12:00 AM
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Aug 04, 2014
 |  BioCentury  |  Strategy

Guest Commentary: Biopharma's echo chamber

Guest Commentary: Why biopharmas should give payers true comparative value data

Of the many reasons for business failure, not listening to customers is the king. And too many biopharmas today are walking around wearing earplugs.

In the U.S., managers are dealing with a set of increasingly powerful customers, thanks in part to the 2003 Medicare Modernization Act and the 2009 Affordable Care Act - customers with a very different set of values than biopharma is used to.

And they won't allow biopharma companies simply to assert value as they have in the past. As has happened in every other industry, customers will learn, or hire intermediaries, to define and then impose standards of value. It's certainly happening elsewhere in healthcare: The Leapfrog Group, Castlight Health Inc. and Change Healthcare Corp. are all helping to define value for money in medicine for employers and consumers. Even CMS sponsors a website that compares hospitals and physicians on the basis of quality.

In short, either pharma helps its customers create the standards with which the value of drugs will be measured relative to their competitors - or they'll have it done for them. And you can bet customers will try the easiest standard first, which is price.

Different days

The belief that drug executives can themselves define their drugs' value, in part by "educating" the customer, is bred deep in the bone. Drug companies used to have essentially one commercial target - the physician - and communications were limited by the label, which was itself the product of a development program created by the company's clinical and regulatory teams (obviously with important input from FDA).

The marketing challenge was to create advantage based on the label, as in the successful serial one-upmanship that saw the progressively more potent simvastatin, atorvastatin and rosuvastatin take advantage of the label-extrapolated messaging "greater average LDL reduction equals better drug."

This isn't to say drug companies didn't do plenty of work trying to figure out what else physicians, and to some extent consumers, wanted to hear. But fundamentally the messaging choices were pretty circumscribed. Economics was rarely part of the advertising jingle, in part because it didn't seem to matter; in part because extra-label economic claims might have been difficult to justify to FDA's marketing watchdogs.

Payers and PBMs, the stakeholders to whom economics do indeed matter, exercised relatively little influence over prescribing decisions, except to push generics. That's where PBMs made most of their money, and payers' pharmacy departments saved it. Comparing one brand to another - particularly in specialty categories - was largely irrelevant.

Today, with generic dispensing rates often above 80%, and the biggest small molecule patent expirations behind us, generics aren't driving PBM profits as they once did.

Payers, PBMs and risk-sharing physicians and institutional providers have instead turned more attention to the skyrocketing costs of specialty drugs and are beginning to define their relative value in new ways and with new energy, crafting more restrictive coverage policies and ultimately limiting...

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