Market Access and Payor Requirements
Considerations for the Life Sciences Executive
By:
Chair, Healthcare /Life Sciences Practice
As discussed in our prior newsletter, the failure to integrate Economic Value into your business strategy- for the different Key Stakeholders in the Healthcare System - can diminish the chance for your product's success. This is true both for a new product coming to market (impacting market access and penetration) and for one already on the market (impacting growth rate and market share). Key stakeholders include the Payor, the Provider and the associated Site-of-Service (e.g. hospital inpatient/outpatient, physician office, home setting, etc.), and the patient. Each stakeholder has a different Economic Value equation. In this issue, we will focus on the Payor as a Key Stakeholder.
Payors are exerting increasing influence over product choice and implementing designed control mechanisms to reduce cost. Government and commercial Payors (and their underlying funders - employers and government) continue to face escalating costs - driven by demographics (the aging of the Baby Boom generation) and the continued introduction of expensive new technologies/drugs. Healthcare expense as a % of US GNP is expected to reach 19% by 2019. In the face of these well known macro-economic trends, Payors are exerting greater influence over product choice and are increasingly implementing designed control mechanisms to reduce cost - including more aggressive formulary/preferred product controls, experimenting with different payment systems that pay for quality/performance, and shift coverage risk (hence cost reduction incentives) to provider groups (e.g., Medicare's ACO model).
The Payor has become a primary Sales Barrier. Historically, Life Sciences companies have targeted the Physician and the Regulator as the primary stakeholders driving product/technology adoption. Capital investment requirements, product development plans, employee skill sets, and clinical data strategies were designed to address these two primary endpoints - then a Company quickly moved to a commercialization phase. Today's Life Sciences Executive increasingly understands that the Payor is the gatekeeper for product adoption and the Commercialization Phase- that the Payor has become a primary Sales Barrier.
What the Payor Wants - as a customer. Unfortunately, many companies are not able to define Payor Requirements - what the payor as a customer wants from new technology/drug coming to market or, increasingly, from an existing product on the market. Given, this lack of knowledge about Payor Requirements, companies do not know how to address these requirements strategically.
Payor Requirements: Payors want clinical efficacy and clinical outcomes and cost effectiveness.
Payors are looking beyond pure clinical efficacy to (1) clinical outcomes: the clinical benefit the patient realizes as a result of the product application, and (2) cost-effectiveness data - relative to existing products or standard-of-care. In other words, payors are looking at the cost effectiveness - built on the clinical differentiation.
On a specific level, payor requirements include:
- Regulatory Approvals/Labeling: the product's regulatory approvals, the labeling including defined clinical application and patient selection criteria, and the supporting clinical safety/efficacy data.
- Defined Outcomes: what outcomes will actually achieved on the defined patient population? And what Outcomes have already been achieved?
- Product Price Point: define the rationale for the product's price point
- Total Treatment Costs: what are the total costs/resources required to manage to patient/patient condition (targeted by the product application) including the cost of product, total episode-of-care costs, and total cost of treating a patient over the defined outcome period?
- Comparative Effectiveness: comparison of efficacy, outcomes, and cost to the competitive products or standard-of-care
- Budget Impact Analysis: budget analysis estimating total outcomes cost on a population level to the payor. May need to be done at a Payor Plan level based on the Payor's plan portfolio
Company Strategy: What can you do? To address the Payor as a customer and optimize business strategy to address increasing Payor requirements, there are some basic steps that should be considered. Fundamentally an Economic Value strategy must be developed and implemented. Critically, this means that a Life Sciences company, compared to historical approaches, must shift resources toward addressing Payor Requirements - and this should be done early in the development process. Some critical components of an Economic Value Strategy should include:
- Define the value proposition
- Assess the expected payor mix
- Model the total Payor costs
- Develop and Implement an Economic and Clinical Outcomes Data Strategy
- Analyze Payor budget impact
- Reimbursement coding strategy
- Reimbursement coverage strategy
- Marketing and distribution strategy
More information on these critical components is available.
Email me for the expanded overview.
While there is great variation in the types of Payors that a Company needs to target (US Government and commercial payors, EU payors, etc.), there are common elements that apply. The above approach describes the sequence of activities that take place to optimally address payor requirements. Clearly, the approach can vary - including the sequence of steps and the degree of investment in each - but these are the elements that a Payor generally evaluates in making Coverage decisions.
We can help. The Mead Consulting Group has done this before - we have developed and executed Economic Value strategies in the Medical Device/Diagnostic and Biologic space for such companies as Medtronic, Summit Medical Systems, Accredo Health Group, Medco Health Solutions, United Therapeutics, Actelion, and Baxter.
MCG's Senior Consultant team has extensive experience across the spectrum of healthcare from device/ biologics firms, provider sites-of-service and Payor Coverage/Benefit design in assessing and building Economic Value Strategies - and integrating them effectively into a company's marketing strategy including Key Opinion Leader network development, proof statement/sales tool development, distribution channel strategy, formulary strategy, GPO strategies, etc.
For a free consultation please contact me at jlangley@meadconsultinggroup.com or
720-273-8014
Coming Attractions: In future issues we will look in more detail at Market Access and Penetration optimization in today's Healthcare world including such critical topics:
- Fundamentals of targeting Economic Value
- Economic modeling by Provider Site-of-Service - Economic value in a provider world
- Integrating Economic Value strategy into Marketing Strategy -including Distribution Channel strategy