Who really "Moves the Needle?" How to focus resources on the most important payer accounts.

Pharmaceutical and biotech companies have begun to realize the importance of focusing their managed markets resources on high-yield payer channels and accounts. Developing a systematic approach to identify these payers is key to increasing the marketshare of their products. This article discusses the evolution of the payer landscape and provides an outline of how to assess the value of managed market channels.

Private and government payers have become more influential than ever. In 2006, these third-party payers are expected to manage 80% of all prescription drug expenditures in the United States, and they can have a tremendous effect on the commercial future of most prescription drugs.

For years, pharmaceutical and biotech companies have understood the need to focus their managed markets resources on payer channels and accounts that have the greatest ability to influence product usage or help drive marketshare, but many have not developed systematic methods for identifying which payers can actually "move the needle" for their individual products. As a result, a number of companies provide large rebates, commit substantial amounts of account management time, and provide numerous value-added programs to payers who are unable to deliver significant marketshare changes for their products.

Owing to recent changes in the managed markets environment, such as the rollout of Medicare part D and the rise of consumer-driven health care, it has become increasingly important for pharmaceutical and biotech companies to develop systematic approaches to understanding which payers are most valuable, and allocate their resources accordingly. Without such a strategy, they continue to run the risk of "leaving money on the table" with accounts that cannot help them, while potentially neglecting important clients.

This article identifies the key payer channels manufacturers must confront. It outlines an approach that companies can use to assess the value of different managed markets channels and the associated accounts, and highlights the changing market dynamics that may affect manufacturers' decisions regarding channel planning. This will help marketers make better resource allocation decisions, allowing them to focus their contracting resources, account managers, and value-added programs on the accounts most likely to have an effect on their product's commercial success.

Developing a Coordinated Channel Strategy

A number of key channels for developing managed markets strategies must be considered, including managed care organizations (MCOs), pharmacy benefit managers (PBMs), specialty pharmacy providers (SPPs), long-term care facilities, hospitals, and employers.

To guide its efforts in the managed markets, enhance commercial performance, and optimize resources, a brand team must understand which channels are most important, given the product or portfolio in question. The team must then focus its efforts on the most important channels, working its way down to the individual accounts (Figure 1). At a high level, an approach to channel planning should contain the following steps.

Identify and Prioritize Channels. Not all channels offer the same value to all brand teams. Product characteristics, such as indication or route of administration (e.g., oral, intravenous), influence the patient care setting, product reimbursement, and specific channels of interest. For example, a specialty injectable product requiring professional administration in a physician's office calls for MCOs and PBMs to ensure access and reimbursement, and on SPPs and distributors who play a key role in the product delivery process.

Prioritize Individual Accounts. Just as all channels do not present the same business opportunity for brand teams, not all accounts in a given channel (e.g., hospitals) present the same opportunity. One approach to prioritizing customers in a channel is to define specific and relevant criteria by which accounts can be evaluated. For example, in the MCO segment, a brand team may evaluate and prioritize accounts according to criteria that include number of covered lives, geographic presence, level of formulary control, willingness to exercise control, demonstrated ability to affect utilization, and diversity of coverage (e.g., offering a part D plan).

In the hospital segment, for example, a brand team marketing a heart failure medication may wish to determine which facilities follow the core measure heart failure guidelines established by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Segmenting hospitals based on their participation and performance in the heart failure core measure may afford a brand team insight into an institution's likelihood of incorporating their product's drug class into treatment guidelines and protocols, potentially increasing product utilization.

For each relevant managed markets segment, the brand team must determine which criteria to use as measures of a given account's potential to drive business, and the relative importance or "weight" of each criterion. The information can then be fed into a scoring system that assigns each account a score, indicating the criterion's relative importance to the brand or portfolio. This enables the team to prioritize their accounts and decide how to focus its contracting, account management, and marketing resources.

Uncover Points of Influence. The brand team must now explore potential strategies for improving or maintaining its brand's competitive position for each account by identifying the optimum points of influence. A point of influence is an attribute of the product that is meaningful to the account in question, serving as the basis for arguments in favor of good formulary access and reimbursement. A product's value proposition--the culmination of its clinical, economic, and humanistic benefits--encompasses the related points of influence. Certain elements of a product's clinical, economic, and humanistic profile may appeal to some accounts more than others, presenting brand teams with the opportunity to create specific messages that address key needs with the greatest level of credibility.

Develop a Channel Strategy. A brand's channel strategy may vary based on the segment's preferences (Figure 2). In the case of the aforementioned heart failure agent, a team may appeal to hospitals that subscribe to the JCAHO core measure through compelling clinical trial data supporting the use of their product in this patient type. However, at institutions that have not adopted the JCAHO core measure, the team may have to rely on clinical or economic attributes that convey a different message, such as the potential for a reduction in the use of certain concomitant medications, resulting in less nursing time.

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Adapting to the Changing Market Dynamics

The payer landscape is evolving, and a number of changes are taking place that pharmaceutical and biotech companies should consider when making channel planning decisions. The three key changes are: (1) rollout of Medicare part D; (2) consolidation among MCOs, PBMs, and SPPs; and (3) the rise of consumer-driven health care.

Rollout of Medicare Part D. The Medicare part D prescription drug benefit is now a reality. Whereas the industry has faced initial challenges regarding the program's implementation, millions of seniors who previously did not have a drug benefit are now participating in the program. The success of the part D benefit may ultimately affect how plan sponsors envision their approach to pharmacy benefit design, including the extent to which they manage the utilization of branded drugs on both the commercial and part D plans.

If part D sponsors are successful in managing drug utilization in the senior population with more restrictive formulary benefit designs, then these organizations may attempt to transfer the approach to their commercial books of business. This may drastically affect coverage of certain therapeutic classes, leading to more restrictive formularies and greater use of generics.

Therefore, it is very important that brand teams thoroughly understand their key customers. They must be adept at communicating the value of their products in ways that will resonate with individual channels, enabling them to remain competitive even in a restrictive environment.

Consolidation Among MCOs, PBMs, and SPPs. Consolidation among various payers is ongoing. Mergers between MCOs are frequent as they search for opportunities to create efficiencies and to acquire expertise in managing more profitable businesses (e.g., mail order, specialty pharmacy).

The onus is on manufacturers to understand the implications of industry consolidation and which customer channels garner the most influence in determining the access and reimbursement of their products. For example, various PBMs have been acquiring SPPs, which has made many pharmaceutical and biotech firms work with these managers--a somewhat different situation than before. Manufacturers must become more proficient in addressing a new segment and determining which entity in this new construct actually drives access and reimbursement. Is it the SPP, the PBM, or the MCO who is being served by the PBM? The answer could have significant implications for the manufacturer and how it approaches account management.

The Rise of Consumer-Driven Health Care. Consumer-driven health care is a system in which patients are more empowered to make their own health care purchasing decisions. This is typically facilitated through high-deductible preferred provider plans in combination with health savings or reimbursement accounts. It is viewed as part of the solution for spiraling health care costs.

Although the outcome is uncertain, the early trend indicates that as the market evolves, consumer-driven health plans may become more widely used. If so, consumers will become more important in the decision-making process, forcing companies to focus more on educating consumers about their products and the conditions they are designed to treat.

Conclusion

As the payer landscape evolves, brand leaders must understand the key channels in which their products' compete, as well as the individual customers' needs. Increased competition through generic and new branded entrants is a reality in many therapeutic categories, and brand managers' ability to maintain, or even increase, their products' competitive positioning is paramount to success. Systematically prioritizing and segmenting business channels and customers helps brand teams make resource allocation decisions that will provide the greatest return on investment and help ensure the brand's long-term success.

Tony Lanzone

Senior Practice Executive,

Managed Markets Practice

Campbell Alliance

8540 Colonnade Center Drive

Raleigh, North Carolina 27615

Phone: (888) 297-2001, ext. 7220

www.campbellalliance.com Figure 1. Approach to segmenting and prioritizing payer accounts.

Criteria Scoring Criteria

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system for easier that some criteria

comparison. affect the total score

more than others.

Account Account

Prioritization Segmentation The weighted scores The individual scores are used to rank the are used to segment accounts. Accounts the accounts and are prioritized group them based on nationally or whether they scored regionally, depending high or low on the on the type of data key criteria. available.