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It’s
no surprise that UnitedHealth, the nation’s
second-largest health insurer, has decided to stop
paying for Nexium, the top-selling acid reflux pill. The
only surprise is that it took this long. Nexium has long
stood as a testament to pharma’s marketing ability,
overcoming managed care’s desire to limit access to
therapeutics that don’t compare well to their
competition in terms of “value.” But in this case,
if other managed care companies follow suit, the direct
revenue hit to AstraZeneca will be huge, as Nexium
currently accounts for almost 20% of AstraZeneca’s
total sales and was predicted by Cowen & Co. to
exceed $10 billion in sales in the next three years.
This
blow to Nexium is the latest in a growing stack of
evidence that the health insurance industry is upsetting
pharma’s apple cart: Managed care is demanding
high-value medicines. The market’s demand for value
has hobbled drugs such as Biogen Idec’s Amevive and
Pfizer’s Caduet, which were expected to quickly become
billion-dollar blockbusters. Manufacturers who have
ignored the growing focus on healthcare value are
unwittingly offering up the next round of rejections.
Astute companies are now racing back through their
development pipelines to re-consider new product
developments through a value prism. Unfortunately, few
companies have started this process nor taken adequate
steps;1 neither are they typically staffed or structured
to pursue it.
Figure
1. The progression of new molecular entity (NME) targets
as they progress to the next phase of clinical
development. Companies with stronger Outcomes Based
Access Manufacturer Index (OBAMI) scores demonstrate an
ability to rigorously chart the value propositions of
NMEs throughout the development process, aggressively
discontinuing those with low value potential. By
comparison, those with low OBAMI scores require far more
initial targets — up to 4 times — to submit the same
quantity or fewer NDAs.
The
Bruckner Group (BGI) has developed unique processes and
tools to help pharma and biotech companies meet the
managed care industry’s needs. BGI’s Outcomes Based
Access (OBA) solutions, including the integration of OBA
principles into the R&D process, have proven highly
effective for pharma and biotech manufacturers. These
solutions are engaged throughout a product’s
lifecycle:
-
Steering
the development of therapeutics toward high-value
targets.
-
Maximally
defining and proving a therapy’s value, thus
achieving broad formulary inclusion and patient
access.
-
Developing
marketing strategies that
leverage value-based market
drivers and re-define competitive markets.
OBA
Development Strategy. The opportunity to create
value that accrues to payers is present throughout the
development and post-launch life cycle of a therapeutic.
However, routine development processes often ignore a
product’s OBA value proposition until launch is
looming. As Figure 1 illustrates, BGI’s research
indicates that those companies incorporating rigorous
OBA interventions early in the development process are
more effective at efficiently using R&D dollars and
assessing development risk.
A
targeted approach integrates the use of economic
milestones early in the development process without a
broad and cumbersome expansion of trials. Leveraging OBA
Early-Phase Value Tests, experienced teams can identify
and remove therapeutics with weaker value propositions,
creating strong and efficient pipelines.
A
value-minded approach to assessing the risk of any
development requires some re-thinking, especially in
competitive and mature markets where new, even weak,
introductions had previously produced revenues. The
development processes for new acid reflux or high blood
pressure treatments, for example, must incorporate an
understanding of the current healthcare value offered by
their many potential competitors. These established
therapies set a high bar for the risk assessment of any
such pipeline opportunities. Manufacturers can no longer
rely on a new method of action or an innovative
advertising campaign to ensure sales. Drugs in these
classes will almost exclusively be competing on the
comparative economic value their therapy presents.
Identifying
and capitalizing on healthcare value is an
interdisciplinary pursuit. According to the 2006
Outcomes Based Access Manufacturers Index, very few
pharma and biotech manufacturers understand the
importance of making connections among the clinical
development and market development teams. How well
manufacturers evolve their development and in-licensing
processes to centralize healthcare value will determine
their level of success in coming years. l
Ian
Joseph is an analyst at The Bruckner Group, the leading
expert in Outcomes Based Access and Healthcare Value
Strategy. www.brucknergroup.com
1
Balekdjian, D. & Russo, M. Drugmakers:
A Dose of Reality. BusinessWeek. June 19, 2006.
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