From Alan Steele, VP, Head of Art, Managed Markets, Palio

Currently, the U.S. leads the world in the amount it pays for healthcare – a whopping 17.3 percent of the gross domestic product in 2009 – according to the Centers for Medicare & Medicaid Services. As A. Mark Fendrick of the University of Michigan and his colleagues wrote in the December 2009 issue of The American Journal of Managed Care: “In short, we pay more than any other country for healthcare, but get less.”  On top of that, poor adherence increases annual healthcare costs in the U.S. by $290 billion according to the New England Healthcare Institute (NEHI).

Closed systems. In spirit, there is no healthcare “system” in America; there are various disconnected players guarding their turf. Stakeholders such as empowered patients, enlightened policy makers, treatment-deciding providers, cost-conscious payers, and profit-driven manufacturers measure value differently. For instance, a manufacturer sees value as the efficacy of a drug versus placebo based on select clinical trials while a payer thinks of a drug’s use as a loss (cost) to its members (patients). Our country needs consensus among all stakeholders, an understanding that revolves around a universal definition of better health: improved outcomes using more economical treatments and advanced tools for diagnosis and patient adherence.

Open system. Managed care is defined as the delivery of the best care for a specific patient at a particular time. This is reached by transparency. Transparency is a broad-scale initiative enabling consumers to compare the quality and price of health care services, so they can make informed choices about doctors and hospitals. In cooperation with America’s largest employers and the medical profession, this initiative is laying the foundation for pooling and analyzing information about procedures, hospitals and physician services. When this data foundation is in place, regional health information alliances will turn the raw data into useful information for consumers.

Government initiatives. The U.S. government, under the American Recovery and Reinvestment Act of 2009 (ARRA), has allocated over one billion dollars to several agencies including the National Institutes of Health (NIH), the U.S. Department of Health & Human Services (HHS), and the Agency for Healthcare Research and Quality (AHRQ) to increase studies which compare drugs and their effectiveness in certain populations. This is called Comparative Effectiveness Research (CER). One of CER’s goals is to cease the “adopt everything for everyone model” and to initiate the “adopt when appropriate” model. Three current inefficiencies in healthcare are overuse, misuse, or underuse of treatments or services. Evidence-based research obtained in real world settings will be used by the FDA to force manufacturers to demonstrate the value of new drugs. Pre-selecting patients and incorporating bio-markers, laboratory measurements indicating a disease or process occurring in the body, will bring us closer to “personalized medicine.” Electronic medical records filled with valuable patient data could also help improve the selection of patients who respond to therapies.

Extracts: “The New Value Equation”, Mike May, Scientific American Pathways. “The Social Life of Health Information,” Pew Internet and American Life project, June 2009. “Value-Driven Health Care,” http://archive.hhs.gov/valuedriven/index.html

Palio is a full-spectrum global pharmaceutical and consumer advertising, marketing, and communications agency that excels in brand creation and specializes in brand strategy, product launches, global marketing, and digital and integrated media.

From John Guarino, SVP, Managed Markets & Payer Strategy, Palio

More and more in the healthcare space, the success of a brand depends on having an understanding of managed markets.

Nearly all business in our industry is managed. In some way, third party payers, be they commercial or government organizations, are affecting most use of drugs. Manufacturers can’t afford to be unsuccessful in this critical part of our business. How often have you seen excellent marketing executed into the physician/nursing/pharmacy space, only to have a reimbursement hic-up derail that prescribing process and set back your efforts in that practice?

The managed markets space is critical to pharma/biotech success for two reasons: 1) it represents the goal line of patients actually receiving their prescriptions and them being paid for, and 2) payers are becoming institutional decision makers that drive physician use through the payer preference.

Companies tend to address the need of managed markets marketing by either making their efforts part of the overall brand strategy driven by the business unit responsible for sales of a specific product, or by carving out managed markets as its own entity, usually within the corporate accounts space, focusing on the entire portfolio. Each approach has advantages and disadvantages. What is critical to success is understanding what is different about marketing to these customers.

Conversations in the payer space look different than they do for health care providers. They revolve around not only clinical differentiation but also the value associated with those outcomes. FDAMA 114 (the section of the regulation guiding pharma marketing to “formulary decision makers”) requires a unique understanding of what types of data paint the value picture best. Companies will need to address what “directly related to” the drugs indicated uses are as well as what “competent and reliable” means for claims data analysis. Internal regulatory and compliance organizations struggle with these definitions, and a clear understanding is important in helping manufacturers find their voice.

The payer buying process is different than that of physicians. Coverage reviews and decisions can vary by customer and they may be triggered by new products, generic entrants, competitive proposals or just a desire to ensure appropriate use of the drugs they pay for. They generally tend to make decisions by committee, with many stakeholders chiming in. Their frame of reference is to allow enough alternatives to satisfy need, but to avoid excess cost. They have to think in terms of patient populations where physicians are making decisions on specific patient cases. Good marketing in this area ensures holistic approaches to messaging –– not only to pharmacy and medical staff within the plan, but also to financial decision makers, quality directors, physician opinion leaders, hospital system partners of the payers and even patients.

Patient payer benefit design often reflects increased patient cost-sharing, premiums, and OOP costs. This move will shift care more towards consumerism. Large institutional decision makers will have to consider how shifting cost will impact members, and manufacturers will have decisions to make about where best to place their advocacy dollars, and how to advocate for patients in a compliant and legal way.

The Patient Protection and Affordable Care Act (PPACA) or healthcare reform, will have a profound impact on the payers and how they run their business. Fixed medical loss ratios, the excise tax on insurers, and benefit design restrictions are just a few areas that will challenge the payers’ profitability, and they, in turn, will challenge manufacturers to make value a linchpin issue in their marketing messages. Comparative Effectiveness Research is a health care reform initiative that manufactures need to help drive, or they will suffer whatever other stakeholders produce. You can think of this as National Committee for Quality Assurance (NCQA) initiatives combining with health economics research.

Things like market access, reimbursement, effective pull through, and contracting profitability are all areas in which expertise is necessary. If your organization doesn’t have strength here you need to develop it… and fast! The market is moving towards these customers becoming more important, not less. An understanding of the differences and similarities between traditional marketing and payer marketing will help deliver the strategies and tactics that ensure access and reimbursement success so critical to the success of the brands you’re managing.