“Pharma Value”

September/October 2013, Vol 6, No 8 - Editorial
David B. Nash, MD, MBA
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All healthcare consumers want to achieve value, namely, best outcome at the most affordable price. Certainly, as readers of American Health & Drug Benefits know, we have talked about value in the past, especially as it relates to the Affordable Care Act (ACA) and the future shape of our healthcare system. As we get further down the road of reform, I was intrigued by a report from PricewaterhouseCoopers (PwC) titled, “Top Health Industry Issues of 2013—Picking up the Pace on Health Reform.”1

I am enamored of these periodic reports from the (remaining) big consulting companies. Typically, an army of researchers fan out across the country, interview hundreds of leading experts, and then they conduct more than 1000 telephone interviews with everyday consumers. That’s exactly the footwork that went into this most recent report.

Although space precludes my review of all 10 sections of the report, I was particularly interested in the section titled, “Meeting the New Expectations of Pharma Value.” Let me summarize some of the key take-home messages from this report.

As a longtime member of our institution’s Pharmacy & Therapeutics Committee and Chair of the Medication Quality and Safety Subcommittee, the report “hit me between the eyes” when it noted that physicians may no longer be the key drivers of formulary design and construction. “If purchasers don’t see evidence that a new drug fills an unmet need or outperforms similar products at a more reasonable cost, the drug won’t receive preferred formulary placement and may not even be covered by insurance.”1

Regrettably, I would have to agree with this observation. Since the pharmaceutical industry has largely shielded customers from the true price of medication and has shifted these costs to others, the pharmaceutical companies will be under much greater pressure under the ACA to prove the value of their products.

We are also seeing the development of so-called outcomes-based contracts, where the value of drugs and devices must be demonstrated before reimbursement is forthcoming. The report outlines 2 examples—one is EMD Serono, a division of Merck that forged a separate contract with CIGNA, and the other is the pharmacy benefits manager Prime Therapeutics—to provide an adherence-based discount on interferon beta-1a (Rebif), an expensive therapy for multiple sclerosis. Published reports cited in a PwC document note that CIGNA has shown that interferon beta-1a helped reduce hospitalizations by 43% in the first year of its agreement with EMD Serono. If we accept these published findings at face value, then it does appear that an outcomes-based contract with a special “adherence rider” may truly be the wave of the future.

Although adherence-based contracts are intriguing, I prefer the “partnership model.” I am particularly familiar with one, which was also cited in the PwC report. This partnership is between Pfizer and Humana, who have forged a 5-year agreement focusing on improving the cost, quality, and access to appropriate care.1 According to experts at Humana, such as Kim Caldwell, Humana intends to do a deep analytic dive on certain products from Pfizer to help purchasers understand the cost-benefit and cost-effectiveness of these drugs. The goal, of course, is to improve the treatment and management of chronic conditions, including many treatments in the Pfizer portfolio for cardiovascular disease and Alzheimer’s disease. Are Pfizer and Humana “usual bedfellows”? In my view, not really. They have an aligned economic incentive to encourage patients to take their medications, do well, and stay out of the hospital. I cannot think of other stakeholders at this moment whose economic incentives are more clearly aligned than a big pharmaceutical company and a national insurer bent on keeping people out of the hospital.

The PwC report also noted 2 overseas examples of “pharma value”; examples that I am sure are familiar to our readers, including how the United Kingdom’s NICE (National Institute for Health and Care Excellence) makes decisions based, at least in part, on a value proposition for every drug. And the same applies to Germany, where “if a company cannot demonstrate that a new therapy provides clinical benefit over established treatments, reimbursement starts at the same level as existing clinically equivalent medicines.”1

A very intriguing survey component of the PwC report was the question they posed to their policy experts, which focused on “how much do you agree with the following: our organization would benefit from a data sharing partnership with biopharmaceutical companies.”1 Overall, 43% of the policy experts interviewed agreed with this provocative statement and only 17% disagreed. The other experts were simply either not sure or had no strong views. If 43% of the surveyed policy experts believe that a partnership is a good idea, that gives me some hope, and I hope it gives our readers hope too, for a more collaborative approach to establishing “pharma value.”

This section of the report ended with 3 take-home messages. First, the pharmaceutical industry must provide robust and reliable data to purchasers on the cost-effectiveness of care, and mock formulary audits are needed, something I have been a proponent of for nearly 2 decades.

Second, the pharmaceutical industry and its partners “should monitor costs and outcomes as they aggregate and interpret data. Underused data from electronic health records, patient registries, medical devices, nutrition studies, and social media can often supplement claims and prescription information.”1 Yes, there is no question that there are other data sources that must be utilized. More on this will come in future editorials.

Finally, “drug and device makers can prove value by including a comparative effectiveness component in clinical trials and pairing products with diagnostics targeting patients who can benefit the most.”1 Well, we all support a broader platform for comparative effectiveness research, and it is heartening to see it being highlighted in this PwC report.

Establishing “pharma value” in new levels and with greater clarity will be a challenge for everyone in the healthcare industry. In my view, collaborative agreements and better teamwork represent the “road to redemption.” I am excited to see reports such as this one from a major national consulting company, because as more people join the “value” conversation, I believe we will be able to make more progress together. As always, I am interested in your views, and you can reach me at This email address is being protected from spambots. You need JavaScript enabled to view it..

Reference
  1. PwC Health Research Institute. Top health industry issues of 2013: picking up the pace on health reform. January 2013. www.pwc.com/us/en/health-industries/top-health-industry-issues/download-publication.jhtml. Accessed February 28, 2013.
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Last modified: October 24, 2013
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