How will the New Marketplace Affect Pharmaceutical Companies? Part 1

With the emergence of a new national health insurance Marketplace, insurance shopping has a new level of accessibility that has resulted in a broad-spectrum shift of health insurance operations, new insurers, formularies, and an array of benefits designed to meet the actuarial expectations stipulated by the law. As of April 19, 2014, over 8 million people signed up for a Marketplace plan, exceeding the projected 6 to 7 million, with an additional 6 to 7 million enrolled in Medicaid. The majority being previously uninsured. The Marketplace is poised to grow to over 24 million members by 2016 with the potential of expansion beyond that by tens of millions.

Formularies and Benefits in the Marketplace

There are approximately 250 formularies that have been created by over 275 insurers. While these formularies had to meet state specific essential health benefit standards, there is a similarity between the 2014 formularies and their commercial counterparts.

In addition, the Marketplace appears to take a more transparent approach to a number of circumstances where the drug benefit would not apply, including:

  • Out of network drug purchases do not count toward deductible or out of pocket maximum, or may have a substantially higher set of deductibles that apply.
  • Drugs prescribed by an out of network physician – not covered.
  • Brand drugs purchased when a generic is available – not covered.
  • Drugs that require prior authorization but are obtained without going through this process – not covered.
  • Non-formulary drugs – not covered.

Drug Utilization

Current Marketplace enrollees, tending to be lower income, overwhelmingly selected the lowest cost premium plans available. We would expect the same type of pharmaceutical purchasing behavior. An initial 2-month snapshot review of approx. 650,000 claims for 25 insurers from January to February 2014 by Express Scripts showed:

  • Higher antidepressant (8% higher), pain medication (29% higher), seizure medication (19%) use vs commercial
  • Specialty Meds: 1.1% of Rx vs 0.75% in commercial
  • HIV: 55% of specialty claims vs 21% in commercial
  • Cancer and HIV higher in Exchanges based on claim cost

Going forward, we would expect to see that initial skewing of drug utilization patterns begin to normalize.

The Marketplace:  What to expect in 2015 and in the Years Ahead

Insurer Expectations

Over the next 1 to 3 years, we expect to see greater market segmentation by key insurers. With some gaining hundreds of thousands of new Marketplace enrollees, this could stimulate new selective and targeted contracting interest and arrangements with Pharma. Insurers will drive toward value and lower costs in this transparent and competitive market, and will request this through contractual concessions and migration to shared risk/outcome type contracts from Pharma. Pharma will need to evaluate the traditional contracting value in light of the emerging reality in this market.

There may be a greater emphasis on certain classes of drug vs others. Products with a lower perceived value to the insurer (i.e., ones that don’t demonstrate cost reductions or quality of care improvements) may struggle to gain preferred status. Bundling such products in rebate agreements with other drugs that do have stronger perceived value is one way in which this risk could be mitigated.

The New Cost-Reactive Stakeholders

The member, with cooperation from their prescriber, becomes the key product decision maker relative to their ability to afford the copay (or coinsurance) at any tier level or the full cost through the deductible. Simply gaining a preferred brand position on a formulary may not return the contract value, as even preferred brand positioning often is associated with a significantly higher copay or coinsurance compared to generics (or compared to traditional commercial coverage of preferred brands (See table 1 above). Physicians will be interested in complying with their patient’s affordability expectation.

The Marketplace Formulary and Benefits

The formulary rules in place for 2014 will continue through the 2015 season (i.e., same benchmark plan, formulary Essential Health Benefits). There will likely be a change for 2016, but insurers are awaiting formal guidance from CMS which is expected to be issued by the end of 2014.

In our next post, we explore the effect on pharmaceutical companies and their business models.



Market Access Survey on Challenges and Key Success Factors

While market access is the ultimate goal for medical device and pharmaceutical companies it remains one of the biggest current and future challenges for the industry. Spiraling R&D and drug development costs around $4-5 billion per a successful drug launch make effective launch planning and implementation more critical than ever to a company’s success.

To uncover the specifics on the challenges and key success factors, Alliance conducted a survey with stakeholders from 38 pharmaceutical companies, each holding positions in pricing, reimbursement, market access, health economics, and policy.  The challenges and key success factors that emerged are depicted below.

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The key findings from this study are as follows:

  1. Know your customer: You must identify and prioritize your customers. You must understand their values and beliefs. Understand their constraints and limitations. Understand what motivates them to take action.
  2. Develop your evidence: What truly makes an impact on their values and beliefs? What trial design and endpoints will help them move into action? What data design and evaluations best support the evidence? What format should the data be in to be most relevant to them?
  3. Be crystal clear internally on strategy and execution: What is your plan? Who has the experience to execute them? When will they do it? How will they do it? What’s the contingency plan when something goes wrong?

For more information on the specifics around the challenges and key success factors, a white paper is available for download at the following link.

Emerging Global Pharmaceutical Trends for 2014-2020

The landscape for pharmaceutical research and development is shrinking, resulting in reduced revenue possibilities and tougher competition. New regulatory and pricing trends emerging this decade bring a paradigm shift that the industry must respond to and embrace to ensure success. The future will bring increased responsibilities to pharmaceutical manufacturers, but will also open the door for new opportunities.

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Smaller Launches

As broad-spectrum pharmaceuticals become increasingly available, the industry begins shifting towards a more specialized focus. Orphan drugs are becoming the focus of development efforts as the specialized area harbors the most opportunity. New patents are being awarded primarily to prescription pharmaceuticals that can address previously untreated – or under-treated – diseases. As a result, the quickest way to an exclusive marketable drug is filling these niche markets.

In 2013 the number of FDA-approved new molecular entities (NMEs) met an industry average of 27, although this number dropped from the 39 approved in 2012. Most of the NMEs approved last year are targeted toward rare diseases or highly-specific medical conditions, proving that Orphan Drugs are becoming the focus for future growth. With such a niche target, large blockbuster releases are entirely impractical. Instead, pharmaceutical manufacturers have favored smaller, more strategically precise launches and as the trend continues into 2014, smaller but more frequent product launches are likely to continue.

Value-Based Pricing

This year we will see the regulations for pharmaceutical pricing reach full effect in the UK. The primary factor behind pricing pressure is a push toward value pricing, a pricing model based upon what customers are willing to pay and the perceived benefits one drug may have over another. The shift toward buyer-focused modeling brings increased pressure for pharmaceutical companies to bring lower-priced or higher-impact drugs to the market. While the regulation is currently localized to the UK, it is likely other European countries will follow suit. With proof of customer benefits, the trend is likely to spread throughout global markets, shifting the burden of affordable healthcare to pharmaceutical manufacturers rather than healthcare providers or insurance companies.


Increased global communication will effect pricing models even further. As international transparency increases, customers gain better ability to compare drug prices across various markets for themselves. Greater technological assessments of new drugs will move the power into the buyer’s hands, putting increased pressure on drug manufacturers to lean toward a buyer-friendly market. A pricing paradigm shift throughout 2014 may be seen that could continue to control pharmaceutical pricing through the remainder of the decade.

Increased Collaboration

2013 represented a rather calm year for pharmaceutical acquisitions and mergers. The relaxed atmosphere is expected to dissipate in the coming years as trends shift towards more aggressive marketing. As previously stated, the pharmaceutical industry is moving toward more specialized medicines, and the race to be the first to bring a targeted drug to the market will cause an increase in company acquisitions. Smaller manufacturers can expect to face increased pressure for mergers or collaborative efforts from bigger companies in the interest of protecting margins for emerging prescription drugs.

In situations where acquisitions are impractical, collaboration efforts from major pharmaceutical companies in producing new research and launching new drugs may be the only option for ensuring a return on investment. However, by its very nature, collaboration means smaller margins for each party involved, splitting profits between each functioning entity and while it could mean smaller profits per drug, the speed and technology of collaborative efforts could increase a company’s overall production. The shifting terrain only better serves the anticipation of smaller, more frequent product launches.

Social Media and Digital Marketing

In the past, the pharmaceutical industry by nature had a resistance to social media and digital marketing techniques. With built-in safety concerns, social media marketing brought a higher risk for the company and the potential for a large-scale fallout from aggressive marketing or what may be perceived as negligence. Opening a drug to social platforms carried a responsibility to customer experiences that extended beyond standard health-effect research. The topic shifted into an open forum where individuals can express concerns or negative experiences directly to the marketing branch as well as other customers.


However, the time has come to embrace social marketing. Cultural trends are leading societies around the globe toward internet-based shopping and product research. As society becomes more closely integrated, social media emerges as the cornerstone for successful marketing campaigns. Admittedly, the concept is not entirely new for pharmaceutical companies, and many manufacturers have been testing the social media waters over the last few years. But as we move into the latter half of the decade, pharmaceutical companies may have to abandon their reluctance and dive head-first into social media marketing, as it will increase their marketing range and establish them as a more socially relevant entity.

Porsche to Pharma – Price Harmonization across GCC

Just as Porsche standardized price levels across the GCC (Gulf Central Committee) a few years ago, Pharma is now following suite.

In July 2005, the health ministers from the six GCC member states, (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE), approved the Price Harmonization Process, a mechanism to align pharmaceutical prices across the region. The process, initiated in 2013, aimed to align the Cost, Insurance and Freight (CIF) price of all presentations marketed in the GCC countries.

What are the Possible Repercussions of the Price Harmonization Process?

At present, there are significant differences in medicine prices across the GCC countries and the likely impact of the harmonization process is predicted to effect the majority of products with substantial price reductions expected across therapy areas. If we look at the potential impact on Glivec 100mg as an example, the probable effect of price harmonization could mean reductions of 5% in UAE and 34.65% in Kuwait.¹

Could the Price Harmonization Process Impact other Non-GCC Countries?

The Price Harmonization Process could potentially have an effect on other countries which take into reference the GCC countries when International Price Referencing.

Each of the GCC countries has a different regulatory timeline and process; if the registration process therefore were to start at the same time in all the GCC countries, the new product would have a different launch date in each market and the launch price in the 1st market may be reduced if one of the other GCC markets launches at a lower price.

In summary, the Price Harmonization Process is expected to result in significant price reductions for medicines across GCC countries. The importance of optimal product launch sequencing will become increasingly important to bear in mind when launching a new product in these markets.

For more information on Alliance’s global pricing intelligence service, please see our Pricentric product page.

  1. Source: Pricentric™ data – April 2014 prices

Impacts of Healthcare Exchanges

Healthcare reform is bringing a major paradigm shift in the insurance market and the establishment of new healthcare exchanges. New legislation and regulatory standards are not only causing a surge in the number of people insured by commercial healthcare, but are also increasing the amount of Medicaid-covered individuals and the scope of Medicaid coverage itself. With the existence of a new national healthcare exchange marketplace and state-based exchanges, insurance shopping has a new level of accessibility that could potentially result in a board-spectrum shift of health insurance operations.

For pharmaceutical companies, this means a complete overhaul of existing standards and a forced adaptation to a new environment. Former costs, expenses, and policies will no longer function as they did, and healthcare companies need to guarantee their business and pricing models can exist in the new atmosphere. There’s no simple fix for those who decide to go it alone, but for industry-savvy executives, there are options to explore for making transitions quick and painless.

Exchange Enrollment

Continued enrollment growth in the healthcare exchange marketplace is driving the Affordable Healthcare Act forward. The open enrollment earlier this year caused a massive spike in the number of people insured in the United States, and the marketplace itself ushered in new insurance policies designed to provide coverage as required by the law. Since the penalty of fine is an ever-present deterrent from ignoring the new legislation, enrollment will continue until all citizens are covered either through commercial means or government programs. Charting enrollment progress and success can provide crucial insight into markets and customers across varying atmospheres and locations. As such, the practice allows medical companies to arm themselves with the knowledge of newly developing terrain in the healthcare landscape and use it to drive their own revenue and relevancy toward sustained growth.

The most important aspect of enrollment monitoring is casting a wide net. Since the new law affects change at the national and state levels, each state in the country will respond to and enforce change in differing ways, or at least at differing paces. As such, it is imperative to research how the market develops across the country on a state-by-state basis. Constant vigilance of the key players and major markets is the key to successful intelligence gathering that can stimulate growth and increase profit.

Never Stop Learning

Changes affected by new regulatory standards cause a need for new practices beyond market research. To fully understand the scope and impact of the Affordable Healthcare Act, education must be the primary focus. Tactical preparation for immediate changes and future shifts as a result of the initial impact provide a proactive way for addressing the new market. With workshops and seminars being made available to them, pharmaceutical executives must take advantage of resources that grant a deeper understanding of the issues and how to work around or with them.

Information is the best-suited tool for handling change. Not only is it necessary to understand and prepare for a new market, but the numbers generated by said market must be scrutinized and used to allow stronger brand identification and business strategy. Factual statistics regarding enrollment numbers, as well as Medicaid membership and impact, provide the basis for developing a marketing strategy. Education is essential to survival and any proposed system or strategy for addressing the new healthcare exchange market must be based upon informed decision making.

Full-Spectrum Coverage

The Exchanges360 suite provides comprehensive preparation for the shifting face of the healthcare industry. Through accurate, up-to-date data analysis, continued education through seminars and workshops, timely and frequent updates regarding enrollment statistics, and personalized consultation efforts toward strategy development, the package is the ultimate support for handling the new paradigm.

Daily on-going support ensures tactics never fall behind the current shape of the market, and direct consultation strategies keep businesses focused on the precise matters relevant to them while advancing new strategies for brand development and profit growth. Aptly named, the Exchanges360 suite provides full spectrum protection for pharmaceutical businesses against any and all unseen consequences of the implementation of the new healthcare market.

Alliance Life Sciences Launches New Pricentric™ Portal: Robust Data Services Application Synthesizes Competitive Global Pharmaceutical Pricing and Reimbursement Data

Alliance Life Sciences is pleased to announce the launch of a new portal for Pricentric™, a comprehensive data services product that integrates competitive pharmaceutical pricing and reimbursement data from multiple global markets. We are offering a free trial of the new portal at:

“Pricentric™ enables our customers to stay ahead of austerity measures across key markets by tracking changes, such as price cuts, margin changes and more,” says Preeti Patel, Vice President, Consulting Services, ALSCG. “This reliable, fully customizable offering – the first of its size and scope — is designed to meet customer needs, providing data coverage spanning over 80 countries, and enabling easy treatment cost comparisons and reimbursement levels for key products by indication or country.”

Pricentric™ provides a robust data source with standardized naming conventions that enable users to easily compare product prices.  Data is standardized using Alliance’s proprietary product classification system to enable easy cross-country comparison at the product and pack level.

Pricentric™ features include:

  • Full range of reimbursement information, including status, prescribing      restrictions, rates and co-payment prices
  • The most current, and historical, exchange rates to facilitate conversions to      standard currencies
  • Flexible data delivery options enable access via PRICENTRIC™ portal, Microsoft or Excel

“Pricentric™ helps users to define an optimal global pricing strategy through the identification of pricing trends in key markets, and monitor responses by competitors to price actions taken for the company’s own products,” adds Patel.  “A team of dedicated experts is available to help with interpreting data, and users can access analysis and modeling exercises, such as pharmaco-economical modeling, analysis, and hospital pay or budget impact, to assist decision-making processes.”

Highlights from the 2014 Pharma Pricing & Market Access Outlook Conference in London

by Patricia Ladrón de Guevara

UK – Update on VBP

Paul Catchpole announced that the Value Base Pricing implementation has been delayed until late 2014.

It was announced that the VBP scheme is going to include an annual cap on economic growth of each medicine. If the pharmaceutical company exceeds the growth agreed, a rebate of the amount exceed will have to be paid back – this amount will be visible to the public!

Referring to NICE, it was said that NICE will be a body to evaluate reimbursement not pricing. It was explained that NICE will not negotiate, publicly set or indicate prices.  The threshold will remain at the same level. NICE will evaluate Value Based Assessments from autumn 2014.

Germany – AMNOG Analysis

Dr. Meriem Bouslouk gave a rundown of recent news on the AMNOG situation expressing that the market launch and early benefit assessment run in parallel with AMNOG. The mandatory rebate of 16% was reduced to 6% the 1st of January of 2014 and will be increased to 7% the 1st of April pf 2014.

France – Medico-Economic Assessment

Professor Jean–Luc Harousseau talked about the pricing process in France.

It was explained that the drugs in France are priced in accordance to the ASMR classification. If the drug is classified in class ASMR I and II: the price will be based on IPR If the drug is classified in class ASMR III and IV: the price approved will be similar to the comparator. If the drug is classified in class ASMR V: the price approved will be cheaper than the comparator and the product will not be reimbursed.

Netherlands – Temporary Reimbursement

Martin van der Graff introduced a very important concept to bear in mind in Netherlands when launching a product in Netherlands, Temporary Reimbursement. It was explained that if you achieve all the criteria for temporary reimbursement in Netherlands, you can launch the product and negotiate the price afterwards.

Italy – Algorithm to Define Innovation

Dr Giovanni Tafuri explained the changes introduced in the evaluation system in Italy.

It was announced that currently in Italy, there is a possibility of quick access ie launch the product before starting the reimbursement process with free pricing.

There are 3 groups of medicines with a faster negotiation process: orphan drugs, hospital only use medicines and medicines of great therapeutic and social relevance.

One very important feature to highlight about the Italian System is that Dr Giovanni talked about the development of an algorithm to define innovation which is due to be completed in 2015.

Canada – Attractive Pharmaceutical Market

Neil Palmer showed the market figures for the healthcare system in Canada.

It was explained the Patented Medicine Prices Review Board (PMPRB) role: the primarily role of this board is price fixing but is not involved in reimbursement decisions. The classification system is similar to the ASMR rating in France. Also, although price setting is a central decision, reimbursement is solely decided at provincial level.

An IMPORTANT NOTE about the future – Canada is considering extending the basket of reference countries (consult Pricentric for more information)

Greece – Reactivated the Approval of New Drugs

Penny Retsa recalled to the audience that Greece has not approved new drugs in the last 2 years. However, she announced that the Ministry of Health in Greece has reactivated the approval of new drugs from the beginning of 2014.

She highlighted that in the price bulletin that has just been published there are new drug approvals for the first time in 2 years.

The Conclusions of the Conference were:

Due to the limited healthcare resources across the countries, Governments are trying to establish new legislations and rules to ensure that the resources are allocated to the most cost-effective treatment. This is resulting in ever-changing price and reimbursement legislation. For further information contact Patricia at:

Copay Offset Cards: Attitudes & Experiences of Stakeholders & Implications for Continuation

Copay offset cards have a grown a great deal in popularity and usage over the past few years. Pharmaceutical companies are offering these cards to reduce, or eliminate, the copay amount required to be paid by patients. The number of companies offering these cards has increased over the years, but despite wide spread use, very little information is available regarding the attitudes and experiences of important stakeholders such as patients, pharmacists, physicians and payers.

In the near term, sponsors of these cards will be making important decisions regarding their continuation and enhancements being made to them. It will be vital to weigh the opinions of the various stakeholders before coming to a decision on whether to enhance or discontinue these programs.

Currently there are approximately 400 active products in the market that have copay offset cards available to patients. The cards reduce the amount of out-of-pocket copay due from patients for a specific prescription, so each product must have its own card. The cards are wide-spread within top pharmaceutical manufacturers, with companies such as Abbott, AstraZeneca, BristolMyersSquibb, Merck, Novartis and Pfizer all offering them for some of their products.

There are differing opinions on the offset cards depending on which stakeholder in the equation you speak to. Many feel that by increasing the affordability for patients to purchase these products, copay relief cards increase adherence and persistency among those patients. However, some are not in favor of the programs as they feel they promote the use of expensive brand name drugs where a cheaper generic alternative is available.

With some preliminary data now available, it appears the majority of physicians are in favor of the copay offset programs. The affordability for patients allows them to have less boundaries for treatment, as they are not as limited on product choice due to price differences. The minority voiced concern that they encourage the use of the higher priced drugs over generics, which could ultimately increase the cost of healthcare in the long run.

There has been some speculation on whether the majority of copay offset cards were being issued for products that had no competition, or ones with brand and/or generic counterparts. Some preliminary data confirms that most copay offset cards are offered on products that do have generic and/or brand competition. In these cases, the brand name product with the offset program ends up costing less than the competition, whether brand or generic. This is where some stakeholders such as the payers start to have concerns on the future of healthcare.

The obvious winner in this equation is the patients. With the rising cost of healthcare, they receive some relief at the pharmacy with these programs, and that’s the main reason they were instituted. The questions remains if through benefiting the patients in the short term, the overall healthcare industry with have long term negative effects as a result in the various pieces of the puzzle.

Global Lifecycle Price Management – A 360 Degree Approach

When launching a new product, companies are often met with a series of challenges. Any error or miscalculation could end up costing your company a significant amount of market share. One of the biggest hurdles to overcome is pricing. Finding a price that is both competitive in the global market, as well as profitable, can be more difficult than companies realize. The key is having access to accurate and current prices of the competition, while at the same time being able to set and maintain effective prices with minimal manual upkeep. Another concern with global lifecycle price management is price erosion with products that have been on the market for a longer period of time.

For example, according to a study by the EPP (European Pricing Platform), 42% of organizations are operating on the most basic level pricing maturity. Approximately 48% are functioning on a higher level, having the right prices on the right products to the right people, but still aren’t fully integrating the commercial process of alignment with marketing and sales. While this second tier is more desirable than the first, it is still far from optimal.

Global lifecycle price management issues can typically be broken down in 3 subcategories.

Product Launch Challenges

These issues can be some of the toughest to deal with when launching a new product. An effective launch starts by determining the best country sequence in which to launch your product, where a mere 1% in price difference can end up costing millions of dollars in net present value, or NPV. Managing all the details and data for launch planning is also critical, especially in knowing the effect they have on pricing. Also, you must take into account the need for change as the project develops, and often times manage this with changing parameters, to keep pace with the project evolution.

Price Maintenance & Compliance Challenges

The next obstacle is maintaining the strength of products that are already on the market. As conditions change, so too must the price on a product. This helps to avoid price erosion, which can cost millions of dollars every year. Here you must also be able to quickly and accurately check reference prices, which is a crucial step in being able to set an effective price in any country. This is a highly effective way to protect your company from any errors in government price publications, as well as to assist in generating accurate reports.

Loss-Of-Exclusivity & Mature Products

When managing older products, the key is to be able to monitor and manage with minimal manual effort and resources. Once a product launch is successful to the point of near self-sufficiency, it’s time to move on to the next project. Having to divert resources to an old project means diverting time and energy away from new ventures, and this can be costly in the long run. Your business must be equipped with the right tools. Software that can efficiently predict the potential impact of price erosion means adjustments can be made before they end up becoming costly issues.

Prevention is Key

What it all comes down to is the proper amount of preparation. By planning ahead and exercising the proper caution and forethought, charting a course to success is easier than one might think.

In the study conducted by the EPP, 88% of organizations declared intention to invest in pricing software for reasons such as, price monitoring, reporting, price guidance and deal making. Alliance Life Sciences specializes in helping life sciences companies operate at peak efficiency with a full suite of global lifecycle price management software designed and developed to aid in managing your business and making sure you hit the right price for maximum profit.

For more information, an on-demand webinar is available on market access operational excellence.

Drug Costs: 5 Things You Need To Know

Recently Dr. Joel Owerbach, VP of Health Policy and Strategy for Alliance, was interviewed for WebMd’s Health Reform 101 blog on the new Health Insurance Marketplaces and Exchanges. In particular, the focus was around what they mean to consumers who are planning to purchase coverage on their own, and what they can expect in the process.

This piece provides a great 5-point summary on the new programs, and is both a quick-read and must-read for those attempting to better understand what they mean to the consumer. The full article can be viewed at this link.