insights to managed care contracting
TRANSCRIPT
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11.12.12
Managed Care Strategy
Contracting
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Managed Markets contracting
Manufacturers and Payers Share the desire to provide value
The objective is to provide optimal access to drugs that
meet a patient’s clinical needs and are cost effective
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Managed Markets contracting
Manufacturer specific objectives
● Limit barriers from commercial and government payers to insure
patient access to appropriate care
● Establish Company as a respected and valuable source for
Payers in the treatment of Disease State
● Support with
– Proper place of therapy
– Cost-effective treatment
– Distribution management
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Managed Markets contracting
Manufacturer Considerations when developing Contracting
Strategy
● What is your tier target? Tier 2, 3, or 4?
● Short term and long term impact of contracting (effect discounts
will have on best price, net price, etc.)
● Current Market dynamics
– New Class?
– Where are your competitors on formularies, what they are doing currently?
● Other considerations
– Other contracts and discounts (Specialty Pharmacy, wholesaler, GPO,
Specialty Distributor) have pricing implications
– Potential step edits, prior authorizations
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Formulary tiers
Commercial
● Tier 3 (Non-Preferred Brand) access– will require no or low
discounts/rebates depending on position in therapeutic class
– First in therapeutic class with significant clinical advantage = little or no
discount in commercial payer market
– Third in class “me-too” = more aggressive discount for inclusion
● Tier 2 (Preferred Brand) access – will require higher
discounts/rebates
– First in therapeutic class with significant clinical advantage = little discount in
commercial payer market
– Third in class “me-too” = more aggressive discount and will likely require “1 of
1”, “1 of 2” or “1 of 3” rebate tiers (“1 of 1” = highest discount and unlikely to
achieve until you have significant market share…making it a “chicken or egg”
scenario
● Tier 4 (Specialty) if plan has a 4 tier formulary can have similar
attributes and considerations to tier 2 depending on plan.
– Tier 4 has higher co-pays and most have co-insurance
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Managed Markets contracting
● Determine government contracting strategies
– Is there a significant potential patient population in Medicare Part D, Medicaid
and other Government (VA, DOD, PHS, FSS)?
– What is your target coverage? Tier 2, 3, 4, 5?
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Formulary tiers
Government
● Tier 3 for 3 and 4 tier plans (Non-Preferred Brand) access – will
require lower discounts/rebates depending on position in
therapeutic class
– First in therapeutic class with significant clinical advantage = little or no
discount in commercial payer market
– Third in class “me-too” = aggressive discount
● Tier 2 for 3 and 4 tier plans (Preferred Brand) access – will
require higher discounts/rebates
● Tier 4 or 5(Specialty) if plan has a 4 or 5 tier formulary can have
similar attributes and considerations to tier 2 depending on plan.
– Tier 4/5 has higher co-pays and most have co-insurance
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Medicare tier structure
Payers with a
3 Tier Benefit
(5)
Payers with a
4 Tier Benefit
(12)
Payers with a
5 Tier Benefit
(6)
Copay
Ranges
Tier 1 Generic Generic Preferred Generic $0 - $12
Tier 2 Preferred Brand Preferred BrandNon-Preferred
Generic
$5 - $43
16% & 20%
Tier 3Non-preferred
Brand
Non-preferred
BrandPreferred Brand
$24 - $98
18% - 50%
Tier 4Specialty or
Injectable
Non-Preferred
Brand
$70 - $91
25% - 75%
Tier 5Specialty or
Injectable25% - 33%
Notes: 14 National and 9 Regional Payers
• National Payers – 50% = 4 Tier; 35% = 5 Tier
• 52% have 4 Tier Structure, most have multiple formularies
• Tier 3 Copay – majority are $60 - $83; Tier 4 copays are 25 - 35%
Need a source for this info
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Managed Markets contracting
For a launch of a new product, perform a Payer Assessment to
determine the Key Targeted National Payers ranked by priority
(typically number of lives) and the alignment of the regional
payer sales team in order to effectively reach regional plans
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Payer D
Payer E
Payer GPayer S
Payer H
Payer F
Payer N
Payer J
Payer M
Payer O
0
2
4
6
8
10
12
20
40+
0 1 2 3 4 5
Payer I
Formulary/Contract Enforcement
Ability to Influence Market
HM
O L
ive
s (
mil
lio
ns
)
We
ak
Str
on
g
Weak Strong
“Size Matters” “Must Have’s”
“Keep the
Door Open”
“Make or
Break a
Region”
Payer L
Payer A
Payer P
Payer BPayer C
Payer Q
Payer R
Payer K
Example: payer assessment
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Contracting trends
Price Protection
contracts
Steeper discounts
for specialty
categories
Rise in
contracting for
tier-3 to avoid
exclusion
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ACA Implications
Payers
● Increased cost for mandatory
requirements
● Increased competition
● Ability to compete in
exchanges
Manufacturers
● Plans to seek greater
discounts
● Plans likely to increase use
of limited or closed
formularies
● Increased Step edits
(especially through generics)
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Finally
● Contracting for access only provides you the “Ticket” to play in
the game
● Well planned Pull-Through strategies are imperative for Brand
Share Growth, which will dictate payers’ views on the Drug, which
will drive future contracting considerations and relationships