Optimizing your Value with Payers

Jun 01, 2011
By Pharmaceutical Executive Editors

Mike O'Neill
Two brothers bicker over the sole orange in their home, unaware of each other's true desires. Their father tires of the argument and peremptorily splits it, giving each boy half. One brother heads outside, quickly scoops out the pulp—tossing away the peel—and eats the fruit he wanted. The other brother, an aspiring chef, moves to the kitchen, excavates the wedges, discards them, and scales the peel for a new recipe he discovered (although the recipe called for the entire rind, not just half).

This story's lesson, adapted from "Getting to Yes: Negotiating Agreement without Giving In," is that the boys had conflicting positions: each wanted the orange. However, they had different, but dovetailing, interests: one craved the inside of the orange, the other the outside. Had the father taken time to probe why each boy wanted the orange, he would have discovered their underlying interests and doubled the value each received.

Understanding interests and positions, among other factors revealing people's true perception of value, reaches well beyond this parable into the pharmaceutical arena. Negotiations occur daily across the globe between company affiliate managers and their interlocutors: payers, insurers, hospital administrators, and HTA advisors who decide where a product's value lies along their budgetary spectrum. Dissecting systematically the interests and positions of those players, then preparing thoroughly to negotiate with them, enhances company managers' opportunities to succeed.

Defining Success

For the pharmaceutical affiliate general manager, market access director, or brand manager, among others who represent their company before decision-makers, defining success in the negotiation starts well ahead of the initial appointment to discuss price level and reimbursement coverage. Some helpful yardsticks of success include:

» An agreement that is better than your alternatives to making an agreement;

» An agreement satisfying your interests well, theirs acceptably, and others' tolerably;

» An efficient agreement representing the best among many options;

» A legitimate agreement where no one feels "taken;"

» An agreement involving well-planned, realistic, and feasible operational commitments; and

» An agreement where efficient process occurs due to good communication, enabling the company to establish the kind of relationships it seeks to strengthen.

Like the brothers seeking to maximize their value with the orange, the "circle of value" in these factors begins with understanding each party's interests, exploring options to enhance joint interests, and offering factors of legitimacy—value dossier data, third-party testimonials, clinical trial outcomes, and others—that both parties accept as real and valid.

Negotiating, in many ways, resembles parachuting. You jump from the plane, aim for a landing zone, encounter unpredictable conditions, get pushed off course, and therefore must adapt. Preparing as an affiliate team for a negotiation by analyzing many key elements enables company advocates to minimize unfavorable surprises, moving conversations away from hardened positions often heard (e.g.: "Your price exceeds what we can accept;" "Your product represents the fourth-class entry, undeserving of first-line treatment recommendation;" "We demand a performance-based risk-share agreement as your clinical data appear weak versus comparators"), and toward discussing options addressing joint interests. Anticipating the take-it-or-leave-it upfront positions companies often hear and moving the conversation into the circle of value where joint value-creating options live takes training and time. For companies that invest in developing these skills, solid commercial returns can follow.

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