Three steps that would ACTUALLY bring down LIST and NET Pharma pricing

Now that we’ve seen the White House Plan to bring down healthcare costs – I’d like to offer a counter suggestion. Here are three steps that would ‘immediately’ bring down list/net pricing and reduce the cost of insurance.

 

#1) Eliminate structured, tiered patient out of pocket and move to a graduated out-of-pocket system based on family income level (opt-in ONLY)

One-size-fits all copay levels are regressive and discriminate against the working poor – while making drugs artificially INEXPENSIVE to high income earners. Currently, there’s a question whether tying patient benefit to ability to pay is legal and most agree that it’s not fair. Why not move to a system where the goal is to charge a nominal fee for each BRANDED prescription tied to income level. A secure, opt-in databased could be pinged for patients seeking to pay below the maximum out-of-pocket level.

I would suggest maintenance of Gx/Brand differentiated out-of-pocket for low priced (MAC’ed) Gx.

 

#2) Require pharmaceutical companies and PBMs/Payers to negotiate over true market access

There’s lots of evidence that out-of-pocket requirements lead to patients foregoing or postponing care. A much better solution would be for Pharma Cos to contract for access (see above at truly nominal out-of-pocket levels). In exchange, pharma would contract PBMs/Payers down to a level that enabled the payers to reduce/eliminate copays. Further, since Pharma would be on the hook for price increases, there would be very limited incentive for price increases. This move would single handedly decrease the perverse incentive to have a HIGH list price, larger rebate, and low net price. Additionally, co-insurance insurance would be largely eliminated with #1 above…

Payers, for their part, would commit to a price where they could provide access to the broadest amount of their patient base. Explicit conversations would be had about the appropriate place in therapy for Gx and Branded alternatives. I’d suggest the PBMs adopt a model like Italy’s – there they provide a price that they’re willing to pay, up to an annual maximum for a given indication, product class, or product. Use beyond this maximum would be provided at the pharma co’s expense. Pharma companies then decide whether they want to ‘take it or leave it.’

 

#3) Remove the Medicaid Best price requirement for instances where the caps in #2 are surpassed and/or for outcomes-based contracts (in situations where the product didn’t work)

Acute readers will note that #2 isn’t possible with the current rules regarding Medicaid best pricing. Allowing exceptions to this policy will enable increase creativity in value-based pricing. To qualify, value-based contracts would have to include potential RISKS and BENEFITS for BOTH parties – outcomes would determine whether the product worked and, built into this proposal, payers would commit to paying MORE in cases where clinical endpoints were met/surpassed in real-world use.

 

As Michael Kleinrock has demonstrated pharma is ALREADY picking up ALL of the net effects of price increases ON PATIENTS. The price increase game is largely over, and the ones left holding the bag are payers with the weakest hands. Moving to these strategies would increase certainty and ease actuarial risk. That would, in turn decrease the cost of insurance coverage – and this effect would be magnified if we increased the total number of people covered with comprehensive insurance. I’d also like to see implementation of truly portable healthcare coverage – paid for by employers, employees, and/or the government (for the record, I’m against single payer but these are bigger/longer conversations, beyond today’s scope).

Decrease the incentives for high prices and you decrease the likelihood of having high prices. Suggesting that government programs lack the negotiating power they have (pharma feels the massive power of the Part D providers every year during the contract renewal process) perpetuates a political myth. I can see the argument that Medicaid pays too much for brand new, high priced biologics; but I don’t understand the suggestion that Part D lacks some power that the same providers wield for their Commercial coverage. (?) States, including Massachusetts, are already asking for waivers outside of current Medicaid rules – maybe the adoption of #2 above for States Medicaid would help to meet their needs and challenge Pharma to provide ‘fair’ prices for open access.

Market Access is a Jam – How good is the groove your team is making?

I recently pitched, and lost, a large project where the client wanted to bring ‘innovation across the board in every aspect of the launch.’ While it’s critical to have aspirational targets, it’s too easy to underestimate how critical the basics are in building a platform that enables innovation. Only once the foundations for a successful launch are in place, can a company even begin to start innovating.

Market Access is like jazz music – first each member of the team needs to learn the tune, the melody, the harmony, and the various parts of the composition. While they focus on their area (or instrument) they need to appreciate the ways that other parts of the organization contribute to launch readiness (how the other instruments contribute to the score). In a Jazz band, the solos, riffing, and mind-blowing innovation can only arise AFTER everyone is completely comfortable with the entire song. Imagine if the drummer started a drum solo while the band was learning the song – and at the same time the bass player started experimenting with syncopation…the entire song would be a disaster.

But this is what happens when brand teams try to innovate from the outset, without building the frameworks necessary for success. As an experienced Market Access professional, I know the part/role I’m to play in the launch. I know where and when I need to take the lead and when I need to fade back into the background, while still ‘keeping the beat’. It’s exciting to work with the best in Pharma commercialization whether the professionals come from trade, legal, compliance, sales, contracting, finance, clinical/medical, or other areas. Problems exist however, when teams have a different vision for what’s needed, don’t agree on the basic strategy, or enable/allow a culture of blaming market access/pricing/legal/compliance/sales or any other part of the organization for failure. Continuing our analogy, this is permitting dissonance…

This isn’t about ‘staying in your lane’ – in fact, the beautiful part of Jazz is that the instruments often switch roles with the rhythm section taking the lead and the other parts of the band either stepping back or keeping the beat during other’s solos. It’s about making better music, about enabling and taking advantage of ideas regardless of where they originate within the organization.

Regardless of where your innovation is going to develop – get the basics down FIRST and COLD and THEN worry about pushing back the envelop. It’s likely that there are folks within your organization and outside who’ve succeeded or failed in similar circumstances. Why not get their insights and integrate them into your launch strategy? Also like Jazz, you can’t have one plan anymore – you need to have your preferred g to market strategy and at least one fallback strategy ready to go. The discipline of creating your fallback will open your minds to strategic alternatives and better enable your organization to make the right decisions when things, inevitably, go slightly off plan. (even if the likelihood that you identify ‘THE’ alternative outcome in the first instance is negligible – if we were that good at forecasting the future we’d nail the strategy the first time…or the second time…)

In an ideal world, Pharma market access would be more like a formal symphony – but it’s just Jazz in the real world. Instead of overly formal precise notes that each team plays, things come too fast and improvisation is much more valuable than the written plan. Which isn’t to say that you shouldn’t ‘plan tight and then hang loose’ (as a respected friend says) – and I’m the guru for formal pricing bands for BOTH managed care and field sales forces after all. There’s excellent reasons that ‘everybody’ does the basics of market access similarly – ignore those at your own peril. Learn the score. Build a formal, tight, integrated launch plan FIRST. Then enable the kind of trust, fluidity, and creativity of a seasoned Jazz quartet and you just might find yourself grooving (and truly innovating) together through a profitable, productive, and exciting launch.