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Understand when total cost of care is the only winning argument - and when you can ignore it, says Oliver Wyman
It is commonly understood in today’s pharma market that successful products combine therapeutic effectiveness with economics: the “access challenge.” According to a new study from Oliver Wyman (New York), current efforts often fall short. “Many payers regard the economic evidence they receive from pharma with indifference, or worse, disdain,” say authors and Oliver Wyman partners Peter Gilmore and Mark Mozeson, citing one health plan CEO who said, “Pharma’s data usually lacks rigor, appears biased, does not address the needs of our members, and is presented to us well after the product is in-market.”
Based on a detailed analysis of 122 new molecular entities (NMEs) launched in the US between 2005 and 2010, the authors came to four key conclusions:
The study’s initial hypothesis was simple: More economic evidence—at or close to the time of launch—should lead to better overall commercial performance. Oliver Wyman looked at (1) the breadth and depth of each clinical program; (2) the health economic evidence presented within 18 months of launch to influential health technology review committees, such as the UK’s National Institute for Health and Clinical Excellence (NICE) or the Canadian Expert Drug Advisory Committee (CEDAC), or published in peer-reviewed journals; and (3) the “return factor”—the quotient of fifth-year sales and development cost, as a proxy for commercial value. Clinical differentiation was scored on a 1—5 scale (1 = undifferentiated; 5 = breakthrough therapy), as was health-economics quality and conclusions (1 = no economic analysis; 5 = unequivocal TCC reduction). A similar rationale was used for return factor. Fig. 1 shows the results.
Fig. 1. Economic/clinical differentiation scores for products launched 2005—2010.
Three conclusions can be drawn at this stage:
Targeting high-cost disease states
Oliver Wyman investigated a second level to the health economics/commercial performance quandary: looking at situations where the healthcare spend is significant for payers, and where pharmaceutical therapies are lacking. For example, arthritis represents 9.8% of payers’ healthcare spend, but only 10% of that is tied to drug spend. Conversely, asthma represents 0.9% of healthcare spend, but 50% of that is drug spend. Discounting many other factors that go into current healthcare, an NME targeted at a higher-cost, low-drug-spend disease state has better odds of commercial success than a lower-cost, high-drug-spend state.
This analysis, say the authors, give guidelines to how industry managers should match investments in drug development to market needs. There are four broad groupings:
The clearest takeaway from the Oliver Wyman analysis is that the pharma industry needs to spend more time and resources analyzing payers’ overall costs. “What matters most to payers is a drug’s impact on the total cost of treating a population, and that means they need research that measures that impact—and not just relative clinical efficacy,” say the authors.
Within pharma companies, a more expansive effort to include market access groups in drug development needs to occur. The authors ask a series of questions: How often is the question of payer economic impact considered before a Phase III trial is initiated? Does the access organization have 50%, 20% or 0% of the voice in portfolio strategy and Phase III start decisions? If there is a choice to be made between adding an economic study to a development program or funding another product, how rigorously are the alternatives analyzed? These questions challenge current pharma leadership on how serious it is about addressing payer problems in drug development.
“The access organization needs to be at the center of the effort to create an economically viable product—and a full member of the team when Phase III decisions are conceptualized and made,” conclude the authors. “We believe that the new level of discipline instilled by this change can also help solve the R&D productivity issues that plague the industry.”
The full study, “A New Key to Access: Solve the Payers Problem,” is available at www.oliverwyman.com.