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The Increasingly Stormy Waters of US Market Access

The US reimbursement landscape for prescription drugs has been shifting rapidly over the last few years. Some of the major US access trends that have accelerated include:

  1. Payers increasing volume control over prescribed therapies, tightening formularies, and utilization management

  2. As the site-of-care landscape is consolidating, provider groups are incentivized to shift away from volume to value, limiting physicians’ flexibility to make Rx decisions

  3. Payers are keen to leverage therapeutic alternatives across crowded drug classes and long-awaited biosimilar entrants in negotiations and contracting with developers

  4. Reimbursement-relevant coding and billing procedures are getting more complex depending on setting/site of administration

  5. Insurance designs expose patients to growing out-of-pocket costs as a share of public list prices while the gap to actual gross prices widens due to greater statutory rebates and confidential concessions towards the drug supply chain

As part of a continuous engagement with market stakeholders, Certara invited 31 managed care organization (MCO) leaders – all active voting members of Pharmacy & Therapeutics committees in their organizations – to discuss the impacts of these trends for the next 2-3 years.

Payers accelerate patient cost-sharing, utilization restrictions, and preferred drugs on the medical benefit

As such forces shape the access landscape for all drugs, payers are particularly concerned that the growth of specialty drug costs is outpacing that of non-specialty drugs. The view is justified considering development pipelines show that 60% of new molecular entities awaiting FDA approval between 2020-21 are specialty pharmaceuticals: High-cost, complex therapies that are often used for chronic conditions and require special monitoring, dose adjustments, special distribution, and administration.

With this group, our surveys confirmed that inflammatory conditions, oncology, and diabetes remain the top three categories of budgetary concern for Commercial and Medicare insurers. Payers note that often about 5% of patients account for half of their entire budget. Despite widespread concerns about patient affordability, one in three commercial payers thus sees “increased cost-sharing” as the leading strategy to mitigate the impact of specialty products. Not surprisingly, utilization management tactics are pivotal in managing specialty spend, and they are expanding across therapeutic areas.

Quantity restrictions and split-fill programs, which prevent medication waste by providing a half-month medication supply at a time, rather than a full month, remain mainstays to control volume, while the use of step edits and evidence-based pathways to specify which drugs to use are accelerating. Notably, clinical trial designs are now routinely scrutinized as payers may limit access via prior authorization to populations narrower than what the FDA label contains. Product reauthorization may then later be restricted to patients’ ability to meet thresholds of clinical response expected from randomized trials.

Figure 1. Challenges encountered with prior authorization processes1

As Figure 1 illustrates, claims analyses show that these procedures significantly impact the abandonment of scripts and have thus been criticized by physicians. As Dr. John Cullen of the American Academy of Family Physicians notes, “The prior authorization process is out of control. It is increasing, and rather than a tool for preventing unnecessary or expensive care, prior authorizations negatively impact my patients’ health and is a significant cause for family physician burnout and the closure of small private practices.” According to the American Medical Association (AMA), this sentiment is widespread: 9 in 10 physicians find that prior authorizations negatively impact patient outcomes. When the US HHS Office of Inspector General (OIG) audited Medicare Advantage Plans, it found notable over- and misuse of coverage and payment denials contributing to “physical or financial harm” of beneficiaries.

Compared to treatments on the medical benefit (physician administered), medications covered on the pharmacy benefit traditionally allowed payers to have more control on management and utilization. But specialty drugs on the medical benefit are no longer immune to more restrictive tactics such as product exclusions and preferred product designation. Payers are eager to integrate medical and pharmacy benefits. As systems evolve, contracting for medical benefit drugs could be on the horizon. As a key medical management objective, payers intend to move specialty infusions towards the lowest cost site of service.

Innovative financing is required for novel therapies

The emergence of gene, cell, and other transformative therapies has magnified concerns about affordability among payers, providers, and patients. The U.S. healthcare system is insufficient to manage these new products. Today, health plans conduct individual risk assessments. Broadly speaking, smaller beneficiary numbers result in higher financial exposure on a per-patient cost basis, and comparatively greater operational challenges given the need for highly specialized treatment knowledge. Some small commercial payers, self-insured employers, and Medicare Advantage and Medicaid can expect a higher impact than larger commercial payers and Medicare Fee-for-Service. At the heart, payers express concerns regarding actuarial uncertainty (how many eligible patients will be in our insurance pool?), therapeutic performance (how do we assess long-term real-world effectiveness of treatments?), and payment timing (how do we administer payment given beneficiary migration?). Developers of transformative therapies should assess novel payment innovation which addresses these concerns, including performance contracts, annuities, reinsurance/stop loss, and subscription models. While recent developments have led to excitement around these new models, MCOs in the US still see comparatively little current use today. Nonetheless, our work with innovators across these modalities shows that, as visualized in Figure 3, an open and collaborative approach among US healthcare stakeholders is on the horizon to overcome the significant legal and practical barriers that limit

Figure 2: Transformation of Payment for Transformative Therapies

Cost effectiveness considerations are increasing in the U.S.

The drug pricing debate has spurred demand for standardized value assessment in the US. Payers want to see drug appraisals based on cost-effectiveness analyses. The venture-funded think-tank ICER (Institute for Clinical and Economic Review) has made its name as America’s “drug price watchdog,” selecting pharmaceutical products for cost-effectiveness review.

Most payers acknowledge a need to consider ICER reports during their drug evaluation process, but many are now also open to seeing an official U.S. agency conduct cost-effectiveness research. Figure 3 shows that there is no longer opposition among any payer types to legislation that would institute an independent body appraising drug value through cost-effectiveness methods.

Figure 3: Support for a policy to institute an official, independent US Health Technology Assessment body

While ICER’s population-level quality-adjusted life year (QALY)-based approaches aren’t easily adopted for individual US payer decision-making, they have cemented a prominent role in payer negotiations for some time. Developers should be prepared to explain why they might find specific ICER assumptions problematic and illustrate the materiality of these concerns towards the value determination wherever possible. More broadly, ICER has a significant influence on federal as well as state lawmakers and health authorities who define drug pricing legislation.

The U.S. drug policy environment has made its market on payer sentiments

In recent years, US health policy has focused on isolating drug costs. Proposals have embraced concepts like price referencing, transparency requirements, and drug importation. With a new Congress and White House under the control of one party, the prospect is greater than ever before that some of the policies which have often already gained bi-partisan traction may well become law soon.

This is an opportune moment to re-examine congressional legislation from the point of commercial payers. Our data, as shown in figure 4, reveals little opposition to policies such as international reference pricing or drug importation at the payer level.

Figure 4: Support for legislative proposals around drug pricing among US payers (n=31, 198M lives)

Most payers support drug pricing proposals, with integrated delivery networks (IDNs) and midsized/ medium plans being the most supportive and pharmacy benefit managers (PBMs) the least supportive. Proposals around internal reference pricing and international pricing indexing (e.g. the Most Favored Nation Model) draw the most support across all payers. The average level of support can be deceptive. Deeper dives into the various payer archetypes reveal a range of opinions among individual payer representatives. For instance, payer representatives responsible for 156M commercial lives favor drug importation, with payers who make coverage decisions for over 30M lives embracing government price negotiations.

While these results are qualitative and not representative of the entire US payer universe, they offer insights into the considerable support among many commercial insurers, responsible for millions of US lives, for policies that are historically antithetical to the free market-based drug pricing paradigm that distinguished the US from the rest of the world for decades. A shift in public opinion has influenced payer perspectives, and many payers express strong dissatisfaction with current price-setting mechanisms. Manufacturers should monitor payer sentiment on this issue.

The new political climate, combined with the growing negotiation status of insurers, shows that the days of simply determining the market demand as a function of price and choosing the profit optimizing point are gone. Developers must leverage attributes of product value that may warrant a preferred product status, outside of and beyond price. The discussion on real world value has become a prerequisite for enabling conversations with payers, while state and federal policymakers seem poised to limit pharma’s pricing corridors with increased legislative intent.

To learn more, read my complete research paper: Research Paper


Data from Avalere, Covermymeds, TrialCard, published in: Basta, N. The Prior Authorization Obstacle Course. Pharmaceutical Commerce. 2016/. Published March 15, 2016. Accessed April 08. 2020



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