The Payoff for Payers

Dec 01, 2011

Lujing Wang, MD
To some extent, evidence is a commodity that one can always buy with money. The question becomes how much one is willing to invest and how much benefit one can expect to receive in return. Within payer evidence planning, a tradeoff is always needed to balance the benefits, costs, and risks of various evidence scenarios. It is imperative that market access teams begin working early in development to understand how payers will likely react to various clinical scenarios and then determine what value propositions will be most supportive of the evidence anticipated to be generated. If conducted properly, this will be beneficial in helping the product secure optimal levels of reimbursement and timely access in its target markets.

The benefits to the company of having a firm understanding of how various clinical, outcomes, and observational evidence will resonate with payers will come in the form of clearer determinants on pricing, reimbursement, access potential, and potential market size. The cost of generating such data, meanwhile, is significant and comprises several components.

The Costs

The first and most obvious cost is the absolute price tag associated with conducting the trial, including the expense of site enrollment, patient recruitment, paying investigators, and cost of clinical research organizations (CROs). A second, less immediately apparent component is the cost of delayed market entry. Delayed market entry means potentially facing generic competition earlier in the life of the brand or losing first-to-market status to a branded competitor.

The third potential cost is the risk of failure. Trial failure by itself is a major setback, but companies face greater loss if the impact of a negative trial directly affects existing business. For example, when an oncology product is trying to extend coverage to include other indications, a company must carefully consider, if the trial fails, the amount of damage this could potentially have on expected revenue in the currently marketed indication(s).

Finally, one must consider the opportunity cost. While this is less of a consideration for large pharmaceutical companies with deeper pockets, for small or midsize companies, in particular those backed by venture capital investment, the options they are able to pursue are often limited. Trial failure can also mean that the company loses the advantages that it may have enjoyed by designing a trial in a different way, for example, in a different trial population.