What does a split congress mean for healthcare reform?

What can we conclude from the election of Democrats to the House while Republican’s increased their majority in the Senate? The simple answer is that nothing will get done in the next two year. I’ve long held that a congressional fix for healthcare is an unlikely outcome; however, I now believe that there are some interesting things that can happen. The focus should be on the (progessive/trifecta blue) states.

#1) Create durable protections under law for pre-existing conditions

IF the Democrats are clever…The Democrats should take Republican claims of support for pre-existing conditions seriously. Even Ted Cruz supported pre-existing conditions down the stretch. Democrats should put pressure on Reps by passing legislation in the House carving out and creating a long-term, legal protection for pre-existing conditions. Even though this is technically unnecessary, given the prominence of pre-existing conditions in ACA, it’s possible that the Republicans may suddenly ‘forget’ their support for this policy. It is unlikely to pass in the Senate – but that’s not the point. Election stump talk is cheap, legislation is more expensive.

Allowing Republicans to u-turn on pre-existing conditions and not holding their feet to the fire would be a mistake. (but count on Democrats to miss a good opportunity whenever they can)

#2) Stop focusing on prescription drugs – start focusing on the medical benefit

Last night Nancy Pelosi gave a truly cringeworthy speech that touched on the need to reduce the cost of prescription drugs as a primary way to make healthcare affordable. As I’ve written many times, we could eliminate our spending on drugs, crippling both the branded and generic drug manufacturers at the expense of thousands of jobs, and ONLY reduce healthcare spending by >10%.

In politics cutting healthcare spending means ‘cutting drug spending’ because drug out-of-pocket costs are highly visible to consumers. But until politicians see the forest (medical benefits) for the trees (drug spending) we aren’t going to see healthcare costs come down. Having a single payer system isn’t going to solve this problem, despite what progressives wish to be true.

#3) The cauldron of innovation is now the States

One lightly reported change is the democratic pickup of 5 ‘trifectas’. With the slow/no rate of healthcare change at the National level, these states are the most likely to try something creative. Rumors abound that California will resurface it’s $400B single payer legislation that went nowhere in 2017. Without the balance of a meaningful opposition party, Democrats in these 13 states will want to demonstrate to their constituents that they can deliver on healthcare. IF they take a serious look at BOTH pharmacy and medical benefits (see #2!) it will be interesting to follow the outcome. Reducing spend by eliminating overbilling, unnecessary care, prioritizing less expensive treatments, etc. sounds much easier than it is. However, I will applaud their efforts and we should all watch with open-minded interest. After all, almost every other advanced economy has managed to provide (good/better) healthcare at lower costs.

Pharma: Please stop blaming R&D for high prices!

I cringe every time I hear a CEO or pharma policy representative suggest that high prices are necessary to encourage innovation. It implies that pharmaceutical prices ARE high because of the investments made to get products approved. Thinking in this way is a mistake. It’s falling victim of the Sunk Cost Fallacy – as the value of a product in the market is completely disconnected with the amount of investment to get that product to the market. Let’s look at this in more detail.

For years, Pharma, PhRMA, and Bio have made the argument that we need to have high prices (particularly in the United States) to enable investment in future biopharmaceutical research. However, the monies flowing into biopharma flow from the high profitability of the industry, NOT directly from high prices. In fact, high prices COULD divert broad scale research AWAY FROM diseases that affect large portions of the population, i.e. diabetes, heart disease, common forms of cancer, by making orphan diseases ‘artificially’ profitable. This is (potentially) fuel for another piece in the future.

Here I want to talk about what we really use to price pharmaceuticals in the United States. The process is simple. We take all possible clinical outcomes, model the financial offsets (also known as HEOR) if they are available, and talk about potential patient populations – both at launch and over the drug’s lifecycle. These are presented in a brief designed to mirror a condensed form of the pharmacy and therapeutics dossiers produced by U.S. payers during the review process. Yes, these dossiers do benefit from and include various outcomes of the R&D process. But there’s not a single payer in the U.S. – state, Federal, or commercial – who cares how much money was invested to produce those clinical outcomes.

Once these value propositions are completed we debate their merits and try to understand where the product fits within the current set of options available. We attempt to include developmental products that will likely come to market during the products’ protected period. We include competitive product characteristics and trade-off various products’ value propositions. Generics & biosimilars will typically offer more value-for-money versus branded alternatives. Many payers have generics first preferences. Understanding this, we work with payers to understand their preferred treatment pathway, and where the new agent fits within that treatment pathway. These treatment pathways create the drug Tiering and controls that define coverage. Depending on the therapeutic area’s unmet need Step Edits (through Generics or Brands) may be appropriate. Depending on the clinical outcomes from misuse or off-label use, prior authorization may be appropriate.

Again, at NO TIME do we talk about the investment required to bring products to market. Because these investments aren’t relevant to the value of the products we produce. Payers don’t care.

Imagine a couple of examples –

First, my wife and I purchase a property in the mountains, far off the road and away from others. We invest to bring expensive building materials to the site and construct our dream home. After we’ve built the home and enjoyed it for years, we decide we want to sell the mountain home to purchase something else. Buyers will come to the property and evaluate the value we’ve created relative to the replacement cost, building from scratch, and their perception of the value of being able to live/vacation at the property. They won’t and shouldn’t care how much money it cost us to build it – instead their perception of value will stem from what we’ve created.

Another example…imagine if the film industry constantly reminded us that we need to pay more for movies in which they’ve cast expensive stars. They’d say, ‘public, you’d better go see this movie because we spent $200m to film it!’ and ‘if you don’t go see these fancy movies, we won’t make them anymore.’ They don’t say that because it’s laughable. Everyone knows that stupid movies with expensive stars that don’t make money flop. And Hollywood, Bollywood, and now China will continue to make movies because SOME make a lot of money.

We need to get more sophisticated about the way we talk about value creation in the biopharma world. It would be great to have a consistent view of value creation and reward – and I believe that will happen in my lifetime. In the meantime, it’s important to discipline yourself, your organization, and your leadership to avoid falling for the sunk cost fallacy when pricing pharmaceuticals & talking about your pricing. Because those of us in the know see through it, and it sounds silly to pharmaceutical outsiders.

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

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:

Skunkworks yield results
If you’re not innovating, you’re working on incremental process evolutions and are unlikely to be industry leaders
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.