After all these years of investment in research and development, here is the moment your company has been waiting for: launching the product and finally claiming a well-deserved reward whilst creating value for patients. There is one last obstacle standing between your great science and your customers: agreeing on a price with payers. Yes, that very step we have all been overlooking for so many years and which we now tend to over amplify in a very human balancing act. You know the value of your product, and you have known its price for a long time – you have researched it, tested it, included it in your forecast, and even communicated it to your teams, your CFO, your investors etc. But there is this one small thing – payers are not willing to pay that price. Your Launch Planning World Map is shrinking, you are preparing to withdraw from Germany, expecting a 5-year delay in France, and trying to mitigate that negative appraisal just published by NICE. At this point in time, you might think that your product will join the long list of pharma innovations that have never lived up to their promises – after all, it is not even a list, it has become more of an exhaustive registry of pharma launches.
Tell me What Payers Want, What they Really Really Want!
If you read this post (thank you by the way!), you have some interest in the topic of drug pricing, and you might think you already know what payers want – a molecule so new it can only come from Mars, priced at a generic level, and backed by a 10-year superiority trial on half a million patients. If you have these three things, please stop reading this post, it is largely irrelevant in your situation. But if you don’t, you can consider these 3 simple things to help you convince a greater number of payers to agree with your offer.
Whether you are negotiating with a Pharmacy Benefit Manager acting on behalf of a client Health Plan in the US, a member of a Clinical Commissioning Group in the UK, or a civil servant from the Joint Federal Committee in Germany, the person sitting on the other side of the table operates within the boundaries of a fixed budget. As you describe your ‘true innovation’, ‘great addition’, or ‘new option’, they might actually hear ‘need to squeeze in’, ‘I didn’t know this was even a disease’, or ‘headache’. There is a reason why pharma payers do not like surprises, it is because in their line of business there are only bad ones. Historically, some of them have been worth than others, like the introduction of SSRIs in the treatment of depression or COX-2 inhibitors in arthritic pain, to name a few. So what you really want to avoid is being the carrier of yet another bad budgetary surprise. You can do this by engaging your payer audience early, way earlier than that actual negotiation hearing. It can be through a formal process such as horizon scanning when they exist, or informally in the frame of portfolio reviews for instance. You can also do this by making sure you have turned every stone in your budget impact calculations. Be sure to include not only the drug acquisition cost but also all the necessary services that are required around the drug, like home delivery, patient training, or recycling of used materials. Consider more creative agreements such as free replacement of used doses in emergency situations, clawback, and capitations. This might help you close the gap during the negotiation and give you a competitive edge over your peers.
2) A good story
A quick look at the company’s P&L will surely tell you that, although payer marketing expenses have been steadily increasing, they remain neglectable compared to HCP marketing expenses. After all, we all love to moan about our industry’s sluggishness to react to our changing environment. On the bright side, this leaves us with that enormous room for improvement. One hard to kill belief in our industry is that market access is about pulling together a dossier – preferably a big one – with lots of complicated data attached to it. Yes, you will eventually need a dossier like you need a visual aid for your sales team. But would you send a rep to a doctor’s office armed only with a visual aid? Probably not. Not without prior positioning, targeting, messaging, testing, training, rehearsing, wargaming, coaching… And repeat. Too often I have heard that same admission of failure – ‘we have all these value messages and data but we don’t have a story’. You need to craft a story to prepare your payer-facing colleagues for success. And you need to apply – at a minimum – the same level of rigor you would apply in preparing your HCP-facing colleagues so that they can deliver the story in the best possible way. By doing so, you will not only be able to convince your payers to agree on the price of your product, but you will also equip them with the story behind the price. A story they will, in turn, be able to tell when asked by their management, their client, or the media. Developing a payer value story is not more complex than developing a promotional campaign, although it requires a different set of techniques and skills given the environment it is aimed for.
In a recent congressional hearing about price increases of one of her company’s products, a pharma CEO seemed to be in complete disbelief when she was asked whether she flew to Washington in the company’s private jet. I found the question to be actually fascinating. Because my read on it was ‘what you’re doing is unfair’. Unfair to whom? Since when making good money has become something to be blamed for, I mean in America, not in France? That is the paradoxical nature of pharmaceuticals. On one hand side, they resemble any private good being sold freely on a competitive market, like cars, or smartphones. On the other hand, they contribute to health care, a good seen by some economists – not all of them – as public. An important characteristic of a private good is that is excludable – a great used car you like is on sale, a customer shows up, pays the price, and leaves with it and there is nothing you can do about it. While most would agree that no-one should be excluded from healthcare. And an unfairly high price means patients will be left out. Without entering a largely sterile academic debate, pharma leaders must at least acknowledge that the goods they are promoting play a different role for the society as a whole than cars or smartphones. A role that brings a great sense of purpose for themselves and their teams, but also a significant amount of responsibility. And fair pricing is one key manifestation of this responsibility. So what is fair pricing? A concept that is surely complex enough to deserve a full post. It will take different forms in different geographies – it is mature in France and in the UK for instance where mechanisms are already in place to regulate the prices and profits at the level of each individual company. It will also be more acutely demanded in some therapy areas than others, like vaccines and orphan drugs. But the trend is clear – pharma companies are asked to price their products fairly. The details of what is fair pricing and how it be implemented will keep us busy, probably for some years.
To Warp it all up in one Line
Making sure your new product brings no bad budgetary news (1), clearly telling its value story (2), and pricing it fairly (3) will help you convince your payer audience to fund it. There you go!
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Three Reasons not to Use R&D Costs to Justify Drug Prices – Inbeeo looks at the pitfalls of this popular approach
Three Reasons Why Value Definition Is The Ultimate Challenge for Pharma – Inbeeo’s perspective on what is the true value of pharmaceutical innovations
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