If you are on the brand, market access, or managed markets team at your pharmaceutical company, likely you are already well aware of the recent proposal by the Department of Health and Human Services (HHS) to remove safe harbor protections from pharmacy benefit manager (PBM) rebates in an attempt to address perceived misalignment of incentives.
The proposed amendment explicitly excludes from the definition of a discount eligible for safe harbor protection reductions in price from a manufacturer of pharmaceutical products to plan sponsors under Medicare Part D, Medicaid managed care organizations, or PBMs under contract with them.
In addition, HHS is proposing two new safe harbors. The first would protect certain point-of-sale reductions in price on prescription pharmaceutical products, and the second would protect certain PBM service fees. More here.
While the end of rebates could be considered the signature policy proposal, there are others with the same objective including displaying list prices on ads, requiring physicians to inform patients of the price of the drug at the point of care and others. More here.
What does this HHS proposal mean for pharmaceutical manufacturers and, most specifically, those who serve in market access/managed markets roles?
Broadly, it means that pharma brands can no longer overcome differentiation challenges for patients funded by the Centers for Medicare & Medicaid Services by buying their way onto formularies through contract rebates. This impact does not affect all brands the same way or with the same magnitude.
Let me draw a general conclusion amidst a mountain of nuances and complexity: Brands with superior differentiation or orphan status, meaning those with recognized value by the marketplace, will see the least change in the status quo. On the other hand, there are brands that fulfill nebulous unmet need, compete in crowded therapeutic categories, and/or have an assailable value proposition. These latter brands have every incentive to snap into action as fast as possible. The business model could be very different by the end of this year.
How to Hedge Against Upcoming Changes
If your market access team finds itself in a war room debating how to hedge against upcoming changes, here are some ideas to discuss as starting points:
1. Revisit your managed markets value proposition. If your current value proposition is delivering suboptimal formulary status or brand utilization, consider that the fault may lie more in the value proposition than in the brand itself. Most of the time we find this could be true when:
- The value proposition was developed by the brand team/professional-focused marketers but is being used for managed markets customers; and/or
- The same value proposition is being used for every managed markets customer, from payers to providers and everyone in between; and/or
- The value proposition was finished more than a year or two ago and therefore does not take into account any of the new Medicare Shared Savings Program (MSSP) tracks, Center for Medicare & Medicaid Innovation (CMMI) demonstration projects, quality improvement/quality measure updates, or other changes in our very fluid managed markets ecosystem.
For further reading on Post-Rebate Pharma Managed Markets Value Props: https://aventriahealth.com/can-your-brand-value-proposition-win-in-a-world-without-rebates/
2. Use real-world evidence. Find and evaluate additional outcomes that are valuable to payers and providers. Done right, this could help differentiate the drug by, for example, spotlighting overall clinical cost offsets. There are also opportunities to collect patient-reported outcomes (PRO) and use these data to establish patient preference.
3. Build a Connected Care strategy. Provider-facing digital tools that are integrated into the clinical workflow can help drive appropriate utilization for appropriate patients at distinct moments along the patient journey. This can measurably enhance brand value, patient outcomes, and also the prescribing experience. Patient-facing apps and other digital tools can drive patient preference, adherence, side-effect management, and ultimately the outcomes that matter to the patient. Connected Care approaches may be branded or unbranded depending on intent.
4. Consider how to best orient your patient assistance programs and hub services. These services have historically been used to support uptake in higher formulary/high patient cost situations. You’re going to want to speak with an expert to understand the nuances, but here’s a 5-minute top-line video that’s insightful.
5. Consider a targeted therapeutics approach. Reduce the budget impact of your brand for payers by identifying target populations who can get the maximum benefit.
6. Assess current contracting strategies and get good at value-based contracting ASAP. The default transactional model (ie, fighting over rebate points) is likely to go away. Consider what is most probable to replace it, especially in a world increasingly focused on value over volume and with ever more data. Easy answer: value-based contracting, at least at some level. Granted, difficulties abound at the present time when it comes to actually agreeing to and executing a value-based contract. But as they say, necessity is the mother of invention. Experimenting on a small scale now, folding in learnings, and improving incrementally is the safest way to venture into any new area, including this one.
7. Strengthen customer-facing execution with strong alignment of market access and field sales. Focus on leveling up field execution, which includes training account managers in consultative selling. Few would argue that working together with large organized customers is a priority for many brands. But today, customers want collaboration—not safety or efficacy coupled with utilization and pricing in its own silo. Dealing with this new reality usually takes a sizable culture shift. On the Relentless Health Value podcast, my co-president Dave Dierk and I talk about how to overcome the barriers to effective collaboration with IDNs. Click here and have a listen.
8. Take a good hard second look at strategies that you may have disregarded earlier. In the past, we’ve heard brands deliberately avoid “above-the-brand” kinds of tactics because their brand was not the market leader. These non-leader status brands have feared assisting patients and helping them understand their disease, manage their medications, or participate in shared decision making. “When all ships rise, we’re helping the market leader’s patients more than patients taking our product” is a common refrain.
The ground might be shifting under the basis for this opinion. “Value above the pill” essentially means improvements in patient outcomes and patient preference. If the only brand winning in terms of patient outcomes and patient preference is the market leader, then the gap will only widen between the leader and the rest of pack. This phenomenon will occur if the market leader is the only one adding value beyond the pill to its value equation. In a no-rebate world, each brand has to demonstrate its own unique benefit/cost equation. Value takes on an absolute component as well as a relative one. The battle for second place begins.
For two podcasts about rebates, click here. The first covers the nuts and bolts of the HHS proposal including its impact on Part D premiums. The second gets into what Pharma should be doing and considering right now from a strategic perspective.
Or alternately, you can listen here: