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Divining the future

In an era of unprecedented global health outcomes and increasing austerity, what can payers expect?

Plumb weightThe past 60 years have seen the steady development of healthcare and improved outcomes throughout the developed world. The pharma industry has played a key role in this, contributing to unprecedented advancements in areas such as cholesterol reduction, hypertension and cancer.

However, over the last 10 years, this very success has led to tension between what people expect and what society can afford. The demands on the system are increasing quickly, with population growth, an ageing population and extended life expectancy; increased patient expectation of coverage, access and choice, and more expensive medicines and healthcare technology fulfilling previously unmet needs.

The global recession has exacerbated these tensions, and healthcare is on the cusp of great change across the developed world. As US President Obama recently put it: "Our healthcare system is placing an unsustainable burden on taxpayers. If we do nothing to slow these skyrocketing costs, we will eventually be spending more on [healthcare] than every other Government programme combined. Put simply, our healthcare problem is our deficit problem. Nothing else even comes close."

This raises a number of questions for the healthcare community: How will policy-makers react to unaffordable public expectations of healthcare? Will payers become the primary decision-makers or will physicians continue to have an important role? What will be the role of the consumer or patient? And what does it all mean for pharma?

To answer these questions, ConsultComplete talked to 35 payers from the US, Canada, Germany, France, the UK, Italy and Spain. We asked for their thoughts on the major trends in healthcare in the next decade and, in particular, for their views on the consequences of these financial pressures on the delivery and reimbursement of care. Here are the key findings.

Lack of sustainability
Payers across all seven countries thought that healthcare was unsustainable in its current form.

A common reason for fearing impending crisis was the unlimited expectation of the public for spending on health, but payers recognised that restricting spending would lead to difficult, and unpalatable, decisions. A Canadian payer summarised the dilemma as: "Should we spend $15,000 on drugs to extend life another month?"

Such comments reflect the consistent view of all payers: there needs to be a fundamental transformation in attitudes to healthcare in the next 10 years by the general population. But how likely is this? While payers are acutely aware of the tensions in current healthcare models, the general population is only just beginning to understand that current systems may be unsustainable.

A German payer argued: "There needs to be an increased level of personal responsibility for people's own health." But will the public accept this responsibility? And will they be prepared to pay more for their care? There are few signs yet that they are willing either to accept restricted access or ever higher taxes and premiums to pay for their healthcare.

Our payers believe that something has to give, and that there would be a transformation in public attitudes to healthcare. Assuming they are correct, our research suggests that, across the seven countries, four key developments will be seen: converging healthcare models, driving value in the system, a shift to a payer-led paradigm and the rise of the empowered patient.

Converging models  
Traditionally, healthcare systems are arrayed on a spectrum, with largely Government-controlled European systems toward one end and a US free-market model at the other. A major trend identified by the payers is the convergence of these systems toward the middle as they try to solve key challenges. In Europe and Canada payers are trying to control costs while improving speed of access and quality of services. In the US the challenge is to control costs while ensuring wider coverage.

These challenges will lead to shared solutions, with countries looking to successful models in other countries for inspiration. Our payers felt that these models are likely to include increased use of co-pay, acceptance of self-pay and greater individual responsibility for health.

Driving value  
Resources must be used as efficiently as possible. Payers want the ability to make fully informed choices on solutions that deliver value while minimising risk. Comparative effectiveness research and health technology assessments (HTAs) will become the norm, and while HTAs will take different forms in different countries, best practice will develop and be shared as payers look to understand how they can be as efficient as possible.

Although regulatory issues will be driven at a supra-national level, HTAs will be driven by the needs of the local population and their willingness to pay for a treatment. They will allow payers to understand what can or can't be paid for in their system, what restrictions may be needed for a drug and to establish the level of any co-pay or self-pay agreements.

Relevant evidence of comparative effectiveness will also be essential. This evidence will typically be based on current standard of care but it may extend to challenging the current patient journey.

Ultimately, payers are looking to drive down the cost of drugs, particularly in the US.

This drive for value was also linked to the following three additional themes:

Transparency: Many payers were disappointed that products simply arrived on their desks at launch. They wanted to understand a company's pipeline and the products likely to make it to launch, to help them plan for new expenditures and future services impacted by advances in medical technology. Payers also wanted to see more transparency in the evidence provided and to work with pharma to explain what evidence they need to reimburse a particular drug.

Performance-based pricing and patient access schemes: Payers need to reduce the financial risks of new product launches while allowing access to innovative new medicines and so they saw advantages to patient access schemes, which allow some control of risks when there is incomplete evidence of benefits at launch. However, many payers were sceptical of these schemes. Some felt they were just too difficult; others focused on the cost and complexity of monitoring and administering high profile cases, such as the UK's Multiple Sclerosis Risk Sharing Scheme, which is said to have cost the NHS in excess of £350m over a seven year period. There were also concerns about the transparency of such schemes and the rigour required by assessing bodies (including the influence different stakeholders have over these bodies).

Targeted therapies – right resources, right patients: Payers were enthusiastic for treatments where populations could be defined and targeted. If developments in personalised medicines, diagnostic tests, bioinformatics and genomics are both suitable for the defined patient group and are shown to save money it is likely that they will be paid for.

A payer-led paradigm
The third key theme was the shift to a payer-led, complex, multi-stakeholder environment for drug companies. Payers will become increasingly important in all aspects of healthcare – deciding what will and won't be paid for in the context of containing cost, reducing health inequalities and getting as much as possible out of the system. However, decision-making will involve complex interaction between stakeholders.

Payers accept that patients will have a voice and an influence on priorities. They also know they are not clinical experts: they need the input of physicians, who will have to think like payers as well as clinicians. Physicians make up a significant proportion of National Institute for Health and Clinical Excellence assessment teams; at a lower level there will be more clinician involvement in commissioning services, not less, hence physicians will still have an important role in shaping medical practice, as well as making final decisions on which drug a particular patient will be initiated on or switched to.

A key challenge for pharma will be to understand fully the needs of each stakeholder group in each therapy area, and to understand the tensions between each group and who influences whom. Then, in a context of some payer cynicism about industry influence, pharma will have to provide solutions to these needs, rather than be seen to be part of the problem.

Rise of the empowered patient
The final theme was the rise of the empowered patient. The trend for consumer choice,  increased use of co-pay and improved online access to high-quality information and peer experiences will lead to a more active patient role in deciding which treatments are best suited for their conditions and circumstances.

This will lead to new ways to segment patients based partly on ability to pay. If society won't pay for a particular drug, there may still be enough patients willing to pay for it themselves to make launch worthwhile.

This will be a global change as rising incomes in developing and BRIC countries (Brazil, Russia, India and China) create a burgeoning global middle class with access to Western information sources through the internet. This, in turn, will create a market for drugs purchased directly by the end consumer and increasing global demand, albeit at potentially lower price points.

Meanwhile, doctors will relinquish some control over the patient to become trusted partners, providing guidance on the best treatment. These changes will provide significant opportunities for pharma to speak directly to patients and doctors, increasing global sales when prices in the West are coming under significant pressure.

There are five major implications for pharma of the evolving healthcare landscape.

1. Develop insights early to inform strategy: The increasing complexity inherent within healthcare implies that pharma needs to use insights into therapy area and treatment needs as early as possible to inform strategy development. The industry needs to understand the key differentiating factors that will demonstrate value and drive a successful launch early in the product development process, ideally as early as possible in phase II.

2. Understand the increasing complexity in each therapy area: In many therapy areas, increasingly complex customer segmentation is required to identify your target patient population. This involves mapping the patient journey to understand the patient characteristics, size, value, influences and insights at each point of interest for the relevant segments. For example, how big will the self-pay segment be if you can't get payer funding at that stage?

3. Positioning must encompass all stakeholders: All relevant stakeholders should be involved in positioning. Insights research should reveal the needs and relationships between different players and combine these unique influences to create an overall brand core offer which appeals to all the key stakeholders.

4. Work with stakeholders early in the development cycle: Stakeholders are becoming more open to working with industry on the development of new products. It is in both their interests to understand early the future needs in each therapy area to make the best decisions on where investment should be placed. The commercial pressures on pharma companies to maximise return on investment makes early, informed, understanding of which drugs to develop, and when to cut likely losses, critical.

5. Pricing is an integral part of core strategy: As value is increasingly the key determinant of success, price will be a core driver and needs to be integrated into the strategy as early as possible. Pricing models should concentrate on whole pathway value not just clinical effectiveness, as prices will be set based on outcomes, savings to the overall healthcare budget, and the priority given to a particular therapy area. Regardless of the health economic argument, a medication may simply be unaffordable for a healthcare system. Pharma will then have to make hard decisions on whether to lower prices, whether there is still a viable opportunity with the self-pay market, or if it can adopt innovative risk-sharing approaches to gain access – as payers try to improve outcomes without taking too big a gamble on a new innovative drug. In short, pharma must be willing to share the risks to reap the rewards.

The future
Payers are interested in getting the best outcome with the resources they have. As a result, we will see global health models learn from each other and become more alike, but also more complex.

Sophisticated tools will be used to drive value through the system, and payers will play an increasing but collaborative role. Finally, the public will be pushed to take more responsibility for their own health and make more decisions themselves.

The implications of these changes for how, and when, pharma develops customer insights, brand strategy and pricing strategy, are significant.

The Author
Ian Pickles, Zoe Gillbe and Stephen Small of ConsultComplete
Ian can be contacted at or on +44 (0)1625 624000.

To comment on this article, email

25th January 2011


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