Drug companies should meet payers' expectations of value, report finds

NEW YORK — More than 80% of health plans would require a drug manufacturer to demonstrate a clear clinical benefit compared with current branded and generic treatments in order for its drug to be placed in the plan's formulary, according to a new survey.

PwC announced Thursday the release of a survey of 100 health insurers and pharmacy benefit managers conducted by its Health Research Institute, finding pharmaceutical companies that are the first to meet the healthcare industry's new expectations of value could have an advantage in the competition for market share and brand differentiation.

"Pharmaceutical and life sciences companies are now collaborating with payers and providers to achieve better patient outcomes and bend the healthcare cost curve," PwC U.S. pharmaceutical and life sciences advisory co-leader Douglas Strang said. "Those that can effectively demonstrate value in nontraditional ways have an opportunity to gain market share in a very competitive market for prescription drugs."

The report also found that 44% of health insurers aren't confident that economic data provided by the drug industry when making coverage and formulary decisions, while 5% described themselves as very confident. Meanwhile, 75% of health insurers characterized their relationships with drug companies as "transactional" rather than "collaborative," with 60% expecting no change in their relationship with them. As a result, 52% of insurers rely on independent data to evaluate a drug's effectiveness, paying particular attention to factors like the availability of generics, physicians' opinions and regulatory guidance.

The report also identified five "major forces" that are changing drug companies' revenue models, including:

• The move toward biologics for smaller, more targeted patient populations;


• The move of private and public health plans away from unit-based payments that reward drug companies for volume and instead are based on outcomes and a drug's effect on patient health;


• Hospitals', health plans' and physicians' demands for more and better data to determine "real-world" clinical and cost effectiveness beyond product launches;


• A realization among health plans and employers that they lose money from patients' poor drug adherence; and


• Patients becoming more involved in decisions about therapeutics thanks to technology and increased transparency of health information.

"As the U.S. health system undergoes significant change regardless of legislative or legal actions, a new definition of value is emerging, one that places patients and their desired outcomes at the center of the universe," PwC pharmaceutical and life sciences advisory services group partner Karla Anderson said. "Leading pharmaceutical companies are increasing their alignment with the rest of the 'four Ps' in health care — providers, payers and patients. They are creating new expectations across their organizations to re-orient their definition of value for each of these groups."

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