Real-world performance becomes key in drug selection

Drug evaluation and selection models are changing. Safety and efficacy have become the starting point for consideration by many payers. What they really want to see is evidence of superior performance in real-world patient populations.

“We have heard from managed care executives about the need for greater clarity on both the cost and the effectiveness of drugs,” said John Edwards, director of the Healthcare Advisory Practice at PricewaterhouseCoopers. “Real-world performance is guiding what they are willing to pay for a drug or if they are willing to pay for it at all.”

PwC’s Health Research Institute surveyed managed care leaders and pharmacy benefit managers in 2012 on changing drug information needs. According to the survey, what buyers want is:

• More and better data on drug quality;

• Solid evidence of improved clinical benefit compared to existing treatments; or

• That a novel product meets an unmet medical need and payment tied to outcomes.

“We are seeing these expectations surface first in specialty pharmaceuticals,” Edwards said. “These drugs are highly expensive, but they are growing both in prevalence and in cost. In 2012, specialty pharmaceuticals represented 3% to 4% of purchasing volume but 20% of the drug spend.”

The new focus on outcomes and performance is reshaping the pharmaceutical world. Payers are willing to pay more for a product if they see convincing evidence that it improves clinical outcomes, patient satisfaction and other real-world measures in meaningful ways. And payers are showing increasing resistance to products that are no more effective than existing treatments.

Payers and pharmaceutical companies also are developing new payment models that reflect the growing importance of performance. Novel strategies include differential pricing for different indications, contracts based on documented outcomes and discounted pricing for combination therapies using two or more agents.

One of the first concrete examples is a 2012 contract between EMD Serono and Prime Therapeutics, a PBM for 13 Blue Cross Blue Shield plans. Prime is tracking clinical changes for multiple sclerosis patients taking Rebif (interferon beta-1A) and will pay rebates to the drug-maker based on documented outcomes.

“When drugs cost more, they get the same kind of scrutiny as other high cost items such as MRI or CT scans versus conventional imaging,” Edwards said. “Payers are increasingly willing to accept the more expensive alternative only when they have convincing evidence of benefit. More than 30% of payers tell us they are planning to move to results-based contracts over the next three years. It’s time to start thinking about outcomes-based reimbursement for your next contract cycle.”

Pharma companies know the change is coming, he continues. Results-based contracting and formulary placement is already a reality in major markets such as Germany and the United Kingdom. When Novartis failed to produce convincing evidence for Xolair (omalizumab) last year, the UK National Institute for Health and Clinical Excellence announced plans to recommend against the drug for certain asthma indications. The national health administration reversed its decision after the manufacturer submitted additional outcomes data and adjusted pricing for certain patient populations.

“It is important for pharma to understand what kind of data plans need and find ways to provide that information,” Edwards said.