The Evolving Value Proposition of New Drugs within a Transforming USA Healthcare Landscape

During the last five years, we have seen many changes in the managed care arena, driven in part by healthcare reform, but also by changes to technology, shifts in drug expenditure, and greater scrutiny around healthcare costs in general. In order to advance the discussion around the evolving USA healthcare landscape and the implications to hospitals, drug manufacturers, and overall patient access to therapies, CBPartners convened a live-panel discussion at the 2015 Beyond the Pill Conference. The following individuals with expertise in Accountable Care Organizations (ACOs), Specialty Pharmacy, and Group Purchasing Organizations (GPOs) were invited to provide insight on the many trends in this rapidly changing environment:

• David Blazo (Director of Pharmacy, Franciscan Alliance ACO)

• Gary Rice (Vice-President of Clinical Service, Diplomat Specialty Pharmacy)

• Walter Geba (Former Senior Vice-President of Contracting and Chief Pharmacy Officer, Innovatix).

According to the respondents, of particular note is the expanding role of many healthcare stakeholders beyond their traditional function. For instance, today’s specialty pharmacies go far beyond claims submission and drug dispensing. With increasing availability and utilization of specialty drugs, there has been gravitational pull towards specialty pharmacy, and hospitals and payers alike have shown their interest by purchasing or starting their own specialty pharmacies. With regard to this trend, Walter Geba noted, “The challenges are that there are many providers who are playing in the same space. You have hospitals that own insurance plans; you have hospitals that own their own specialty pharmacies; you have home-infusion providers who are buying specialty pharmacies. So what do you do? You build partnerships.”

With the tighter integration between many parties in the payer-provider-patient chain, more stakeholders than ever have a stake in the finances of high-cost drugs, particularly specialty medications. Specialty drug spending increased by 30.9% between 2003 and 2014, and has offset the stagnation of small-molecule drug expenditure that followed the patent cliff. As a result of the increasing cost-conscious USA healthcare landscape, there has been a cultural paradigm shift that now encourages many healthcare professionals to take a role in cost management. From an ACO perspective, there is a focus on quality metrics, integrating coordinated care efforts among providers, and cost. These three aspects are equally considered and can impact management decisions with regard to seeking evidence in support of formulary listing for new drugs. As highlighted by David Blazo, “We have established a process to manage a master drug formulary that covers all 12 hospitals and all physician offices [in our system]…Our process does create winners and losers, but as guidelines and practices change, well so does the formulary…We are very evidence-based.”

Along with cost-containment and improving patient care, the new USA healthcare model places a greater emphasis on population health. As noted by the respondents, the integration between payers and providers will focus on developing strategies in order to understand and improve population health. It was noted that stakeholders are now focusing on 60% to 80% of the population who are considered low-risk today, because they have the potential to become high-risk patients with significant unmet needs in the future. Therefore, focusing on population health can assist with identifying the subset of patients who may become high drivers of cost and to follow them more closely. As emphasized by Mr. Blazo, “You are not going to build the ROI in this space on quality alone. There needs to be a business case on how this will work, on how stakeholders that are in this today will collaborate together for the sake of population health.” It was raised that the increasing focus on population health is expected to change the landscape on how drugs are being developed. For instance, population health and unmet needs can be used to determine which disease areas should be prioritized for care and investment.

As these partnerships between health systems, physician networks, and managed care itself are being fostered in the evolving healthcare landscape, our panelists noted that patients were constantly at the forefront of discussions across stakeholders. For instance, Gary Rice noted the following: “It is important to have a balanced approach to the value proposition for those products, and how are you, as a manufacturer, going to address those challenges associated with the patient experience.” Under the umbrella of specialty drugs, patients’ needs are being considered as studies have found that specialty pharmacies are able to improve patient adherence to medication as well as offset direct and indirect medical costs. The role of specialty pharmacy providers has been gaining traction among current and new healthcare stakeholders because of its ability to manage costs of high-value therapeutics through a streamlined delivery process, as well as an ability to collect clinical and outcomes data.

As highlighted by our panel experts, during the last five years there have been many changes in the managed care world. How should manufacturers respond and adapt to the emergence of new customers (i.e. ACOs), the greater focus on the management of specialty drugs, and the implementation of initiatives targeted at improving quality and cost of care? As exemplified by the numerous examples of hospital systems purchasing physician practices and the influence of specialty pharmacy offerings beginning to integrate into new sites of care, manufacturers are recommended to closely monitor the stakeholder expansion and partnership landscape in order to properly prioritize future customer targets. With the growth of the specialty pharmacy channel, manufacturers should explore opportunities to partner directly with specialty pharmacy providers to leverage drug delivery and patient-support options. Furthermore, manufacturers can support the initiatives being developed and implemented by today’s care providers by brainstorming public health initiatives (such as the identification of high-risk patients associated with increased health resource expenditure), as well as providing data to support payers / providers / systems which can potentially help to triangulate patient benefit. Overall, manufacturers should seek to play an active role in collaborating with current and emerging stakeholders, as this has the potential to translate to improved patient access to innovative, life-saving and improving treatments and enhanced population health. Every stakeholder has a role to play in the market’s increased focus on quality of care, coordination of care delivery, and cost containment.

Andrew Gould, Maximilian Hunt, and Christina Yong:

CBPartners would like to thank all of the panel experts who participated in the live-panel discussion. The workshop aimed to bridge the various perspectives, and we greatly appreciate each participant for sharing their insight on the transforming USA healthcare system.