developing robust payer-manufacturer relationships: explore the

©2015 Roger Green + Associates, Inc.

Developing Robust Payer-Manufacturer Relationships

Explore the Managed Care Perspective

March 23, 2015


Four thoughts you should take from the next 45 minutes

1. Contracting is about adequate commercial performance and good pricing; partnership is about shared vision

2. Plans are beginning to “touch the third rail” of oncology, although management in this category lags other high-priced disease classes

3. In the eyes of the Payer community, no BioPharma today has distinguished itself consistently as a willing partner

4. In the short-run, capitated oncology practices will emerge as negotiators for lower drug prices and product preferences

2

This area is evolving rapidly


Get to know your presenters

3

Our journey to the podium today


Strong relationships require success on three dimensions

4

Account Management

Economic Value

Products and Clinical Data

Payers are…

...People

…Purchasers

...Professionals

Manufacturers can engage payers as People, Purchasers, and/or Healthcare Professionals


We asked payers to tell us how seven manufacturers perform on each relationship dimension

5

...People

…Purchasers

...Professionals

• Pursues pricing and placement commensurate with product value

• Pursues innovative contracting strategies• Produces useful HEOR tools and reliable HEOR data• Contract terms offer greatest net cost savings to plan• Manufacturer looks for opportunities to align with you

around shared goals

• Account manager listens to your organizational needs

• Account manager demonstrates professionalism

• Account manager takes ownership for developing the relationship

• Account manager has pleasant personality

• Account representative understands your business

• Produces and develops products that meet unmet needs

• Designs and executes clinical trials with meaningful endpoints and comparators

• Displays commitment to the well-being of patients

• Account staff is medically knowledgeable

Many components were tested within each dynamic

Answers reflected an extremely high levels of co-linearity, but there were clear differences in what drives

contracting vs. partnership


Contracting success correlates to one key variable from each dynamic

6

Current Contracting Relationship

...People

Account representative understands your business; speaks strategically about business opportunities with you ...Professionals

Designs and executes clinical trials with meaningful endpoints and comparators

…Purchasers

Contract terms offer greatest net cost savings to plan

Successful contracting relies on doing everything well enough


Partnership correlates solely to elements of commercial strategy

7

…Purchasers

Future Partnership

• Pursues pricing and placement commensurate with product value• Pursues innovative contracting strategies• Produces useful HEOR tools and reliable HEOR data• Manufacturer looks for opportunities to align with you around shared goals

Better relationships require common vision


Long-term, stable relationships involve two dimensions

8

Execution and vision each play pivotal roles

ExecutionNot good enough

Good enough

Superior

Vision

Non-aligned

Aligned

Strength of relationship

Du

rab

ilit

y o

f R

ela

tio

nsh

ip


Plans are converging on a common strategy to manage specialty drugs

31%

12% 11%17%

49%*

30%*

19%11%

6%*

0%

25%

50%

75%

100%

Pharmacy BenefitTechniques

Wean Physicians offDrug Revenues

Differential ASPReimbursement

Treatment PathwaysBonuses

Drug Capitation inOncology

% o

f p

aye

rs

Plans With Active Programs, 2013 vs. 2015

2013 (n=52) 2015 (n=47)

9

Pharmacy benefit-style programs continue to be the most-used options

Q2. We want to understand what strategies your plan is using (and intends to use in the future) to control the costs of specialty pharmaceuticals and other high-cost medications. For each potential strategy, please select the category that best fits your plan.

* P < 0.05

“Oncologists know this is coming and our goal has been to soften the blow so that they are better engaged and aware that they’ll be taking on [financial] risk.”

“A capitation cost model is the final step, we need to have robust EMR systems in place to make data-informed decisions for this.”


Pharmacy benefit techniques are seen as more effective in general

3

2

2

4

5

3

5

2

9

16

0 5 10 15 20 25

Drug Capitation in Oncology

Wean Physicians off Reliance on DrugRevenue

Performance Bonuses on TreatmentPathways

Differential ASP Reimbursement

Pharmacy Benefit Techniques

Success of Active Programs, 2015n=47

Extremely

Somewhat

10

Differential ASP reimbursement scores 100% effectiveness rate

n=13

n=23

n=8

n=11

n=14

91%

100%

71%

64%

75%

“The [lowest ranked options] are the toughest work, and probably take a little bit longer… The other options, while important, are basically stop-gap measures in the interim, while broad, fundamental reform is taking place.”

“When you work in a business with supermarket-size margins, you cannot afford to think about the long-term.”

% who find their programs successful

©2015 Roger Green + Associates, Inc. 11

“Competition brings manufacturers to the table… Three or more (similar agents) starts to open it up, with four the dam really

opens up and manufacturers will have to buy share.”

“We need to pick and choose our battles and there’s not enough to play here yet… “There’s no price difference, why would we pick this

fight?”

Today, PD-1 management is not brand specific

Without more information or competition, the “fight is not worth it” on brand preference

28%

51%

9% 11% 13%

0%

17%

53%

11% 11%15%

2%

0%

25%

50%

75%

Not yetreviewed

PA tolabel/indication

Specialist-only Step-throughexisting agents

No barriers Not covered

% o

f p

aye

rs

Coverage for PD-1 Inhibitorsn=47

Opdivo

Keytruda

87%

9%

2% 2%Prefer neither

Anticipate preferringone agent in future

Prefer Opdivo

Prefer Keytruda


Beliefs change with additional PD-1s on the market

12

Payers split into two segments: maintaining equal coverage versus contracting

58%*27%

15%

Please assume there are now four PD-1 inhibitors available and marketed. They are all listed at similar prices. What is the likelihood that plans will:

Cover all four PD-1 inhibitors equally

Actively seek to contracts, with the best contract receiving preferred coverage for their agent

Cover each agent tightly to label, but implement restrictions to provide preferred coverage for the agent with the best contract

16%

35%

49%*

SEGMENT 1 SEGMENT 2

n=3 n=6

“Once you get 3, 4, 5 products, then we will treat

them as a class.”

“There was [one company] interested in contracting for

their product, which we considered but then declined due to not enough volume to

justify rocking the boat.”


Approaches to biosimilars are varied, with most payers leaning towards equal coverage

13

Payers do not exhibit the same patterns as with PD-1s

42%

33%

25%

A biosimilar of rituximab has been FDA-approved for similar indications and will cost ~20% less. What is the likelihood that plans will:

Immediately cover the biosimilar and actively encourage its use

n=9

30%

32%

38%

Cover all four PD-1 inhibitors equally

Actively seek to contracts, with the best contract receiving preferred coverage for their agent

Cover each agent tightly to label, but implement restrictions to provide preferred coverage for the agent with the best contract

n=9

Cover the branded agent only while waiting for more information on the biosimilar

Four PD-1 inhibitors listed at similar prices:

Immediately cover the biosimilar without taking a position on which one to use


Payers: No manufacturers exhibit sensitivity to our economic needs

14

“Sensitivity…[is] directly proportional to competition in the market”

“Sensitivity to economic needs is not exactly a hallmark in the industry.”

0%

100%

Which manufacturer(s) exhibit sensitivity to your economic needs?

n=9

Company A

Company B

Company C

Company D

None

“We have some contracting for some of the supportive care categories but very little for infused high cost agents. Sensitivity to our needs tends to be directly proportional to competition in the market and the fear from manufacturers that they will be disadvantaged.”


Payers: Manufacturers will listen and act on our business needs

15

Five of nine could name at least one company; answers varied

“So far we contracted only with Companies B and D in this arena not only due to these companies listening to our business needs but also due to the market realities in that category.”

“To be fair, there have been contracting openings given by Companies B and C, following fairly lengthy discussions, but we could not come to an agreement on details.”

1

3

2

1

4

0

1

2

3

4

5

Company A Company B Company C Company D None

Tit

le

Which manufacturer(s) show willingness to listen to business needs and act on discussions?

n=9


Payers: Potential for alignment vis-à-vis therapies, biomarkers, risk sharing, HEOR metrics

16

QALYs and genomics pave the way to manufacturers assuming risk

“I will give credit to [certain manufacturers] and some smaller biotechs who are pursuing innovative breakthrough therapies. To me, the pursuit of unique mechanisms of action in previously unsuccessfully treated cancers is a defensible business model.”

Which manufacturer(s) show the strongest commitment to developing genuinely good medicine?

Which manufacturer(s) show alignment with payers in a vision for oncology?

“The best way I could foresee [to gain alignment] would be a willingness to rebate the cost of a drug that does not work for a given patient. In the interim, finding biomarkers or genomic tests to match the right patient would be the best interim strategy.”

“[The ones who have] did so by using biomarkers and making improvements on existing products or by developing a few breakthrough products.”

“[Alignment would come from a] commitment to reference pricing as done in other countries. Tie pricing to outcome measures (QALY-type metrics).”


Plans anticipate dramatic changes in oncology guidelines

17

Cost is projected to become a major factor over the next 3 years

28%

43%

26%

43%

45%

36%

34%

45%

30%

51%

36%

21%

43%

26%

28%

38%

45%

34%

51%

34%

0% 50% 100%

Mental Health [K]

Hypertension [J]

Nervous System Diseases [H]

Heart Disease [G]

Dyslipidemia [F]

Asthma/COPD [E]

Joint Disorders [D]

Diabetes [C]

Oncology [B]

Hepatitis C Virus (HCV) [A]

Guidelines That Include Costs – Today and FutureN=47

Q5. For each of the following disease states, please indicate the status of guidelines that incorporate therapy costs

Disease State Rank

Today 3 Yrs from Now

1 1

8 2

2 3

7 4

6 5

3 6

2 7

10 8

5 9

9 10

85%GHJK

81%JK

79%jk

79%jk

74%

73%

69%

69%

64%

64%


Factors that influence plans’ guidelines reflect disease categories

18

National guidelines are of extra importance in oncology

3% 4% 4%

45% 41%54%

20%34%a

26%

32%cd20% 16%

0%

25%

50%

75%

100%

Oncology[A]

HCV[B]

Mental Health[D]

% Im

po

rta

nce

Stated Importance in Setting Guidelines: 2015n=47

National guidelines(e.g., NCCN for Oncology)

Therapy costs

Clinical (Efficacy/Safety)

Manufacturer relationship

Q9. Now we would like you to assess the relative importance of different factors in determining your plan’s approach to setting guidelines for different disease states. For each disease state, please allocate 100 points so that each column/disease state sums to 100

Capital letters indicate statistical significance at 95% CILowercase letters indicate significance and 90% CI

“NCCN is the easy, go-to but they don’t define sequence. We’re trying to create oncology medical homes and using real-world data to drive decision pathways.”


Payers anticipate that cost-centered approaches will have significant effect on overall healthcare spending

19

Provider efforts to control costs directly will increase

Q4. Please estimate what kind of an impact each of the following efforts have or will have on overall health spending in the United States. In considering your response, please weight how likely each outcome is to occur as well as how much impact it might have when it does occur.

26%

45%

37%

55%

41%

68%

54%

62%

7%

6%

7%

9%

15%

13%

15%

28%

0% 20% 40% 60% 80% 100%

2014

2015

2014

2015

2014

2015

2014

2015

% of payers

Positive Very Positive

Specific Treatment Guidelines Written with Therapy Costs in Mind

Scorecards to evaluate drugs based on cost/value alongside traditional

efficacy/safety measures

Creation and Promotion of “Wasteful Procedures” Lists

QALY-based “high” or “low” value ratings in practice guidelines and

performance standards

Impact of Cost Control Approaches on US Health Spendingn=47

90%*

69%

81%*

56%

64%*

44%

51%*

33%

* statistically greater than 2014, 95% CI


The “two-tiered” cost management of the future

HCV Cost Managers Oncology Cost Managers

20

Pharmacy and medical cost managers will address aligned incentives


Four thoughts you should take from the next 45 minutes

1. Contracting is about adequate commercial performance and good pricing; partnership is about shared vision

2. Plans are beginning to “touch the third rail” of oncology, although management in this category lags other high-priced disease classes

3. In the eyes of the Payer community, no BioPharma today has distinguished itself consistently as a willing partner

4. In the short-run, capitated oncology practices will emerge as negotiators for lower drug prices and product preferences

21

This area is evolving rapidly


Thank you.

developing robust payer-manufacturer relationships: explore the

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