The Economic Realities of Value
By: John Doyle, DrPH, MPH | April 04, 2014
Macroeconomic pressure and austerity measures across the healthcare industry are shining a spotlight on the issue of value, and payers willingness to pay for new healthcare treatments. These economic pressures have moved to the forefront of this conversation, and biopharma companies need to start thinking about how they will impact individual products and therapeutic categories in the near and long term. Every therapeutic area faces unique risks, competition, and desirability for innovation, and all of these factors affect the economic feasibility of a treatment.
This balance of risks and benefits determine an organization’s willingness to pursue a path of research. When you compare the hyper-competition in prevalent conditions like diabetes, to the relatively low competition for treatments of rare conditions where smaller populations struggle with unmet medical needs such a myelodysplastic syndrome, you see the push and pull between economic analysis and health and humanistic evaluation.
This discordance underscores another problem in the value conversation – what benefits one stakeholder is less attractive to another. While payers and providers may be drawn to diabetes treatments that offer long-term incremental improvements to a large population, biopharma might be more interested in revolutionary treatments that address unmet medical needs in innovative new ways – if the outcomes are better and the costs are reasonable. These treatments are often easier to uncover, and will have a greater potential value statement.
That brings us back to the challenge of defining value. Every definition of value – for specific treatments and by specific stakeholders – will vary. As an industry, we have to acknowledge these varying definitions, and pursue all of them simultaneously if we want the healthcare system to function effectively for everyone.
Until every stakeholder group, including biopharma, providers and payers, look beyond their own value goals to embrace the broader goals of the network, the industry will be overly focused on short term benefits to the detriment of long term advancement opportunities.
You can learn more about our survey results downloading the Value is the Target.