HawkPartners Perspective on Payer Research

Discussion Document

Fall 2012

For more information contact:

Scott Wilkerson

Scott.wilkerson@hawkpartners.com

301 951-7046

2

The US health insurance landscape includes a mix of private commercial plans and government payers

Avg. Annual

Spending

Growth, 2005-

2010

Estimated Total Spending, US$B (2011)

2%

Relative size of

circle

represents total

covered lives

Medicare

Medicaid Private Health

Insurance

Age of

Covered

Under Age 18

Age 65+

Age 18-65

$500

Other Gov’t

Programs

4%

0%

8%

Out of Pocket/

Uninsured*

*Estimated covered lives based on number of uninsured

Sources: US Census; Congressional Budget Office; CMS.gov “National Health Expenditures 2010-2020”

US Healthcare Payer Landscape

6%

$750 $250 $1,000

3

16%

10%

8%

6%

5%

4% 3%

50%

13%

13%

10%

9%

8%

6%

5%

4%

32%

US Pharmacy Benefit Managers Share of Members (2010)

Express Scripts Inc.

CVS/Caremark Rx, Inc

Medco Health Solutions, Inc.*

ICORE Healthcare, Inc.

Health Information Designs, Inc.

NovoLogix

MedImpact Healthcare Systems

Argus Health Systems, Inc.

All Others

UnitedHealth Group

WellPoint

Kaiser Permanente

Humana Inc.

Aetna Inc. Health Care Services

All Others

Highmark Inc.

Largest US Private Health Insurers Share of Total Premiums Written (2010)

Sources: AM Mindpower Solutions; Pharmacy Benefit Manager Institute

*Acquired by Express Scripts in April 2012

Both commercial health insurance and PBM markets are consolidating, with large players increasingly dominant

4

Payer influence in the pharmaceutical marketplace has risen dramatically

14%

33%

10%

17%

26%

34% 32%

18%

14%

2%

Payers Specialists Key OpinionLeaders

Others GeneralPractitioners

2001-2006

2007-2011

Which pharmaceutical stakeholder is the most

influential?

Source: Monitor survey of 256 executives from large and mid-sized pharmaceutical companies

As health care costs continue to rise, therapeutic categories become more crowded, and products become less differentiated, payers will gain even more influence

5

As they gain influence, payers are looking for a more strategic relationship with pharma companies

More information about the

total cost of care vs.

alternative therapies

Greater flexibility and

transparency with

pricing/contracts

Providing information about

their products and pipeline

Value-added programs to assist

patients, pharmacists and clinicians

Payers

Payers are looking for pharma companies to partner with them to

achieve better, more cost-effective patient outcomes

Private Insurers

Medicare

Medicaid

Other gov’t

programs

PBMs

6

The current environment has enhanced the need for market research to understand payer needs and expectations

Potential Uses of Payer Market Research

Clinical

Development/

Pre Launch

Market Launch and

Growth LOE

• Value proposition

testing

• Customer experience

research

• New indications

assessment/testing

• Specialty pharmacy

needs research

• Market opportunity

assessment

• Clinical trial

design/endpoints

• Pricing and

formulary tier

placement

• Packaging

/distribution strategy

• LOE strategic

planning

• Generic competition

impact assessment

• LOE messaging

testing

7

If done right, payer research provides significant insights

1. Reaching the RIGHT respondents

• Recruiting influential respondents from the leading national plans requires a strong network and database of MCO contacts, as well as utilizing senior recruiters with payer experience

2. Mining maximum insights

• Maximizing insights from payer research requires using skilled moderators with deep category knowledge, an understanding of payer dynamics, and appropriate sensitivity to payer time constraints and confidentiality issues

3. Integrating the results

• Significant value can be added by integrating payer insights with data from different areas, including physician and patient research, market forecasting, customer experience tracking, and competitive intelligence

Pharmaceutical Payer Research – Key Success Factors:

1

2

3

8

HawkPartners has extensive experience with both private payers and other large scale health organizations

We have experience interviewing and surveying MCOs, PBMs, Specialty

Pharmacies, and other payer organizations

– We also have experience with other large scale health organizations, including key

stakeholders from both Integrated Delivery Networks and large medical groups

Working with our field partners, HawkPartners utilizes databases of specifically

targeted Medical and Pharmacy Directors in managed care organizations

– We recruit using phone, fax and email information, and conduct additional desk research as

needed, especially to reach larger national plans and PBMs

– Telephone recruitment is conducted by trained executive interviewers with prior experience

recruiting these types of respondents

HawkPartners and our field partners have recruited respondents from the

largest US commercial plans and PBMs

– We have also successfully recruited a wide range of payers in Europe and Asia Pacific

9

HawkPartners has successfully completed payer research in US, EU and other markets

HawkPartners has completed projects with payers on such topics as customer

experience, new product evaluation, prioritization of coverage considerations in a

therapeutic area, product messaging and value proposition development, as well as

broader therapeutic category trends

• Chronic Pain Therapy Payer Value Proposition Testing (US)

• Oncology Payer Customer Experience Assessment (US)*

• HDL Market Opportunity Assessment (US & EU)

• Market Opportunity Assessment for New Product Formulation/Delivery (US)*

• Stroke Treatment Assessment (US &EU)

• Omega-3 Market Opportunity Assessment (US)

• Therapeutic Category Long-Term Opportunity Analysis (US & EU)*

• Chronic Pain Product Comparator Research (US)

• Ophthalmology Perceptions/Trends (US & EU)

• Diabetic Macular Edema Opportunity Assessment (Emerging Markets: Latin America, Eastern

Europe, Africa/Middle East, Asia)

• Chronic Pain Product Profile Refresh (US)

• Impact of Packaging / Distribution Changes on Respiratory Medication (US)

• Bone Healing Development Strategy (US, EU, & Japan)

• Understanding Specialty Pharmacy Considerations for High-Risk Patient Groups (US)

Examples of HawkPartners Payer Research

*see case study

10

Case Study: Measuring customer experience drivers among payer account customers

HawkPartners’ Approach:

Utilized a quali-quant research

approach with pharmacy and

medical directors from HMOs,

PBMs and specialty pharmacy

to obtain a baseline read on key

customer experience metrics as

well as rich insights on CE

drivers.

Results: Client is using the

results to develop value-added

programs to assist clinicians,

pharmacists and patients in

partnership with payer

organizations.

Challenge: Client seeks to establish a baseline measure of payer account customers’

experiences to understand how well their needs are being addressed through partnerships

with pharmaceutical companies.

32%

15%22%

5% 6%

33%

37%14%

25% 20%

% Ranked #2 and 3

% Ranked #1

36%

23%

65%

52%

30%

Most Important Pharma Company Attributes% Ranked in Top Three

n=45

Fair pricing Listens to

needs of

managed

care

Resources

to assist

patients

Info for

health

economic

analysis

Resources

to assist

physicians/

pharmacists

*Note: data has been disguised to protect confidentiality

Attribute

A

Attribute

B

Attribute

C

Attribute

D

Attribute

E

11

Case Study: Scenario planning for an existing medication facing new category entrants

HawkPartners’

Approach: Conducted

qualitative research with

specialist physicians,

pharmacy directors and

other payers, exposing

them to a product profile

and eliciting their

feedback on their

perceived evolution of

the market and decision

making criteria.

Challenge: Pharmaceutical client recognizes the changing market landscape (new class

of agents that is easier to use and the availability of a generic formulation of the market

leader) and needs to proactively address to these issues.

Results: Feedback confirmed that the agent will indeed face challenges but identified

several potential strategies and tactics for the client to explore to retain share and

deepen existing relationships with pharmacy and medical directors.

Perceived Benefits Questions / Drawbacks

Pharmacy

Directors

• Reduction in costs with

lack of monitoring

• Easier to administer

• Cost

• All concerns expressed by physicians

Physicians • Ease of Admin

• Increased compliance

• No need to monitor

• How will we know if it is absorbed?

• Dosage adjustments for BMI?

• Reversibility?

• Metabolization?

• How to measure efficacy?

• Indications?

Managed

Care

Decision

Makers

• Reduction in costs with

lack of monitoring

requirements

• Easier to administer

• Cost – will most likely be Tier 3 (with the

potential for one new agent on Tier 2)

• Will not impact coverage of current

branded meds as the expectation is that

all will already be Tier 3 when new

mechanism agents are introduced

• All concerns expressed by physicians

12

Case Study: Leveraging payer feedback to assess the market opportunity for a new product

HawkPartners’ Approach:

Conducted qualitative

research with payers and

KOLs. Augmented these

findings with secondary

market research, including

case studies of analogous

agents.

Results: Findings

revealed that payers will

play a critical role in

shaping the category’s

treatment paradigm due to

the agent’s expected high

price and payers’ doubts

regarding generics and

other substitutes.

Challenge: To inform its development strategy for a new agent, a pharma client needed

insights into the category’s evolving treatment paradigm, the role of both current and

emerging treatment options, and unmet needs of payers.

Category Coverage Decision Considerations

Guidelines Cost Efficacy Safety Administration

Cost of entry

Most important

but not really

differentiating

now

Better efficacy

alone may not

drive displace-

ment of older

treatments

Does drive

coverage

• Especially if no

other advantage

Total cost matters,

includes admin-

related, e.g. office

visits for

(Procedure)

Rebates/contracts

can be vital in

status decisions

Given expense

of (Treatment

Type), Payers

want evidence

will work in

population

• Or would

prefer agents

which have

that data

Helps drive step

decisions

Associated costs

are key – so

(mechanism A)

is preferred to

(B)

Frequency is

less important

(but less often

can help with

better

compliance)

Cost of entry

Second in

importance but

not really

differentiating

today

Superior safety

alone would

not drive

preferred

status

But less safety

is a big

problem