Marketing's Stepchild No More

Nov 01, 2009

A key source of competitive advantage in today's crowded therapeutic space is knowing what the customer wants. That's a mind set that starts not today, but yesterday. In fact, it depends on the capacity to anticipate need with the right mix of product, data, and support services that can yield coveted status as "partner of choice" with an increasingly powerful community of payers. To help readers make sense of this new environment, Pharm Exec looks at two recent product introductions, highlighting what to do—and what to avoid—in managing this business-critical function. — The Editors

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Just a few years ago, most companies looked at reimbursement considerations as the last step in the commercialization process. Only after a product was close to launch was consideration given to reimbursement—and even then it was addressed bluntly, as in "What price can we get?" The reimbursement function was all but divorced from the product plan, the "red-headed stepchild" of the pharmaceutical business.

This approach may have been effective when physicians, pharmacists, and care sites were the dominant decision makers in selecting pharmaceuticals. Today, however, payers are driving the agenda and demanding sophisticated clinical and economic data before agreeing to a price for reimbursement. The industry is now being challenged to demonstrate a strong value proposition for its products, and payers are helping drive the agenda.

The Power of Prediction

Simply stated, the objective of a reimbursement strategy is to support increased sales and premium pricing. But when companies develop and implement reimbursement strategies late in the product development process, the best opportunities may have already been lost. At that point, detailed product communications with external decision makers (e.g., government agencies, payers, customers, public advocacy groups, industry associations) should have been going on for years. These are not idle conversations, since getting appropriate reimbursement coding from the US Center for Medicare and Medicaid Services (CMS)—or its foreign equivalents—and securing a place on insurance formularies are keys to realizing the commercial potential made possible by market authorization.

Building a product's case for reimbursement must draw on evidence-based medicine that focuses on reduced cost and/or superior quality of patient outcomes. Demands by payers to support claims of superiority require that those responsible for reimbursement strategy become involved in data collection, organization, and presentation.

But the process has to go back even further. Effective reimbursement planning requires more than asking how to convince payers to reimburse at an acceptable price. The reimbursement strategy must provide quality input into company investment decisions. To ensure that the company builds a portfolio of products with good reimbursement potential, the function must shape the overall reimbursement environment, creating networks that influence payer thinking, establishing internal management processes that accurately guide and inform senior management's stage-gate decisions, and bringing a broad range of skills and functions into planning R&D's pre-development design specifications.

Cypher: Outreach for Outcomes

There are important lessons to be learned from "early adopters" in managing reimbursement as a strategic priority. Cordis Corporation, a Johnson & Johnson company based in Florida, achieved a landmark reimbursement success with its drug-eluting stent, Cypher, in April 2003. It was the first medical device ever to be assigned a coding classification prior to attaining FDA approval. (Typically, there is a delay between FDA approval and coding classification because the CMS has been unwilling to discuss reimbursement classification until a product has been approved for safety.)

In influencing CMS to become engaged earlier than required by law, Cypher's project team reminded them of instances where the agency had come under fire for a slow reimbursement coding response to revolutionary new technologies that had gained FDA approval. The team convinced CMS that this was a situation where expediency was in both the agency's and the population's best interest.

To accelerate time lines, the project team repeatedly encouraged CMS to consider reimbursement eligibility as soon as each round of data became available, going so far as granting CMS permission to look at reports submitted to the FDA for consideration. Not only did they share available clinical data with CMS, the Cypher team also built an economic case. Using actual Medicare data, Cordis showed that even if the agency paid more for the drug-eluting stent up front, the clinical value—in the form of fewer repeat interventions—would make long term costs even more efficient.

In addition to the collaborative approach to CMS, Cordis also structured and implemented outreach to other key constituents that could influence CMS's receptivity. They initiated communication to medical societies, encouraging them to contact CMS after the proposed rule came out. They called on key private payers, presenting them with the clinical and economic case they'd made to CMS. Finally, they set up a hospital awareness program, stressing physician surveys that showed practitioners would be eager to use it.

Not only was coding achieved prior to FDA approval, the project team managed to attain a new coding classification for its technology that carried with it a significantly higher payment rate than products at the current standard of care. Near total and immediate payer coverage translated to many additional months alone in an attractive competitive space. Lacking competitors with similar developed/approved products and boasting an incremental reimbursement payment, Cypher achieved high volumes and premium pricing.

Having successfully received new and unique coding for their product from CMS, Cordis next realized that if physicians' notes didn't reflect exactly what was done, and coders didn't enter the new code, the hospital couldn't be reimbursed at the proper rate. (This would then impede adoption of the Cypher stent.) So the project team implemented extensive reimbursement training of coding staff and physicians, confident that it would provide a high return on investment for the company through accelerated adoption.

Cypher owes much of its positive reimbursement results to exceptional planning and use of data to build an effective clinical and economic value case for its product relative to the current standard of care. Their outreach to multiple constituents and astute positioning of their product's value also stand out. Despite receiving very positive outcomes, the Cypher project team continued to develop economic models in an attempt to improve data and achieve still better outcomes evidence. For example, a new economic model and analysis was developed as soon as a competitive drug-eluting stent was launched since there was now a new appropriate comparison product.

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