Gone are the days when pharma had two customers. In addition to doctors and patients, pharmaceutical companies ply their wares
to increasingly powerful third-party payers and—although they still have a lot to learn about them—to the employers who buy
health coverage and pharmaceutical benefits from those insurance companies. As healthcare costs rise at a pace that exceeds
revenue growth for most companies, benefits are going from a "must have" to a "nice to have" for many employers. Companies
who want to hold onto benefits are becoming more sophisticated customers. Overall, healthcare benefits have come under cost-cutters'
scrutiny as employers attempt to control the percentage of revenue dedicated to employee benefits. And because their premiums
pay for it, companies want to influence healthcare—from policy and delivery to, in some cases, formulary decisions.
"Business will take a leading role in systematizing healthcare, reducing waste and inefficiencies in the healthcare system
in the way that mirrors what they have done in their own companies and industries," said Lee Scott, CEO of Wal-Mart, in a
recent interview with The Wall Street Journal.
Scott's vision is proving to be a challenge for many employers. Facing double-digit premium hikes, they struggle to provide
high-quality medical coverage at an affordable price. Typically, employers have used cost-shifting as a management tool to
decrease their costs. Employers increasingly believe that cost-shifting has been overused and is affecting clinical outcomes.
This has caused some employers—Pitney Bowes is one—to develop innovative programs that actually increase pharmaceutical costs,
but anticipate a return on investment in the form of better overall healthcare outcomes. Instead of shifting costs to the
employee, Pitney Bowes does the opposite. Its program waives out-of-pocket expenses for chronic medications, such as those
used for diabetes. Rather than managing short-term costs, the company focuses on increased productivity through better health
Other employers are simply slashing coverage. But whatever the strategy, employers see few alternatives to becoming more active
in benefit design and healthcare management. They want more control over the programs that cover their employees and other
beneficiaries. Although employers typically do not make therapy-specific decisions, their decisions directly affect the way
pharmaceuticals are covered and costs are shared.
Pharmaceutical manufacturers need to recognize these new sentiments among employers, and use their expertise to help companies
design benefit packages at a price that keeps their businesses competitive while ensuring that employees continue to receive
high-quality medical care. For employers, this often means maintaining good enough health benefits to attract and retain high-quality
workers. In many cases, when pharmaceutical sales reps call on employers, they fail to recognize the differences between these
new customers and other, more familiar institutions like hospitals and insurers. To maximize the benefit of contacts with
employers, manufacturers must understand employer attitudes toward healthcare as well as the ways they can shape coverage.
In December 2005 and June 2006, The Zitter Group, a pharmaceutical marketing consultancy, hosted the Employer Resource Network
(ERN). The ERN is a semiannual meeting, designed as a forum for employer representatives to discuss with peers and pharmaceutical
manufacturers a range of social and economic health issues facing employers. These issues affect the pharmaceutical coverage
offered to employees. Ultimately, they shape relationships between pharmaceutical manufacturers and employers. The June ERN
included 18 senior employer-segment representatives (medical directors, human resources managers, coalition executives, employer
benefit consultants and pharmacy benefit managers). These employers provide coverage for over 23 million lives in the United
States. (See for the list of ERN participants.)
Employer Philosophies of Healthcare Benefits
The interaction between employers and pharmaceutical manufacturers was a hot topic at both meetings. Representatives agreed
that pharmaceutical manufacturers must improve their understanding of how employers function in the benefits arena. As employers
become increasingly involved in coverage decisions, there will be significant opportunities for pharmaceutical manufacturers
to work directly with employers to design drug coverage. However, employers will expect pharmaceutical manufacturers to focus
on their needs, which differ from those of familiar pharma customers like managed care and providers.