Articles on Pharmacy Benefit Management

Featured Health Business Daily Story, April 12, 2010

Health Plans, PBMs May Have Increased Influence Over Which Drugs Are Prescribed 

Reprinted from DRUG BENEFIT NEWS, biweekly news, data and business strategies for health plans, PBMs and pharmaceutical companies.

By Renée Frojo, Editor (rfrojo@aishealth.com)

Payers’ restrictive formularies and more rigorous evaluation of new therapies is changing the way pharmaceutical companies market their products by putting a greater emphasis on published research results. That could give pharmacy benefit managers (PBMs) and health plans greater influence over which drugs are prescribed, say some industry analysts.

“As cost control pressure mounts, those paying for and managing prescription drug plans will have the greatest influence over what products will be available for the physician to prescribe,” Mike Wokasch, executive advisor at Wokasch Consulting, LLC, and author of the Pharmareform.com blog, tells DBN. As a result, plans and PBMs “will become increasingly important marketing targets for pharmaceutical companies.” That’s because “the realities of health care reform will come with an increased need for cost control at the payer level, and prescription drugs are an easy target.”

While physicians ultimately make the prescribing decisions, Wokasch argues that they have become increasingly constrained by formularies and influenced by payer guidelines. Insurers’ broader generic drug portfolios, restrictive formularies and more rigorous evaluation of products “have diminished physician product choice and are replacing the physician as the primary driver of prescription drug use,” he explains.

The results of this changing dynamic could have an impact on how drug prices are determined. For example, when a drug company decides how to pitch its new product to payers, it will have to prove not only why the product is superior to all the other therapy options, but also why health plans should pay more for it. If drug companies have solid published clinical and economic value data, “they will be able to charge pretty much what they want,” Wokasch asserts.

He adds that this is very different from the days when mediocre products could be transformed into blockbusters with “creative marketing and commercial horsepower,” which in reality meant “big budgets and large sales organizations.”

By contrast, David Clark, vice president of pharmacy services for Regence BlueCross BlueShield and president of RegenceRx, contends that “it is not likely that the [health reform] law passed will give payers more influence over which drugs are prescribed” — especially for Medicare Part D. “When Part D passed, the federal government was strongly lobbied to prevent too many controls over medications by plans,” he tells DBN. “As a result of all efforts, Part D plans are now required to cover all medications in several therapeutic classes.”

For instance, CMS requires that Part D formularies include all or substantially all drugs in six drug classes: antidepressant, antipsychotic, anticonvulsant, immunosuppressant, antiretroviral and some chemotherapy drugs that aren’t generally covered under Medicare Part B.

In fact, Clark adds, “if health care decisions are not made on a scientific basis, payers’ influence over appropriate therapy could be decreased.” For example, he explains, even drugs that are backed by weak scientific evidence with poor ratings are sometimes still approved by the FDA. And even when Regence’s pharmacy and therapeutics committee votes to not include a certain drug on its formulary, CMS could require the PBM to cover it in Part D products.

Such government mandates, especially those requiring specific coverage of products or treatments, also could have the unintended consequence of increased costs, Clark warns. “Mandates limit payer ability to negotiate price or coverage based on the clinical value of the product or treatment.”

Payers Demand Better Clinical Evidence

Regence currently requests access to all of a drug maker’s studies when reviewing new products, “to help us find the evidence that provides sound enough information to help guide better clinical decisions,” Clark says. “What we have seen is that a large number of studies are so poorly done they cannot be used to make clinical decisions and that only about 10% of new products provide more value clinically than previously available products.”

Wokasch agrees that drug companies will have to step up their game to offer proven, clinically meaningful products that stand out over other therapeutic options. “They will have to develop and publish the data to support the clinical claims and prove the value of products they want used, especially if they are expecting premium pricing to other therapeutic options,” he says.

In addition, drug companies will have to increase their use of sales and marketing executives with expertise in managed care markets “to navigate the labyrinth of decision making and negotiate favorable positions for product use within the plan,” Wokasch says. “They will need the assistance of scientifically credible resources (not sales people) to help them discuss the technical aspects of their products.”

While Wokasch acknowledges that many of these marketing tactics are being used today by drug makers, “the level of managed market expertise and the robustness of the clinical data needed will increase proportionately with the cost control intensity of health care reform,” he argues.

Still, marketing directly to plans will prove tough, given payers’ increased level of scrutiny over new therapies. “We focus on science, not marketing,” Clark maintains. “We are already approached by pharmaceutical companies and we will continue to require valid evidence to support the relative value of their products.”

Wokasch agrees that payers won’t tolerate traditional drug company marketing and sales tactics. “As cost control becomes increasingly important, I believe they will further distance themselves from industry influence,” he explains. “Pharmaceutical companies with anything short of definitive published clinical data to support the claims for use and purported value will be met with skepticism and more likely just be dismissed.”

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