The pharmaceutical industry is on a journey to a brave new world. After long-dominating the medicines space, where it has enjoyed high profits generated from blockbuster drugs, payers are increasingly measuring outcomes and focusing much more on prevention.
A seismic shift from volume to value, from a unit-based pricing model to a value-based one, is underway, albeit at a much slower pace than had been predicted. Pharma must adapt to the future or die because it is certain that within the next decade most medicines will be paid for based on the value they deliver not the financial profit they command. New relationships between pharma and payers must be forged.
By 2020, according to a report by Price Waterhouse Coopers (PwC), “Pharma 2020: Challenging business models. Which path will you take?”, no pharmaceutical company will be able to “profit alone.” All will have to “profit together” by collaborating with a wide range of organizations, from academic institutions, hospitals and technology providers to companies offering compliance programs, nutritional advice, stress management, physiotherapy, exercise facilities, health screening and other such services.
The end result will most definitely be a transformed healthcare landscape, one that is unrecognizable from the current paradigm, where new players and a disruptive infrastructure will emerge. Collaboration and risk-sharing will be key to success.
Some pharma companies have already started to embrace the challenge. They have examined the terrain, plotted the coordinates and are ready to embark. But others are still at the starting point, uncertain and fearful of what lies ahead, not really knowing which path to take.
John Graham, head of Value, Evidence and Outcomes and Medical Enterprise Operations at British pharma giant GlaxoSmithKline, spoke to EyeforPharma about how his company has faced the challenge of a changing landscape.
He explains that approximately four years ago GSK recognized that it was lagging behind in its understanding of how value, evidence and outcomes would tie together within the future system.
“It was a very significant gap and GSK was at a great disadvantage,” he says.
Then the department that he now heads up, Value, Evidence and Outcomes (VEO) was born. GSK brought in new leadership, focused on a new strategic framework and established new relationships across the whole company to demonstrate value. VEO now gets involved in decision-making from the get-go, at the point where the company is developing its disease area strategies.
“This is critical to our success,” he says.
According to a report by Deloitte: “Value-based pricing for pharmaceuticals: Implications of the shift from volume to value”, successful, widespread implementation of a value-based pricing system is dependent on several key actions such as developing and adopting useful and workable value metrics, providing adequate reward for value, and establishing electronic exchange of health information to capture data from the entire consumer experience. All stakeholders must collaboratively work together to help ensure these key actions are achieved.”
But Graham warns that trust between payer and pharma must be enhanced to make progress towards this new paradigm possible.
“One of the biggest barriers currently in outcomes-based contracts is a lack of trust in the result of the research from either side, in the assessment or in the metric.
“The payer does not automatically trust that the pharma research is valid, but the payer does not always see it as their job to do the research themselves, or they do not have the expertise themselves. So we end up in a place where we can’t really validate and if you can’t validate or gain that trust then you cannot agree on an outcomes based contract.”
To be able to have open dialogue and discussion between payers and pharma is vital, he says, because before embracing the payer, pharma really needs to understand what the payer challenge is, you need to understand their perspective and they need to be clear as to what their need is.
“This is the first wave of trust,” he says.
He is adamant that there needs to be engagement on the payer side in the same way as pharma is engaging.
“Not until we get to a place where payers are doing some of their own research and both payers and pharma realize that they are finally on the same page, getting similar results, will there be trust,” he says.
Graham believes that to enable greater collaboration and to facilitate agreement on value-based pricing, pharma organisations must ensure its leaders and representatives fully understand payers, how the business model works, where the challenges are and where they need to make an impact so that when they are having a discussion it comes from an educated point of view.
“The more we can be educated about each other the better chance we have of doing something that is good for the patient, good for providers, good for the payer and good for GSK,” he says.
Graham believes that in the not too distant future, and thanks to the work of his VEO department, GSK will be in a position to have that conversation with payers, armed not only with a greater understanding of the patient burden, the disease burden to the system, the outcomes needed to improve both of those first pieces, but also a plan for how to move forward.
“The new value-based model will depend on having the right mix of people who understand how to do the right research, at the right time to generate the right evidence for the right decision,” he says.
He is also a firm believer that patients must be at the centre of it all and can help enormously in building trust.
“If patients, who are the true payers in the end, validate that their needs are x or y and pharma and payers validate the same with each other then it comes into focus.
GSK’s VEO department includes a Patients in Partnership and a Patient-Centred Outcomes section which enable the company to gain a greater understanding of what the patient need actually is.
“So, in respiratory, for example,” says Graham, “we can see what the real patient need is, look at the drug and identify that it will be transformational, for example, in a patient with COPD.
“This becomes the threshold of value and has transformed the company’s ability to prioritize its assets based on value, so that when it gets to Phase III we are pretty clear on what we need to demonstrate. It’s therefore easier to make a decision on what the Phase III programme will look like, to build the real world evidence programme around it and to launch a drug that has truly demonstrated value.”
Graham believes that as pharma begins to really prove that the research it is doing is of a certain standard it will help the push towards greater trust.
But he adds that the US healthcare system adds further complexity to the problem.
“In the US you have approximately 250 different payers and so therefore you have 250 different opinions,” says Graham. “And even if you limit it to the five that cover the majority of patients in the US, you still have five different opinions and each one of the five ideally wants to see the evidence in their own patient mix.
“Even though you may do a very robust assessment there’s always the caveat that they can throw out to you that you didn’t do it in their patient group.”
“The panacea would be that payers and pharma agree on what research is valid.”
He says in order to overcome some of these barriers, pharma is working on multiple fronts, including around the regulatory acceptance of real world evidence.
“Because,” he says, “as regulators accept it and allow for its use in promotion or discussion you will find, I believe, that payers will start to accept it too.
“So as the regulatory agencies validate what is acceptable and as other organizations such as ISPOR define quality standards for RWE and non-interventional research I think payers will get to a point where they will naturally accept it and become more active in wanting to see it .”
So what is ultimately achievable?
Graham believes that as the Googles, the Amazons and other non-medical organizations of this world get better at synthesising information, we will learn from them how to boil down information to create meaningful data, which can be used through innovative techniques, to generate evidence and both pharma and payers will become more descriptive about what is the real impact an intervention has on the patient.
John Graham will be weighing in on pharma’s new landscape at the eyeforpharma Medical Affairs USA event in April.