Changing the relationship requires new efforts from pharma and plans

Whether you believe a successful relationship is a 50/50 split or 100%/100% commitment, the market has yet to see either case when viewing the pharma/payer interactions. posted an interesting article based upon  a survey by PricewaterhouseCoopers of 100 health plans and pharmacy benefit managers:  “ By three to one, insurers characterize their relationship with drugmakers as “transactional” versus “collaborative,” and nearly 60 percent do not expect any change. As a result, 52 percent of insurers rely on independent data to evaluate drug effectiveness.”  Wow,  a tough statistic to swallow when you look at the investment life science is putting into evaluating products.

Top off those data points with input from 2 conferences I recently attended- and I wonder, what do both parties want/need to work together moving forward?  Should there be collaboration at all- or does the current friction between the two industries provide healthy checks and balances?  Let’s dive a bit deeper into the topline results quoted in Pharmalot from the study (always dangerous to address the summary points without access to the questions and the response ranges).

Health plans state they view relationships with pharma as transactional vs. collaborative but do they express a desire for those relationships to change?   After all,  they call pharma “vendors”, evoking a transactional image.   If they desire more collaboration, how would they define it?  Will legal teams embrace the definition of collaboration through contracting?

When I read further, “Insurers are not confident in formulary submissions from drugmakers.  Just 5 percent of respondents in the survey indicated they are very confident in the economic data provided by drugmakers when making coverage and formulary placement decisions.   And 44 percent are not at all confident.   Meanwhile, only 7 percent are very confident in the information to evaluate comparative effectiveness between drugs.” Should these low numbers be attributed to  a trust issues or member population difference?   Or could this  distrust really be a case of “show me results in my populations”, requiring an entirely different negotiation/exercise?

Balance this survey with the new arrangements in the press described as pharma/payer collaborations.  A few are described as tapping into both organizations to build new insights for R&D and/or measuring product effectiveness.  I am convinced adding the institutional knowledge and data sets from both groups will be more valuable than either industry spending resources to prove on its own.  Yet I wonder, will pharma be required to partner with every payer to prove its worth to avoid the old adage “that was not my member population or my member demographics”?

The collaboration may sound easy to an industry outsider, yet many pharma companies will be required to  re-vamp systems, processes and the policies to become a “collaborative” partner- and the insurers should meet them at least halfway (50/50).  The traditional transactional relationship between the two industries runs deep and I am not confident there will be industry wide collaboration in the short-term.  Here are some of the steps I believe must occur within pharma before it becomes a reality.

Pharma must recognize and address:

Many existing contract operations system will not support new complex contracts:  This is one of the issues outsiders, and sometimes senior management,  overlooks.  Contacting in new ways requires advances in the current contract administration area.  A more advanced system requires resources  pharma has stripped to barebones or even outsourced.  Get that core competency back into the organization, contract operations should not be confused with accounts payable or payroll.  Follow the dollar inside your four walls which includes: Strategy, Analysis, Reporting, Contracting and Payments.  Own the complete process, measure and correct. With over one-third of the survey participants expecting to have alternative contracts within the next three years- the clock is ticking.

Work with the plan skeptics mentioned above to measure Health Outcomes and product comparative effectiveness:  Based upon the PWC survey results- the plans will continue to look for their own proof points whether pharma collaborates with them or not.  Pharma must decide if they want to take part in that analysis, or run parallel- regardless, negotiations will remain tough between the two industries- either in defining the studies, or in negotiating the formulary.  My perspective, join early to help define your fate, or keep running independently and pay for your fate.

Legal teams must be in the loop:  The legal team may be seen as a large internal barrier to getting the innovative contracts signed, yet the right legal team will balance the business needs with the corporate risk tolerances.  Allowing the legal team to be part of the strategy build as the new collaborative relationships are forged will prevent last minute contract re-works.

Each healthplan/pbm is continually defining  their market niche:  Understanding the strengths, weaknesses, the customers they service and business drivers of each organizations is  critical if the two industries are to move to collaborative relationships.   While all are interested in managing costs, some plans will be followers to the more innovative leaders.  Pick wisely after understanding their real business model and capabilities.

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    Welcome to the SAS Health and Life Sciences blog. We explore how the health care ecosystem – providers, payers, pharmaceutical firms, regulators and consumers – can collaboratively use information and analytics to transform health quality, cost and outcomes.
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