In response to the rapidly growing influence of managed care, the pharma industry has undergone significant transformation.
In the past, to drive prescriptions, the main focus of pharma companies was selling to the individual doctors.
Under the traditional fee-for-service model, physicians based their prescribing decisions primarily on their evaluation of the therapeutic value of a product. The cost of the medication was not the principal driver for their choice.
Today, physicians no longer have complete discretion to prescribe whatever medication they deem necessary. With approximately 85% of all prescription drugs reimbursed under some managed care plan, doctors' decision-making is largely influenced by managed care formularies.
Market access has become a critical issue for most commercial pharma companies. It is no longer sufficient to sell doctors strictly on the clinical benefits of a product to gain market share.
As a result of the changing landscape, from an industry perspective, healthcare is comprised of three main players:
Marketing and sales teams focus mainly on patients and prescribers, while managed market teams concentrate on the payer side of the equation.
Whether your organization has a pipeline full of innovative products or merely a few established pharmaceuticals, the possible success or failure of the portfolio will be affected by the existence of a well-rounded, managed care strategy.
So, pharma companies ought to know how to navigate in this new environment, understanding the priorities and objectives of managed care organizations and their decision-making processes.
The Origins Of Managed Care
The passage of the Health Maintenance Organization Act of 1973 marked the official inception of managed care as we know it. It was intended to serve as a method to contain rising health care costs.
Supporters of the managed care system saw the potential to put a significant halt on healthcare-related expenses through the formation of provider networks and utilization management.
Provider networks required physicians to meet certain quality standards and agree to lower pricing arrangements as conditions for their membership.
Utilization management was put in place to allow payers to determine whether a treatment or drug ordered by a physician is really necessary. Since the mid-1970s managed care organizations have gradually replaced private practices of individuals physicians, fee-for-service reimbursement, and independent hospitals.
Key Players In The Managed Care Space
The three major types of managed care organizations are.
- Preferred Provider Organizations (PPOs)
- Health Maintenance Organizations (HMOs)
- Point Of Service Plans (POS)
In the U.S., PPOs are by far the most common forms. Of the three, HMOs are the most restrictive, PPOs are the most flexible and POS plans are somewhere in-between.
In a managed care system, formulary decisions are typically made by a Pharmacy Benefit Manager (PBM). PBMs offer a wide range of pharmaceutical services to HMOs, PPOs, and employer group health plans.
Due to their market power, PBMs negotiate discounts from pharma companies in exchange for placing their products on their formularies.
As a part of a solid managed care strategy, it's important to understand market trends and dynamics within the payer segment.
So that you can develop effective strategies to increase product usage and drive market share.
3 Reasons Why You Need A Managed Care Strategy
1. Market Access Is Important For Commercial Success
From a pharma company viewpoint, managed care contracts play a vital role in paving the way to commercial success for any given product, especially those new to market.
But, the reality is that poor market access can quickly become an insurmountable obstacle to even the most talented sales and marketing teams.
Furthermore, it is no longer enough to implement managed care initiatives with the sole purpose of getting "access." A greater vision and solid strategy are needed when working with managed care organizations to achieve long-term strategic goals.
2. Growing Managed Care Influence Impacts Company Bottomline
Pharma companies need to understand how the decision-making process of each payer differs from one another, and the unique set of tools they use to control utilization.
The ever-growing influence of managed care over the industry's ability to remain profitable calls for the implementation of sound managed care strategies.
3. Rapidly Changing Managed Market Landscape
In the life sciences industry, the managed care landscape changes fast. So fast that many companies are unable to maintain momentum or stay on top of trends.
Companies that disregard the importance of staying on top of the trends find themselves scrambling as they try to minimize the imminent losses created by their inability to keep up.
The failure to communicate formulary changes to key teams across the organization in a timely fashion can have detrimental consequences, such as loss of market share and diminished customer trust in the sales force and leadership.
3 Effective Ways To Create A Sound Managed Care Strategy
1. Synchronize Brand And Managed Care Strategies
Creating an effective managed care strategy in isolation, separate from brand strategy will never allow for maximum impact.
It is vital to identify gaps that exist in the organization between market access and sales/marketing teams and clear these potential blocks.
Encourage internal communication, data, and insight sharing between these teams to minimize the gaps in communication and enhance collaboration.
2. Train Your Sales Force For Effective Pull-Through
Empowering members of your commercial team to assist with pull-through efforts is essential to capitalize on forumulary wins.
Successful pull-through is a common condition set by managed care organizations upon granting a favorable formulary status. This means that the company must demonstrate the ability to drive market share of the product in question within a set period.
Ideally, the market share of competitor products in a less favorable formulary position is anticipated to decrease. If the sales team isn't able to drive the expected results, the formulary decision may be reversed.
Giving commercial teams the additional skill sets around market access will be incredibly helpful in capitalizing on major formulary wins.
3. Power Your Teams WIth Technology With Reliable, Real-life Market Data
One of the most common complaints from sales teams of commercial pharma organizations is the lack of reliable market data available to them in the field. To improve sales call effectiveness, customer-facing team members are expected to pre-call plan.
Integrating modern pharma artificial intelligence modules into your software processes can help you harness market changes as they occur to develop a strategic pre-call plan.
Pre-call planning includes a review of up-to-date market access data and other product-specific information.
This process of planning for face-to-face interactions with customers can be drastically enhanced by providing your teams with technology that integrates market data dynamically and from multiple sources.
Developing An Effective Managed Care Strategy
The influence of managed care over the profitability of the commercial pharma industry is immense. Building a sound strategy that is specific to dealing with managed care organizations can be done by:
- Synchronizing managed care and brand strategies.
- Putting sales force in the driver seat for effective pull-through.
- Empowering commercial and market access teams with technology that delivers real-life market data.
Do you have an effective managed care strategy currently in place at your commercial pharma company?
Are you interested in learning more about managed care strategies and supporting software for the pharma industry? Get in touch with us today for a free consultation!