc experimentation. Instead of reactive and fragmented experimentation, companies now need a coordinated, strategic approach.
- While pharma companies may not feel much urgency to act because net margins in the traditional drug business have not yet shrunk significantly, wait- and-see may not be the best option. Early-mover advantages — for instance, from network effects and switching costs — will make it harder to enter the market later.
"Transparent information is essential for markets to function efficiently," says Risa Lavizzo-Mourey of the Robert Wood Johnson Foundation. "A lot of information in health care has not been transparent, leading to waste and inefficiency. Patients don't know about the quality of different providers. Neither providers nor patients know the true price of products or services at the time they are making decisions. Information — for instance, on the relationships between pharma and providers or on rebates paid by pharma to payers — has often been opaque."
So, transparency has become critical for the move to value — which is essentially a move to a more efficient health care market. Without transparent information, it would be very difficult to make informed decisions about which interventions deliver the most value. Payers need transparency in their drive to reduce care variation. Patients need transparency — and increasingly expect it — as they take more financial responsibility for their health care decisions.
Just as the demand for transparency is increasing, many of the trends listed above are rising to meet the demand. Big data is being aggregated and combined, giving stakeholders more insight into the full picture. Social media and app-driven solutions — Castlight Health, Healthcare Bluebook and many others — are giving patients transparent, easily digestible information on provider options, associated costs and insurance co-pays, and more. In some cases, these tools are remarkably customized and patient-specific.
For instance, Charles Saunders of Healthagen (an Aetna company) talks about the WellMatch tool his company has developed, which gives patients information on the cost for a particular service, not based on averages, but rather on the specific health plan design for that patient. These apps are just one aspect of a larger movement. In recent months, there has been a spate of transparency-driven measures. In May 2013, the US government initiated an unprecedented three-part initiative that is, for the first time, giving consumers information on what hospitals charge. In April 2014, it followed up by releasing data on payments made to providers who treat Medicare patients — the first such release of information in that program's history. As of April 2014, the European Union was in the final stages of approving a new clinical trial regulation that would greatly increase the transparency of trial data. Indeed, pharma companies have come under growing criticism for not being open with their clinical trial data, and some firms have also responded with their own measures to make their data more transparent. This is now an urgent imperative for the industry.