The Year Payers Stopped Threatening - Pharmaceutical Executive


The Year Payers Stopped Threatening
The notion that employers would continue to pay the cost, whatever it was, has been turned on its ear.

Pharmaceutical Executive

Although change is occurring in most of the major MCOs, there are varying degrees of urgency. Some companies like Aetna are planning to complete this process in two years, whereas others are moving forward less aggressively. What is unmistakable, however, is that almost all the major MCOs recognize that changing how and where biologicals are administered is critical to efficiently utilizing limited healthcare resources and cost control.

Biological drugs become a target. Previously, MCOs didn't consider biologics a major concern, both because they represented a relatively small cost (at the time) in absolute dollars and because the cost of biologicals was less "visible," buried within the $1.2 trillion medical benefit. However, in the last few years, as companies have brought many more biologicals to market—and increasingly for diseases with much larger patient populations such as rheumatoid arthritis and multiple sclerosis—managed care executives have come to realize that they need better tools to manage the utilization of these increasingly large costs.

Controlled utilization. Administering biologicals under the pharmacy benefit will dramatically alter how biologicals are made available to physicians and patients, and how they are utilized.

Under the medical benefit, payers receive a claim submitted by physicians after the service and therapeutic have already been delivered or administered by the physician. Their only choice is to pay or not pay the claim.

Once payers move the administration of biologicals under the pharmacy benefit, they will be better able to control the selection and utilization of biologicals (and the total cost thereof) by having the ability to monitor and pre-authorize therapeutic utilization, physician selection of brands, and benefit administration. Not only will payers be in the position to have advance knowledge of the prospective usage of biologicals, but they can also use the same tactics that have been effective in controlling utilization of pharmaceuticals including formulary tiering, favorable co-pays for preferred branded therapeutics, step therapy programs, disease management programs, and prior authorizations. In that way, they can better drive utilization toward those treatments within a therapeutic category that demonstrate the most favorable pharmacoeconomic value.

Loss of influence over distributors. The integration of specialty distributors and outpatient care facilities into the decision-making process adds an additional complication not encountered with other pharmaceuticals. Specialty distributors' and outpatient facilities' motivation are almost entirely financial, driven by the margin between their purchase price and the level of reimbursement. In several markets, these players can greatly influence usage depending on the exclusive contracts or discounts given by a particular manufacturer. Payers leveraging the limited resources of the medical benefit can have some influence by varying their reimbursement formulae. But, with payers armed with the capabilities of their pharmacy, they will begin to take more targeted control over utilization—before utilization takes place. This will severely curb the capability of manufacturers to drive their sales by influencing distributors.

Payers vs. Pharma Currently, many payers are frustrated with the level of cooperation they receive from pharma manufacturers. This frustration extends to:

  • compliance with the Academy of Manager Care Pharmacy's (AMCP) format for formulary submissions
  • transparency of pharmacoeconomic information
  • a shared grievance having their critical needs "not really being heard" by manufacturers.

AMCP format. While most manufacturers comply with the nominal requirements of the AMCP format for formulary submissions, payers find that most dossiers fall significantly short of substantive compliance, specifically in the area of the economic impact model (i.e. the value proposition). Others in the payer community disagree, citing the difficulty for pharma manufacturers to accurately assess the pharmacoeconomic value of a product at or just before launch (when these models are developed for payers), while insufficient outcomes data exists to determine the therapy's long-term impact on the cost of treating disease.


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