Top 10 Pharma and Biotech 2018 Trends to Watch
Success in today’s pharmaceutical marketplace requires companies to continually reassess strategic direction, anticipate and absorb change, and move with deliberate speed. Leaders must step back, ask tough questions, and manage through ever-evolving obstacles to capture opportunity. As consultants, it’s our business to keep an eye on the trends that will impact the future of our industry. Everything from technology to the government to the largest online retailer in the world affects how our clients will continue to find success. Below we highlight ten of the trends we’re watching closely as we give way to 2018. Most of these have characteristics of headwinds and tailwinds, as trends are apt to do. As always, it’s what you make with what you’ve got. We hope that this list provides insight to make the most of this year’s opportunities.
The volatility of the Affordable Care Act (ACA) – Douglas Bock, Partner
Direct efforts to repeal the ACA in 2017 have failed, but the new tax law eliminates the “individual mandate” requirement of the ACA. Most policy experts predict the end of the individual mandate will remove millions of healthy people from insurance pools thus driving up premiums for sicker people. The net effect could reduce by millions the number of Americans with healthcare coverage. From the vantage of a manufacturer, programs to subsidize patients such as copay cards and PAPs could see dramatically higher levels of patient participation.
The copay accumulator creep – Kevin Cast, Partner
As enrollment in copay programs could be poised to surge, PBMs (pharmacy benefit managers) are getting more aggressive in combating copay subsidies. For several years, pharma has expanded access for branded products through copay programs directed at commercially insured patients. PBMs have consistently bucked against copay programs for interfering with benefit plan design, reducing generic substitution, and raising costs for plan sponsors. In an effort to secure greater control, PBMs developed copay accumulators at their specialty pharmacies to decipher when a copay card is used, and only apply the true out of pocket contribution against the beneficiary’s accumulator (deductible and/or out of pocket max). While this approach may not significantly affect the patient’s out of pocket, the manufacturer will see a dramatic increase in their total copay budget. The application of copay accumulators is just getting started. This year will see a widespread creep, with more and more drugs being targeted by payers. Manufacturers must understand how to work effectively with these cost control measures, or they will need to curtail copay programs or eliminate them altogether. Unfortunately, the net result may be less access to expensive medications.
The realities of low-cost medications entering the specialty pharmacy channel – Charlie Bell, Senior Director
By now, we’ve all grown comfortable with what makes a specialty drug “special.” But, the pipeline includes numerous drugs that will disrupt how we think about specialty and the services that play sidekick to that designation. Specifically, the marketplace will see many low-cost therapies requiring the high-touch services customarily implemented for their higher-priced relatives. That demand will compel innovative program design by manufacturers and specialty pharmacies. Most specialty drugs are priced within a range that supports the high-touch specialty pharmacy service model. Lower-priced specialty products disrupt the economics of the specialty channel. This disruption creates a downstream financial strain that goes beyond the specialty pharmacy and impacts other stakeholders within the specialty channel. Smart program design requiring detailed financial consideration and thoughtful harmonization of all program features and stakeholders is a must when planning an elegant commercial approach.
The consolidation of patient access – Douglas Bock, Partner
Change was the name of the game for patient access service providers in 2017. Those of greatest significance included:
· CareMetx ending its relationship with Walgreens
· Diplomat’s acquisition of WRB Communications
· The creation of PharmaCord
· ConnectiveRx’s acquisition of Careform
· Express Scripts’ sale of UBC to Avista Capital Partners
· McKesson’s purchase of RxCrossroads
· Leadership shuffles at major players like Lash Group and Covance
Pharma manufacturers working with any of the groups above should prepare for the inevitable evaluation and improvement of patient access programs. It also never hurts to be prepared for the possibility of operational inconsistencies as people are displaced, platforms are integrated, and programs are physically moved from one location to another. Even if your patient access vendor didn’t make the list, you may still benefit from new or improved service offerings and have to manage through interruptions as the marketplace tries to keep pace with ongoing, rapid evolution. The smartest teams are actively prepared for the highs and lows of continued consolidation in the patient access space.
The inevitable convergence of e-services - DeWayne Manning, Partner
In 2018, we will undoubtedly continue to see technology making a positive impact on the specialty pharmaceutical business. We’ve seen e-services begin to automate processes across the patient journey, often resulting in improved speed and customer experience. We expect that progress to evolve into more processes being automated and, more significantly now, being integrated to become tighter, faster, and more accurate.
At this point, the convergence of e-services, sometimes across multiple vendors, is where the largest opportunity for growth lies. Going forward, brand teams should have technology conversations as part of every launch strategy and specific conversations about opportunities to converge e-processes in the name of a better customer experience. If your eRX, ePA, and eBI could happen almost simultaneously, how much faster could your patients start therapy? Perhaps more importantly, does that improve the patient experience in the way you’ve determined to be most impactful? We’re entering an environment where the selection of e-services—from the types of services to the vendors—can make or break a brand. Asking the right e-services questions at the onset of planning is more important than ever.
The shift in focus from the competition to the patient – Sheryl Heinle, Senior Director
The restructuring of the U.S. healthcare delivery system, the regulatory environment, and the competitive landscape of reducing costs are challenging the pharmaceutical marketplace. Differentiation has become vital to success, pushing brand and market access teams to disrupt conventional approaches to how they reach and care for patients. Applying a new line of thinking known as Blue Ocean Strategy, pharma and biotech organizations are changing the way they approach their launch and patient access strategies. A great example of this is when companies view REMS requirements as an opportunity, rather than a liability, and refocus marketing efforts on the heightened safety and quality of their product.
Blue Ocean Strategy suggests that lasting success comes not from battling competitors but from creating “blue oceans” of uncontested market space ripe for growth. In forming a different mindset focused on creating opportunity versus trying to beat the competition, value is inevitably delivered to the customer or potential customer. In 2018 and beyond, we expect more companies to apply this approach to effectively guide business models that support the voice of the customer, speed to treatment, quality of service, and strategic course corrections at low cost.
The role of gene therapy as an economic change maker – Kevin Cast, Partner
Gene therapy offers highly effective but extremely expensive treatment options to very sick patients. Because most of these therapies are administered only once (or are in fact curative), pharmaceutical manufacturers have one opportunity per patient to get paid. Today’s healthcare system isn’t set up for this type of reimbursement model, leading to the need for an approach as novel as the medications themselves. All stakeholders—from the manufacturers to the specialty pharmacies to the payers—are seeking solutions. This year will likely see a unique collaboration between these groups, resulting in sustainable economic models built to improve access to these life-saving therapies.
The rise of the consumer – Katie Rapp, Senior Marketing Consultant
Never before have consumers had as much power as they do today. They compare products and services, ask friends, read and publish reviews, price check, and like to engage—as in on a two-way street—with brands. It is unwise to underestimate healthcare consumers’ willingness to comparison shop if it means they can save money or feel better about their purchase. Shopping for medications may not be the same path-to-purchase as other necessities, but for most Americans, it’s one of the most important buying decisions they make. And being a smart shopper able to make value-based choices isn’t easy. That’s where pharma companies can play a critical role in creating reliable, understandable information and decision support tools to help navigate the information overload maze with confidence.
In 2018, healthcare consumers will continue to expand their expectations in not only how they interact with healthcare companies, but also in how those same companies interact with the world. Is your organization green? Do you give back to the community? Does your company make the world a better place? One could argue that all medicines make the world better, but only the companies making an effort to show that in a meaningful way are being rewarded in the court of public opinion. Your message matters more than ever. If you don’t have someone dedicated to making sure it resonates with consumers, you should.
The Amazon(ian) elephant in the room – Douglas Bock, Partner
It seems inevitable that Amazon will more deeply enter the pharmacy sector and forever change the industry. They may enter the pharmacy business directly, buy up some current players, or perhaps simply provide back-end dispensing support. One can only imagine how the pharmacy model would be upended if pick, pack, and ship functions became hyper-efficient commodities. Differentiation for pharmacies would come in the form of heightened customer service and improved patient care.
The most progressive companies aren’t waiting for the massive disruption that promises, but are instead making consumer-centric changes now. If you can buy toilet paper at 3 a.m. and expect things like responsive customer service, no-risk return policies, and free 2-day shipping, why shouldn’t you expect the same (or better!) of your pharmacies, healthcare providers, payers, and pharma companies? Between offering same-day delivery in certain markets and their pending merger with Aetna, CVS seems to get it. This year will surely see how other pharmacies adapt their business models to prepare for a market that includes Amazon.
The struggle with DIR fees – Kevin Cast, Partner
Direct and Indirect Remuneration (DIR) fees were instituted by CMS to fully capture Medicare Part D total drug costs to ensure that PBMs would not retain the difference between the apparent and actual drug costs after factoring for the rebate dollars paid by pharma. Many experts believe that what started as a great idea is now being abused. Are the PBMs following the intent of CMS, or are they merely retaining these fees to squeeze more out of the supply chain?
Regardless of where you fit in the pharma industry, DIR fees impact every constituent in the supply chain: pharmacy margins are eroding to all-time low levels, payers may or may not ultimately be reaping the unbalanced benefits from DIR fees, and pharma doesn’t think DIR is their problem. What is reality and what is fiction?
For now, there is no resolution in sight unless the government decides to take action. In 2018, we will see pharmacies continue to lobby the authorities on the misapplication of these fees by the PBMs. Will pharma come to understand DIR as their problem? If the current application of DIR continues, it may ultimately limit choice of pharmacy fulfillment sites and funnel more scripts to the payer-owned pharmacies.
For pharma companies, 2018 is a time to rethink basic assumptions, challenge institutional bias, and force debate around longstanding approaches to commercial success.
- Archbow Consulting -
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