Payer Power Conceptually, the historic relationship between payers and pharma companies has created an environment in which payers are largely on the defensive. Although the public maintains a negative perception regarding MCOs' willingness to pay for therapies, payers have in the past been very likely to cover any reasonable therapeutic regardless of its healthcare value—though patients might have had to jump through some hoops and pay a higher co-pay. Bad press, physician support, and most importantly patient advocacy have served to obtain coverage even in the most resistant of circumstances. Expect this to change.

As The Bruckner Group reported in a series of articles appearing in Pharmaceutical Executive over the past four years, payers have asked pharma companies to provide pharmaceoeconomic data that demonstrates products' healthcare value (See "Biologics Beware," June 2004; "Show Us The Value," September 2003, and "Raising The Bar," November 2002). Though a few pharma marketing and development teams have embraced the outcomes-based access (OBA) paradigm, many manufacturers have complied minimally while aggressively continuing to pursue traditional marketing tactics. Payers are dismayed at the continued utilization, for example, of Nexium (esomeprazole) and Clarinex (desloratadine), and the lack of use of generic Prozac (fluoxetine) for depression and Mevacor (lovastatin) for hyperlipidimia. As BGI had reported, a lack of manufacturer compliance was likely to create an environment for an extreme crackdown by payers. This crackdown is in its initial phases of rollout, though it has been in organization phases for years. Unfortunately, as the pendulum swings, some of these policies appear to be outside reasonable clinical guidelines.

Reject first, ask later. Payers are enacting or plan to enact broad, sweeping changes that switch the burden of proof to companies. They are saying, "If you want your drug covered, prove that I should pay for it." Citing cherry-picked patients, unrealistic dosing schedules, and placebo control, companies will increasingly find that the proof must come from head-to-head trials. Unless the results of a clinical trial are stellar and represent an unparalleled clinical outcome regardless of the above criticisms, the drug will be in limbo. It will be neither accepted nor formally rejected—instead, the decision to place that drug on a formulary status will be deferred.

Building the system. The key to all of these programs is that the prospective cost savings from tightening utilization need to exceed the cost of developing and implementing the systems and staffing to achieve them. Payers may have been more reluctant in the past to aggressively expand these efforts, instead seeking a balance of measures including working cooperatively with some obvious candidates to try to efficiently utilize limited healthcare resources. But with the unabated escalations in healthcare costs, and with added pressures on the other side from their customers, payers are feeling forced to more aggressively develop and implement the systems that will make it possible to achieve their utilization efficiency and cost-containment goals.

New targets. Many payers have been improving their data collection, storage, and mining capabilities over the past years. This has expanded their ability to locate additional targets that might have been otherwise missed, and rapidly roll out new cost-cutting programs. While in the past payors largely ignored therapies—however high priced—that were used by a relatively small population, they now see an opportunity for cost-cutting.

From Medical to Pharmacy Benefit The 2005 study of payers determined that the vast majority of payers are actively moving, or gathering the resources to move, the administration of biologicals from the medical benefit, which is the cost center for such services as physician and hospital care, to the pharmacy benefit, where pharmaceuticals are currently covered. Although this has been an issue on the horizon in previous years, payers now believe that the benefits of this change outweigh the costs, and the time has come to address this issue.