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  • Art Taft

An Opportunity for Bio-Pharma Manufacturers

Updated: Dec 26, 2019

Commercial employers are the ultimate payer for the majority the health care in the United States. These employers pay 52% of the aggregate US healthcare bill which translates to about 20% of the worldwide healthcare spend. Historically, employers have considered oncology care untouchable due to the severity and comparatively low prevalence of the various cancers. Medicare is considered to be the major payer for cancer care. This is due to the time of life where individuals are most likely to be diagnosed, and it can also be caused by the fact that the employers’ buying power is fragmented across millions of organizations and dozens of health plans.

This status quo is likely change very soon.

Employers and Health Plans are recognizing the financial toxicity of newer oncology treatments.[i] And they are concerned about the actual benefit of these care protocols.[ii] Reports even suggest that “dozens of new cancer treatments” do not positively impact patients’ outcomes.[iii] A recent Gallagher survey clearly indicates that employers are concerned and are starting to consider various strategies to impact change.[iv]

Bio-Pharma Manufacturers should see this as an opportunity.

Employers are not happy with several cancer care areas. The price of the medication is the lead topic, but there are other concerns:

· When the treating oncologists do not use the most effective agent first, the employer absorbs additional costs for alternative care, potentially avoidable exacerbations, and often worse care outcomes.

· The treating oncologist often use expensive care and continue treatment to within a few days of the patient’s death. The oncologists avoid end-of-life counseling even when it is in the best interest to the patient.

· Historically, the distribution channel has received a variety of what are, to the employer, hidden payments. Administering rebates and other cash flows makes the cost of care less transparent and adds administrative costs that a simple and direct pricing model would resolve.

· The lack of studies that assess product safety, efficacy, and financial benefit makes it hard for employers to justify covering very expensive treatments in their benefit design.

Ultimately, the employers want to provide clinically and cost effective care to their members through their benefit design. Employers want full transparency at the time they make the benefit decision. They also want to have the oncologists make the care decisions but also share some of the financial risk associated with their care decisions.

Why should this be an opportunity for a treatment manufacturer?

Bio-Pharma Manufacturers represent 60 to 80% of the total treatment costs for oncology care. The cost of the medication is presented as the major issue. Thirty five percent of the costs for medication industry wide is for marketplace promotion. The move towards “value-based” pricing in cancer care is driven by the channel partners not the employer-payers. The employers are well aware of the lack of transparency that exists in the current rebate system and associate this with Bio-Pharma manipulation of their purchasing decision process. As a result, the Bio-Pharma manufacturer receives the full blame for the high costs associated and manipulation that results in ineffectual care. The distribution channel partners and the oncologists whose actions add to the total cost are often willing to pass the responsibility for the total cost on the manufacturer alone.

Bio-Pharma manufacturers are also rethinking their distribution channel. As more complex medications enter the market designed to serve fewer but more specific patients, the manufacturers are already reducing the number of outlets to ensure appropriate use and administration.

It is absolutely critical that ____ completes a detailed confidential survey that assesses the self-insured employers’ thoughts and identifies possible ‘value-base” approaches that translates in employer speak to the lowest possible medication price with the maximum transparency in the overall process. The survey will not only capture the data but it will seek to identify partners interested in piloting different value-based contracts. One specific group to be included in the survey would be State Employee Trusts. They represent concentrated populations in specific geographies to insure there is sufficient incidence of a condition in the pilot.


[i] https://khn.org/news/pricey-precision-medicine-often-financially-toxic-for-cancer-patients/

[ii] https://khn.org/news/widespread-hype-gives-false-hope-to-many-cancer-patients/

[iii] https://khn.org/news/dozens-of-new-cancer-drugs-do-little-to-improve-survival-frustrating-patients/

[iv]http://www.benfieldresearch.com/pdf/2019%20Gallagher%20Research%20&%20Insights%20Employer%20Oncology%20Management%20and%20Benefit%20Design%20Overview.pdf.




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