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.

Three takeaways from the CBINET Access and Coupon Conference

As faithful readers will already know, this week we sponsored and attended the West Coast Access and Coupon conference. The three biggest takeaways were:

#1) A wide gap still exists between the leaders in the space and those who are new to the area. While this is natural and a part of the landscape, coupons are becoming too big (estimated to be $13B in aggregate spend by 2019) to leave coupons to the newest members of your brand team. Time to set up a Center of Excellence, if you haven’t already done so, and put as much time and attention into creating and monitoring these programs as you do on Managed Care strategy. In fairness, the members of COEs that I do know from Pharma weren’t in attendance – but this is a problem too, because we need opportunities to get together, brainstorm, and collectively address points #2 & #3.

#2) From our perspective, neither Industry nor the Copay Card providers are taking fraud and abuse seriously enough.

Only one panel covered fraud and abuse, and only at the most basic level. The comment was made that performing audits and excluding pharmacies from the network is the job of manufacturers – which seemed strange to us – as profiting, via volume-based contracts, in situations where fraud is either confirmed or highly suspected, would AT A MINIMUM put the commercial interests of the copay vendors in opposition to their pharmaceutical clients.

We, at ChiralLogic, aren’t lawyers and can’t/don’t provide legal or compliance advice. But suffice it to say that our eyebrows were raised. If we were directly managing these programs, we would provide written instruction to our copay card provider to make us aware, in writing, of any pharmacies in their network either confirmed or strongly suspected of fraud – either for our programs or in their network for another company. We’re also working on establishing a real-time fraud detection capability and starting to think about working with ChiralLogic clients on implementation.

We support human and computer driven monitoring looking for suspicious pharmacy activity. For more information on what we’d look for, please contact us directly.

#3) The industry is losing – losing the battle of contracted access, and losing the battle by bearing the brunt of increased patient out-of-pocket

Various sources, from the companies that report their Gross-to-nets, to ESI’s 1.8% price increase, to the performance of most large pharma and biotech stocks suggest that the tide for price increases has changed and the payers and PBMs have won. The coupon industry is stuck doing things the way they’ve always done them – they’re still focused on coupon aggregators (easily fixed by increasing your cap to avoid the ‘copay surprise’) when the payers are counting their rebate dollars (increasing while access is stable and declining).

What’s needed is new and truly innovative thought. That might come in the form of an upstart copay provider. Innovation might come at the expense of the employers – but from what I’m learning employers and PBMs are innovating FASTER than the industry. Retail will, eventually, win the battle and issue their own copay adjustment vehicles (for obvious reasons they probably won’t be ‘cards’ but they’ll act similarly). Vertical integration means MORE copay aggregation as the payers get increased access to even retail transactions.

So even the innovation edge is going to the payers/PBMs. Coupons and copay cards are here to stay until 2023, at the earliest. Let’s work together to turn this around for manufacturers, patients, and providers.

Also published on LinkedIn

Coupons: Transaction Cost Fallacy & Why Program Design Matters (More)

How to make a classic pricing error in Copay Card Vendor Selection

At the recent CBINET Formulary, Copay, and Access Summit, I heard tales of finance and procurement strongly suggesting and even forcing brand teams and Centers of Excellence (COEs) to select vendors based on lowering transaction costs. While establishing and maintaining cost effective programs IS important, focusing on transaction costs when selecting vendors is a classic pricing mistake, here’s why:

#1) Transaction costs represent a fraction of the investment in the program

Let’s simply assume that fees represent a total of 5% of total program cost, with patient benefit taking up 95%. That’s a ratio of 1/19. If the goal of the program is to truly cut costs, it would be 19 times more efficient to focus on reducing the patient out-of-pocket expenses, or better yet as we’ll see, enable those investment dollars to go farther.

#2) Reducing patient out-of-pocket expenses, though VASTLY more efficient than reducing program management/transaction costs, isn’t REALLY the goal either

As your sales force produces more scripts, your total expenses for these programs will increase. The goal of the program should be to increase NET revenues. Since BOTH the patient benefit AND the transaction fees are tied to filled scripts, the goal should be to increase the number of filled scripts. As Luke Greenwalt puts it, increase your script volume AND your efficiency ratio and you’ll increase net revenues. In this case you’ll have both higher transaction costs and higher patient benefit. But you’ll also have a lot more net revenue with which you can pay your expenses.

Unless your market is extremely mature with completely flat script generation and an immovable efficiency ratio – in which case, perhaps focus on optimizing BOTH expenses and patient benefit. This is because it’s not possible to increase net sales in this kind of market using patient assistance.

#3) Therefore, focusing on the 5% (expenses) at the expense of the 95% (dynamic program design) misses the point

From my experience, borne out at the conference as well, the focus on decreasing transaction costs may be due lack of differentiation in program design. Clearly, Finance and Procurement teams solely focused on expenses don’t believe in program differentiation. I tend to believe that card providers overstate the potential sales lift from their program designs; card providers should do a better job helping stakeholders to understand the dynamics of these leveraged programs.

I mentioned Luke Greenwalt’s efficiency ratio above – and spoke with the leaders of each of the major coupon providers at the conference. Each had his or her own suggestion for differentiating their services – via increased compliance offerings, better program design, improved data and reporting platforms.

As we’ve noted above – improvements in program benefit design are 19x more likely to improve your program’s bottom line. Let’s look at an example

ACME Pharma – procurement/finance tell brand team to switch from Good Co to Cheap Co

Savings on transactions = -20%

Loss on Program design = -10%

$100m program (to make math easy)

BEFORE: transactions and maintenance = $5m

Program investment = $95m

ROI of the program = 2 to 1 (this number was presented at the conference)

Yield = $180m – $100m = $80m net sales lift

 

AFTER: transactions and maintenance = $5m * 0.8 = $4m (reflecting the 20% transaction savings)

Program investment = $95m (held constant for analysis purposes)

ROI of the program = 1.8 to 1 (previous efficiency -10%)

Yield = $171m – $99m = $72m net sales lift (reflecting a loss of 10% versus the previous net sales level but an ROI of -800% versus sticking with your previous vendor + $1m saved versus -$8M lost)

 

But what if the company were to switch to a vendor that was 15% more expensive but 20% better at program design – after all the best doesn’t come cheaply

Excellence Pharma – COE and brand team switch from Good Co to Great Co

Increased Expenses on transactions = +15%

Gain from better Program design = +20%

Same $100m program

New: transactions and maintenance = $5m * 1.15% = $5.75m

Program investment = $95m (held constant)

ROI of the program = 2.4 to 1 (2 from before times 1.2)

Yield = $228m – $100.75m = $127.5m net sales lift

Versus the original program, that netted $80m, you’d be ahead 59%!

Coupon and copay dollars are leveraged – because they often take advantage of managed care money that you wouldn’t otherwise get. Please don’t focus on the pennies and miss picking up the dollars. And you shouldn’t WANT to work with vendors who want to play the low-priced transaction game. How can you trust that they have your best interests in mind when they can’t demonstrate their value in this way – and avoid an industry destructive price war. Maybe it’s better to go with a vendor who can explain the math behind WHY they’re maintaining their transaction fees at a profitable level.

Finally, at some point, copay and hub vendors are going to wise up and ask for percentage of WAC – as do wholesalers and specialty pharmacies. It might be a better overall deal for pharma to cease this race to the bottom before the industry’s best adopt this approach.

Also published on Linkedin

Building an innovative managed markets function…

Who’s responsible for managing and coordinating the Innovation center for your Managed Markets and Pricing group? I’d be willing to bet that it’s not centralized, not properly funded, and working on the wrong things. It’s hard to ‘fix a plane while you’re flying it’ – as one of my favorite mentors likes to say.

We all know the reasons that Innovation doesn’t get enough attention in the Managed Markets functions within medium to large pharma. And, no, I’m not talking about the work that you’re doing getting ready for so called ‘innovative’ contracts. I’m talking about preparing your organization for the tectonic changes that are coming through innovative technologies, blockchain, population demographics, etc. I realized recently that somewhere between 60 and 80% of my time in-house was spent on innovative programs – that’s a LOT of time spent on thinking about the future.

Reasons to consider making innovation a full-time focus of a single individual within your Managed Markets team include:

  1. Skunkworks yield results
  2. If you’re not innovating, you’re working on incremental process evolutions and are unlikely to be industry leaders
  3. The future is coming, and not everybody can be a leader, but there’s no reason to lag behind

Let’s look at each of these:

#1) The history of skunkworks goes back to at least the Allied response to the Second World War. The idea that people are more innovative, especially when viewed in terms of results per unit of time, when focusing solely on innovative projects makes intuitive sense. However, how many managers do you know who can say, ‘while I have no idea about the value of the project or when it will be delivered, ‘SURE!’ let’s green light it.’ But it’s like R&D for your managed markets function. Without investing time, energy, and money into innovative approaches how do you know whether your planned improvements in your operations are world class?

If people and teams have daily tasks to support the current business AND a mandate to innovate, the day-to-day tasks will always trump thinking about building the future. Today’s fires ALWAYS burn brighter than tomorrow’s potential conflagrations.

#2) One of the biggest frustrations I’ve had in my professional career is how much of the business calendar is devoted to focusing on incrementally fixing fundamentally broken business processes. I’ve spent an inordinate amount of time developing integrated managed markets databases, sometimes because the working one we inherited was broken through mergers and acquisitions. How much of YOUR time is spent on building (for) the future? Clearly every successful biopharma company puts an incredible effort into building LAUNCH strategies – and I’d like to think that we’re pretty good at it. But what about capturing the learnings from what worked during one launch and applying it throughout your organization? What about building the contract management application of the future? Who’s working with finance on the next generation GTN solution for forecasting and monitoring your progress including coupons and copay cards each month of these launches? It’s very difficult to be both a best-in-class operator while being a world-leading innovator – in fact, there’s an argument to say that those are two different professional profiles entirely.

#3) One of my favorite lessons from business school was the fast follower theory. While it’s exciting to be a true innovator, it’s often even more profitable to be a fast follower – and specifically building capabilities to respond to competitive developments is the mark of a true strategist. For example, during my days guiding global pricing for Bausch + Lomb, we made a lot of money through taking strategic OTC price increases around the world. In every case, we considered the relative market position of the brand, the likely competitive response, AND the wholesaler/retailer responses. It was critical to understand these competitive responses from both a directional and timing perspective, to properly forecast when our price increases would generate profitable sales. And, most frequently, our competitors HELPED our cause by being fast followers and matching the strategic direction of our price increases (they didn’t need to ACTUALLY match our price increases, but that’s a matter for another blog post…)

When your competitors innovate, what can you copy quickly and adopt in your organization? You don’t have to follow every lead. Being a fast follower means that you can potentially avoid disastrous innovative ideas, but you need to build an agile enough organization to quickly follow others’ leads.

Where does this lead? There are two options – create a center for innovation within your Managed Markets team or bring in consultants with the ability to translate best practice ideas to your organization. Here’s where the insights from a company like ChiralLogic shine. We have the strategic thinking to keep up with consultants like McKinsey, Deloitte, and BCG. This is matched with exceptional domain expertise and recent launch experience from INSIDE pharmaceutical companies. It’s very difficult to understand the quality of a company’s innovative ideas internally; however, the pleasure of being independent is that I can now see where we were innovative and where we were lagging.

So dedicate someone from your team to be the champion of innovation for your managed markets and pricing team – and have them give us a call, we’re happy to help.

In honor of Uwe Reinhardt – the Sahara Model & Why it Matters

Uwe Reinhardt makes a number of brilliant points in this post, published in February of 2017 – thehealthcareblog.com/blog/2017/02/08/the-sahara-model-of-value-pricing/

There’s an incredible amount to unpack in this piece. And it’s one of the closest pieces I’ve seen to how drugs are actually priced in the United States. Understand the power dynamics of a given market and you’re on your way to understanding pharmaceutical pricing.

The comments about the middle class, especially as they pertain to out-of-pocket expenses for drugs are also excellent.

Clearly losing Dr. Reinhardt is a big loss.

But where does all this leave us? It depends – fully implemented the new finance models mentioned toward the end of the article completely dismantle the global pharmaceutical model as we know it today. Is that likely to happen? No. Is it important for more people within the industry to understand and appreciate these proposals? Yes.

Why? Because application of the Sahara model as illustrated by the recent spate of $250,000/year and now even $475,000/treatment drugs is creating a furor that the industry, Bio, and Phrma can’t control. Rather than talk about pharmaceutical pricing, why not implement (voluntary!) caps on sales and market expenses as a percentage of gross revenues? If we don’t get control of the narrative, some of these innovative R&D strategies are likely to be imposed, especially in a political climate that’s becoming more polarized, and could swing wildly in any direction with each coming election.

To be clear, I believe in the current venture-backed small company to big company R&D system. I believe many of the recommended R&D funding strategies would lead to even more horrible outcomes for new drugs. But I have serious concerns that we need our political class to focus on creating a stable healthcare payments system that covers as many Americans as we can, instead of focusing on how to pay for innovation. But if we continue to lose the battle, by making spurious arguments about needing high prices to support R&D, when we’re really supporting Sales & Marketing, then we make our industry vulnerable to wholesale changes that threaten patients and investors even more.