All Over the Map

How can pharma meet the needs of payers in such a fragmented landscape?



Pressures to control costs while maintaining quality have created a fragmented payer landscape in the US that is impacting market access within the oncology space. In efforts to find a solution to this turbulence, various payment and reimbursement models are being trialled, leaving a trail of confusion as to what payers want – and need – from pharma.

The key players within the US oncology payer landscape are federal payers, such as Medicare and state-administered Medicaid, and the five private payer giants – United Healthcare, Aetna, Cigna, Humana, and the regional Blue Cross and Blue Shield plans that coordinate nationally.

Exerting great influence on these payers is the Center for Medicare & Medicaid Innovation (CMMI), which supports the development and testing of new payment and service delivery models. For example, it has invited payers to trial the Oncology Care Model (OCM), an episode-based payment system designed to promote quality patient care. Some payers, such as Medicare, have accepted, but the American Society for Clinical Oncology (ASCO) is promoting more substantial reforms that include higher, more flexible payments, as well as accountability for the delivery of high quality care. The big federal and private payers, who already have a variety of needs, are being fragmented further by the attempts of organizations such as CMMI and ASCO to contain costs without lowering quality. 

What do payers need from pharma?

While some payer needs vary, Soeren Mattke, Senior Scientist and Managing Director at RAND Health Advisory Services, doesn’t believe there is a huge difference. “I don’t see that payers fundamentally have different decision processes going on. They pretty much all look for the same criteria, such as safety and efficacy, in relation to price,” he says. While most experts agree that payers all want the same thing – value – this value may not be the same for payers, pharma and patients.

James Bianco, President and CEO of CTI Biopharma Inc., gives an example of two cancer drugs, where one costs $10,000 and the other $100,000 but the second drug improves progress-free survival. “The more expensive one may require special justification for some payers. For patients, however, the improved survival may be enough for the high cost.” The weight given to progress-free survival could also differ between payers, so pharma companies need to understand stakeholder perspectives before presenting the value story to different payers. This is even more important due to the fact that the criteria for value keep changing, including the outcomes to measure, making the development of outcomes-based agreements a complex undertaking. Taking a more pragmatic, bottom-line view, Hinkel believes there is more to payer needs than value. “Talking about value sounds really good, but from a payer perspective, this is still really more about the impact on their budget and what the price of their premium will be,” she says. 

Mapping the landscape

In addition to the interpretation of value, payers also vary in terms of their readiness to collaborate with other stakeholders on innovative pricing and reimbursement schemes. “There are often payers who recognize how things are changing, that some fresh thinking is needed to tackle these problems, and who have openly said that they are looking to collaborate with many factions,” says an anonymous director of global payer insights and access at a large US-based pharma company. “However, there’s a lot of variation between those who just want the status quo and those who recognize that change is needed. Even among those who recognize that change is needed, there are those who have the ability to change and those who don’t.”

The fragmented payer landscape also means that customers tend to lack integration, which is a hurdle to establishing long-term payment contracts. “People are talking about outcomes based and risk-sharing contracting, but we have such a fragmented and fluid system in the US that no payer wants to use an outcome that will be measurable in two or three years; by that time the patient could belong to a different payer,” explains Hinkel. “People can change insurers every year, so the idea of these long-term contracts based on outcomes that aren’t so immediate become a real challenge to implement.” 

It is important to note that the challenges in mapping the complex payer landscape vary between payers. “People have run into some friction when it comes to smaller payers,” shares Hinkel. “Typically, small payers try to follow the lead of the larger payers.” In such cases, she believes there is the opportunity to point out to smaller payers that they are deviating from the norm.

Developing solutions amidst payer variability

So, how can pharma meet the diverse needs of US payers when it comes to oncology drugs? By recognizing the common threads in the decision making processes of payers, pharma companies can tie this into their product value propositions. “The one thing that flows into all payer types is the National Comprehensive Cancer Network’s clinical practice guidelines in oncology,” says Hinkel. “A lot of the payer decision-making is based on these and so we need to influence at that level by having a favorable placement within the guidelines.”

We now have to justify and provide better evidence and communicate much more eloquently why things are priced the way they are, what value they deliver, and why we need to deliver that.

Bianco is a proponent of standardized health technology assessment body. “Of all the systems I have come across in my professional interactions, the UK is the most evidenced-based and objective, It is a model worth considering in the US, although modified for some of the unique differences in American healthcare delivery,” he says.

The nuances between payers in terms of quality targets for reimbursement require market access teams to work more closely with payers than they have in the past. “The one thing I have spent a lot of time involved in is understanding the communication aspect of the pricing narrative,” says the anonymous director of global payer insights. “In oncology, it used to be that we didn’t need to work much with Corporate Affairs and Communication, but now there is a story. We now have to justify and provide better evidence and communicate much more eloquently why things are priced the way they are, what value they deliver, and why we need to deliver that.”

Payers should be classified into those who are more business oriented and the more patient-oriented, says Hinkel. “Understanding the motivations of the payer company and the individual who makes the decisions – whether driven more by business, scientific data or patient stories – can make you a more effective negotiating partner,” she explains.

Changes to insurance plans from President Trump’s White House could mean that public and private payers will need to focus their resources on establishing how their insurance products will look in two or three years’ time. So it may not be in their interest to develop new payment models with pharmaceutical companies. Market access teams need to establish even deeper relationships with payers at the State and national levels sooner rather than later.

New approaches

Below are four examples that oncology drug pricing in the US is on its way towards more elaborate and long-term value-based models. Such models involve a care provider or drug manufacturer being rewarded when they meet a set of criteria that promote, rather than measure, health outcomes.

Iressa risk-sharing agreement
AZ entered an agreement with Express Script to reimburse the cost of lung cancer drug Iressa (gefitinib) if individual patients fail to respond to the drug and need to discontinue treatment by the third prescription fill1.

Indication-based payment
One drug may be used for several cancer indications, which means that the clinical utility and level of competition vary. From the start of 2017, CVS has priced and reimbursed medicines in certain therapeutic areas, including oncology, based on effectiveness.2 Essentially, CVS is aligning discounts with indications and paying more for those medications that work better.3 4,

Herceptin biomarker-linked reimbursement
Genentech has adopted a conditional reimbursement scheme where reimbursement is contingent on a HER2-positive biomarker test. The drug is administered only to patients who have a high likelihood of responding to the treatment and therefore present a better chance for high drug effectiveness5.

The oncology care model

The Center for Medicare & Medicaid Innovation has developed the Oncology Care Model, which is designed to incentivize practitioners to promote care coordination and quality in chemotherapy treatments. Improved coordination is aimed at lowering overall Medicare costs for cancer therapies. This model also includes the participation of some commercial payers, indicating that the budget and quality considerations of payers for cancer medicines can potentially be reshaped.6 This model is not a radical departure from the current fee-for-service payments; when the participating care providers meet certain criteria, they are eligible for a monthly bonus. After six months, the Innovation Center evaluates the outcomes for each patient and decides if the care provider deserves an increase or a decrease in reimbursement.


Extracted from Trends in Oncology, Market Access & Pricing Magazine. Click here to download.

Check out eyeforpharma's Oncology USA summit (20-21 June) here


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