Pharma/payer relationships: appetite for reconstruction

It is commonly accepted that health care systems are so large, complex and driven by vested interests that wrestling them into a sustainable future is more challenging than maneuvering the Titanic. But lately I get the impression that the many hands at the helm of health care systems are all reading from the same chart, and are learning how to work together to steer into calmer waters.

In March, I joined Sir Andrew Dillon, the CEO of NICE, and Josep Figueras, Director General of the European Observatory on Health Systems and Policies, on a panel at The Economist’s annual Pharma Summit to discuss changes ahead for national health care systems. When we were asked about the elements we wanted to see in health care systems in the future, Sir Andrew spoke of his desire to see more transparency around products, and for a broader view of the things that constitute “value” in health. Dr. Figueras talked of more engagement with patients, and better adherence to treatments. For myself, I would like to see a clearer path toward reimbursement of “pill-plus” services, as we move toward an outcome-focused future.

Each of the items on our wish list is underpinned by a common thread. To be achievable, they will require much greater degrees of conversation and cooperation between disparate players in health care. The Economist event was remarkable for the consistency with which this message came across. I don’t believe that a few years ago we would have heard senior pharma executives saying such things as:

  • “We need transparent and ongoing discussions with HTAs and payers, and alignment on common goals.”
  • “We need to be less protective about what we own. The risks are too big for us not to collaborate and share.”
  • “The elevation of payers is a proactive change, and industry has to adapt to the new payer environment.”

Why are we hearing this now? Richard Bergström, director of industry group EFPIA, hit the nail on the head when he pointed out that if all anyone looked at was pharma’s pipelines, they would think that the sector’s business model was working just fine — the problem companies have is with getting their products on the market. We all know that the drive to value in health care has created new currencies, including prevention, patient-centricity, remote monitoring, self-care and behavioral change. This has led to a fundamental shift in the relationship between payers and the life sciences industry.

Speaking with payers — as we have, while preparing our upcoming Progressions report — it is apparent that many understand the life sciences industry’s predicament. Sir Andrew, at The Economist event, said that from his point of view there is a shared ambition between the life sciences industry and health systems, but neither side has yet found a way of converting that ambition into a relationship that is in everyone’s best interest.

The very fact that payers are aware of the need to bridge the gap should offer some comfort to life sciences companies as they think about their medium- and long-term strategies. In the short term, they will have to accept a degree of pain inflicted by payers, most of whom see drug prices as a major driver of the growing cost of care. A deeper conversation with payers, however, points to a way forward for their relationship with pharma. Yes, they are attempting to keep costs down and figure out what sustainability means, but they can’t do it alone. Pharma has an array of tools at its disposal that can help, not least of which are massive amounts of woefully underutilized data.

But before it gets its hopes up that payers will come knocking at the door, the industry needs to embark on what one pharma R&D leader described as a complete change in philosophy, and become more “predictive, preventive, pre-emptive and participatory.” I would add “proactive” to that list. For all its size, health care can sometimes look like a collection of cottage industries, working in tandem but often somewhat in conflict. Industry can take a lead in addressing that conflict by developing and sharing their understanding of diseases, and predicting demand for treatment and reimbursement criteria. The data they have at hand can be used prescriptively, helping payers to mitigate future risks on a scale far beyond managed entry agreements and other market-access strategies.

Initiatives such as the Innovative Medicines Institute, a €2 billion public-private partnership between European policy makers and pharma, are rare in the way they provide an industrial-scale collaborative approach to addressing major health issues. They shouldn’t be.


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