Many biopharma companies are under growing pressure from policy makers on both sides of the aisle – as well as from state and federal regulators and lawmakers – to demonstrate greater value from drug spend. While many can agree the health care system could benefit from reduced drug spending, there are many different ways to address this challenge.
Drug pricing was a topic we explored during a “town hall debate” at this year’s annual BIO International Convention. Biopharma companies are facing more scrutiny than ever from lawmakers and other stakeholders to increase transparency related to how they price individual products and demonstrate the value of therapeutic interventions. During my presentation, I highlighted six categories of ideas that policy makers are eying to relieve some of the pressure from growing drug spending (see the infographic to the right).
I also discussed the significant pressure on biopharma companies to develop products that are clinically and economically differentiated against the standard of care, a requirement for therapeutics to be adopted into clinical practice.
Some proposed policies, such as allowing Medicare to negotiate drug prices under Part D, require an act of Congress. Other ideas – like increasing transparency, removing barriers to value-based contracts, and increasing generic competition – could be implemented by regulatory agencies.
Most of these ideas have both advocates as well as critics who are concerned about unintended consequences. Many critics say that some proposals might limit patient access to new treatments, put public safety at risk, or slow down the pipeline if investors were concerned about lower returns on research and development (R&D). Conversely, several advocates of some proposals are confident that these and other evolving policies could strike a balance between patient access, safety, and spend.
Regardless of what happens on Capitol Hill or within federal agencies, the health care industry’s transition toward value-based competition is likely to exert pressure on drug pricing. As the policy debate continues, biopharma companies can – and should – prepare for the industry’s accelerating movement toward value.
Transition from volume to value creates value-based competition
Value-based health care creates financial incentives that tie physician payments to the value of the services they provide, instead of the volume. This changes the way these stakeholders evaluate new drug treatments and adopt them into clinical practice. Physicians want to understand how treatments will improve care delivery and patient outcomes. And they typically want to see these improvements in a way that is tangible and measurable. Many health plans are also interested in seeing value demonstrated in this way. This disruption to the traditional fee-for-service reimbursement system has often led to value-based competition for therapeutics.
Biopharma companies could benefit from addressing the evolving needs of stakeholders to demonstrate value. How can they change their business models to win in this new environment? Consider these strategies:
- Understand care delivery models: Biopharma companies could benefit from having a deeper understanding of care delivery models. It is no longer enough to develop an innovative product that achieves results. The conversation has shifted from just the cost of a product to the value that is created, or costs that might be avoided in the future. Product value propositions within health systems and within specific patient populations should be developed with this perspective.
- Identify appropriate and meaningful metrics to measure outcomes: Quality measurement is an important component for all stakeholders participating in value-based care. Biopharma companies can collaborate with patient advocacy groups, providers, and health plans to learn which quality measures they should focus on, and then work to demonstrate improvements against them. This analysis should include an end-to-end view of data based on the performance of the product in a patient population.
- Understand the value of portfolio offerings to support the patient journey: Biopharma companies should continue to evolve their offerings and services that help health plans and providers achieve population management goals, including the challenging areas of medication adherence, helping patients with self-care and management, and getting targeted interventions to the right patient populations.
- Capture real-world evidence: Many biopharma companies have access to a tremendous amount of clinical data about the efficacy of their products, and they understand how it performs for patient populations, as well as for the patients themselves. Companies should continue to evolve this understanding by capturing and analyzing patient-generated data and real-world data. Biopharma companies should consider partnering with health plans and providers to access this data, and to run additional analyses and gain more specificity about how products are working in the real world. This information could be used to develop product value propositions, but also to inform portfolio strategy and R&D.
In order to develop innovative new therapies that extend and improve lives, biopharma companies will likely need to continue making substantial investments. They also will need to demonstrate the value of that investment to patients, payers, providers, and investors. Regardless of where policy falls, and which levers policy makers are able to pull, pricing pressure on the industry is not likely to diminish any time soon.