Managed Markets Advertising Addressing the Value Challenge in the Evolving Pharma Marketplace

Jim Mittler, PhD, Medical Director

The Value Challenge report from Economist Intelligence Unit

• Released February 6, 2012• Second in a series of 4

pharma reports• Global survey of 399

industry executives to better understand the nature of the “value challenge” in pharma

http://www.managementthinking.eiu.com/value-challenge.html.

The “value challenge” in pharma

• It’s no longer enough to bring safe and effective drugs to market; new products must provide superior outcomes to existing medications

• Companies must demonstrate added value if higher costs are to be garnered for new therapies

• There is a range of stakeholders with different perceptions of value– Pharma companies– Physicians– Patients– Commercial payers– Government payers– Regulatory agencies

http://www.managementthinking.eiu.com/value-challenge.html.

Managed markets expertise is increasingly important

• The value challenge is a long-term issue and a leading concern for the drug industry

• Pharma companies lack confidence in the ability to respond to the value challenge

• There’s a shift of power in market influence from pharma to payers

http://www.managementthinking.eiu.com/value-challenge.html.

Divergent perceptions on the value of a new drug

• A significant gap in the definition of value exists between payers and industry, which will continue in the future

• Fundamentally different business objectives drive this; however, payers are becoming increasing more influential and pharma needs to adjust

http://www.managementthinking.eiu.com/value-challenge.html.

Which of these factors have the greatest influence on how your organization currently assesses the value of a new drug?

Biopharmaceutical company

Biopharmaceutical services provider

Generic pharmaceutical

company

Health insurance company

Government payer

Regulatory agency

Degree of improved efficacy over existing products 63% 50% 44% 31% 26% 36%

Total patient outcomes 41% 39% 29% 34% 26% 29%

Whether it addresses an unmet medical need 54% 36% 27% 15% 39% 32%

Potential number of patients who could use the drug 23% 31% 54% 33% 10% 25%

Cost compared with competing products 14% 8% 37% 38% 29% 21%

Improved longevity of patient 14% 11% 20% 31% 36% 44%

Improved quality of life of patient 25% 31% 34% 65% 52% 52%

50% and over 40% to 49% 30% to 39% 20% to 29% 20% to 29% Source: Economist Intelligence Unit Survey, September 2011.

The lack of a clear definition of value is a significant challenge

http://www.managementthinking.eiu.com/value-challenge.html.

What are the biggest barriers to your company’s efforts to demonstrate the value of its products? (% respondents)

Different stakeholders define value differently

56%

36%

33%

26%

18%

Source: Economist Intelligence Unit survey, September 2011.

Value considerations differ for different conditions being treated

The same stakeholders in different geographies define value differently

Inability to obtain or failure to generate data related to value during trials

Lack to understanding of what stakeholders are seeking

Understanding of value differs the most according to stakeholder, type of medical condition, and geography

The balance of power is shifting to payers

Traditional pharma companies see themselves as losing influence over the market to commercial and government payers

In your opinion, how has the influence of the following stakeholders on the type and price of products brought to market changed in the biopharmaceutical market in the past 3 years? (% respondents)

*Percentage show the difference between the positive and negative responses for each group. For example, 41% of respondents from biopharmaceutical companies say their segment has lost influence and only 17% say it has gained influence, for a net negative 24%.

-40 -30 -20 -10 0 10 20 30 40 50 60

36

40

21

12

26

15

17

32

39

37

13

19

5

-32

19

43

54

33

42

30

38

-24

Biopharmaceutical Companies Other

Traditional biopharmaceutical companies

Specialty biopharmaceutical companies

Generics manufacturers

Payers/insurance companies

Government department/agencies charged with healthcare spending

Regulators of formulary access

Regulators of drug approval

Patients/patient advocacy groups

General practitioners

Specialized doctors

Institutional healthcare providers

Who has gained influence according to:

http://www.managementthinking.eiu.com/value-challenge.html.Source: Economist Intelligence Unit survey, September2011.

Managed markets strategy can better meet the value challenge

Traditional sales channels are giving way to health economic information targeted to the payer audience

Regarding its go-to-market strategy, which of the following has your organization done in the last 3 years to better demonstrate value to the market? (% respondents)

http://www.managementthinking.eiu.com/value-challenge.html.Source: Economist Intelligence Unit survey, September2011.

0 10 20 30 40 50 60 70

25

14

20

25

26

22

24

25

28

41

6

12

27

33

33

42

42

45

55

64

Value Leaders Rest of Survey

Shared more information on new products with medical professionals

Published different or more complete data on product efficacy

Gathered more extensive information on efficacy of drug once it reaches market

Share more information on new products with patient/patient groups

Shifted go-to-market strategies from doctors to payers (public or private)

Publish data on the overall cost of treatment for a patient rather than just the pharmaceutical cost

Increased efforts to encourage patient compliance in order to enhance effectiveness of product

Shifted resources from traditional sales channels towards making efficacy/value information better known to the market

Changed metrics of commercial performance (eg, put greater emphasis on patient trust in company)

My company has not made significant changes to better demonstrate value in the marketplace

Three-part aim: What looks good to payers in the evolving marketplace

Value proposition

Better health outcomes for patients

Better health of populations

Lower costs through healthcare quality improvement

“A general concept that translates across all conditions and care settings.”- Dr. Shari Ling, MD

Deputy Chief Medical Officer, Centers for Medicare and Medicaid Services

http://www.managementthinking.eiu.com/value-challenge.html.