Title: Pressure from Increases in Cost, Pricing Implications, and Launch Considerations Craig Kephart, President
1Pressure from Increases in Cost, Pricing
Implications, and Launch Considerations Craig
Kephart, President CEOCentric Health
Resources, Inc.May 6, 2009
2News
- the PwC report recommends collaboration with
non-drugmakers, particularly on disease
management programs. Partnering with other
companies on "holistic solutions" rather than
"narrow treatments" is a more flexible and
"value-enhancing" strategy than, say,
mega-merging. - Drugmakers are going to have to think of
themselves more broadly They can't be makers of
drugs. They have to be health gurus, project
managers, hospital partners ... and so on. - Outsource RDOutsource manufacturing. Outsource
sales and marketing, even. Then forge some links
with tech companiesand insurers, healthcare
providers and benefits managers. Reinvent
yourselves, pharma! Don't you know that's the
latest trend?
Source Fierce Pharma, Pharma In 2020, it's not
just drugs anymore, April 30, 2009.
3More News
- Were going to see a growth in outcomes
guarantees for pharmaceuticals, and its very
healthy. - - Robert Seidman, formerly Chief Pharmacy Officer
for WellPoint.
4Agenda
- Profile of a typical orphan drug
- Key Differences
- What Defines Success?
5Profile of an Orphan Drug
DRUG B
10,000
1,000
Yes
None
Oral
70,000/year
Home
Ongoing
Side effect mgmt, lab draws
None at this time
High
Low
Some
High
DRUG C
1
1
Yes
Possibly
Any
?
Anywhere
Ongoing
Possibly
Unlikely
High
Low(?)
Some
High
DRUG A
Potential Market 100,000
Number of Identified Patients 5,000
REMS No
Storage Requirements 2C-25C
Route of Administration IV Infusion
Cost 100,000/year
Site of Administration 60 home/40 Facility
Frequency of Administration Ongoing
Nursing Required Yes
Competitors Few or None
Value of Reimbursement Expertise High
Priority to Managed Care Low
Advocacy Influence High
Financial Support Needs High
6Key Differences vs. Larger Drugs
- Have to spread cost of service model and
monitoring over fewer patients - Focused sales force, specialists, CSLs, etc. need
to ensure physician that patient has access to
drug and that ongoing care is consistent - Fewer patients means every patient is critical
for sales need to build high-touch compliance
and loyalty program in order to keep patients on
drug - Greater demand for outcomes P4P, value based
benefit design. Health management is most
effective when fully integrated with distribution
7What Defines Success
LAUNCH DRUG
GET APPROVAL
High-Touch Patient Services Exclusive
Distribution REMS/Data
Plan Ahead Build Contingency Plan Integrate with
Distribution
MAXIMIZE SALES
Access Compliance Find New Patients
8Get Approval
- Companies that are willing to put the right
structure in place to monitor patients, collect
data, and measure outcomes should find that the
new regulatory model can work to their advantage. - The fewer questions left open, the more thorough
the planning and preparation, and the more
narrowly defined the REMS plan, the simpler the
FDA application process. - Execution of this planning process can provide
your organization with a competitive advantage
over manufacturers who fail to build REMS
requirements into their distribution.
9Typical Specialty Model
Typical Specialty Model
Buy / Sell
10Exclusive, Buy Sell
Mfr. Direct
Exclusive
Buy / Sell
Direct
11Comprehensive Model
12REMS Elements
13Maximize Sales
- Access
- Compliance
- Finding New Patients
14Integrated Health Management Distribution
Sell drug, service fees if reqd
Fee for service
Coordination, claims and reimbursement
Aggregated Data Reporting
Rx
Consented Patient data
Pharmacy and clinical services
Data
15Buyer (Payer) Bargaining Power
Characteristic Bargaining Power Bargaining Power
Characteristic Strong Weak
Product Demand High Low
Switching Costs Low High (not many alternatives)
Patient Buyer Demand Low High
Brand Importance to Patient Buyer Low High
Products for ultra orphan therapies tend to cause
weaker buyer (payer) bargaining power, thereby
eliminating barriers to access.
Source Fadia T. Shaya, PhD, MPH, Associate
Professor and Director, Center on Drugs and
Policy, University of Maryland School of
Pharmacy, CBI Strategic Pricing and Modeling
Techniques to Demonstrate Product Value, April 6,
2009
16Distribution and Patient Outcomes Continuum
Multiple SP providers with Integrate Hub Patient
Registry, and Health Management
Multiple Programs, Multiple Providers
Integrated Distribution Health Management
No Program
LOW
HIGH
17Why the Integrated Plan Works
EDUCATION IS NOT THE SAME AS A WELL-INTEGRATED
PLAN
EDUCATION
PROGRAM DESIGN
To maximize effectiveness, education must be the
right information at the right time and delivered
in a customized, personalized way
Significant effort is placed into the design of
the program prior to launch
DISTRIBUTION
Health management tied to distribution allows for
interventions at many levels
18Design Process
Intervention Goals (Examples) 1. Achieve
remission, manage relapses 2. Reduce risk from
steroids 3. Decrease ADEs 4. Improve knowledge 5.
Reduce relapses 6. Manage stress, depression 7.
Improve QOL
19Education
20Distribution
OPPORTUNITY FOR PATIENT INTERVENTIONS ON MANY
LEVELS
PHARMACIST
NURSE
REIMBURSEMENT
21Peer Health Coach
Goals
Goals
Individual Health Plan
Educate
Quality of Life
Capture Data
Compliance
Impact Outcomes
22Why the Peer Health Coach Model Works
Thus the development of PAGs
They want support, information, education.
Patients are driven to interact with other
patients.
23Service Intensity Bonus
- Service Intensity and Loyal Customers
- Service intensity is about cost-effectively
building relationships with customers. - A company cant offer more service than can be
covered by the value of a customer's repeat
business. - The right level of service intensity is therefore
a function of long-term product revenue and cost. - Effective service intensity creates loyal
customers. - You can measure service intensity.
24Service Intensity
- Types of Health Care Data
- There are many different kinds of health care
data - Prescription
- Contact management information
- Doctor and nurse notes
- Billing records
- Electronic medical records
- Lab dataorders and results
- Medical and pharmacy claims
- Survey datacustomer satisfaction and assessment
data. - As long as it can be tied to a customer, it
becomes a vehicle for discoveryfor learning and
improving the customer experience.
25Service Intensity
- Infusions from Facility to Home
- Patients that Centric assists in setting up home
infusion services are 1/4 as likely to terminate
as all other patients. - The process is labor intensivefilled with
paperwork and phone calls, but the long-term
payoff is loyal customers.
26Service Intensity
- Alternative Funding Sources
- Patients that Centric assists in finding
alternative funding sources are also 1/4 as
likely to terminate as all other patients. - Because almost 1/3 of Centric patients have new
or additional payors year to year, inability to
pay in one year does not mean the same for future
years.
27Service Intensity
- Extra Attention to Patient Concerns
- Patients that Centric assists by finding answers
to complicated questions are about 2/5 as likely
to terminate as all other patients. - The process is labor intensivebut customers
appreciate and reward the companys propensity to
give them extra attention.
28Service Intensity
- Infusions during Travel
- Patients that Centric assists in setting up
infusion services during travel are 1/10 as
likely to terminate as all other patients. - By enabling patients to be less held back by
their condition, the company becomes an integral
part of their lives.
29Integrated Specialty Pharmacy Results
Over 2,350 patients enrolled in program
92.8
Compliance
Patient Retention
95.8
95
Patient Satisfaction
98
Program opt-in rate
Time period measured 2005 2007 Source
specialty pharmacy data
30Cost Management
- What are the costs of Distribution?
- Managing multiple vendors
- Risk of service breakdowns
- Inconsistent Service
- Counterfeiting or diversion
- REMS requirements
- Redundancy in data collection efforts
- Compliance and health management
- How to mitigate
- Compress distribution channel
- Integrate service model with distribution
- Include distribution and patient services in
pricing
31Pricing Reimbursement
- Include Distribution and Patient Services in
Pricing - Include cost of distribution
- Include cost of REMS
- Factor in increased risk
- Consider impact of ASP
- Margin pressure from SPs will force more
discounts from the manufacturer - Discounts drive down ASP
- Direct distribution can mitigate this impact
32ASP Adoption
Does your organization anticipate moving to
ASP-based payments in the next 12-18 months?
n 81
Yes
No
My organization has already started to move to ASP-based payments.
Source payer survey, reported August, 2008.
33AWP vs. ASP Pricing
No incentive to SP
Margin loss to channel
SPs will look for margin on both fronts but will
face challenges...
The direct model addresses this issue with a
Fee-for-Service approach
34Summary
- Profile of a typical orphan drug
- is changing
- includes oral medications, subsets of larger
patient populations, and personalized medicine - Key Differences
- Require high-touch patient services
- Higher demand for outcomes data and monitoring
- What Defines Success?
- Get Approval
- Launch Drug
- Maximize Sales