Mapping the pathway
(This is the ninth in a 10-part blog series on industry trends that are shaping the future of healthcare.)

The macroeconomic pressures and austerity measures that are impacting the global marketplace have not spared the healthcare industry.  With healthcare costs coming under increasing scrutiny, we are seeing escalations in the use Health Technology Assessments (HTAs) and other tools to guide reimbursement decisions.

In more than a dozen countries across Europe, Canada, Australia, and even in the emerging markets, national organizations now exist for the sole purpose of advising on or determining public reimbursement of approved therapies based on formal value appraisals. Here in the U.S., the Affordable Care Act (ACA) triggered a shift from volume to value, which the private sector has fortified and extended that shift as evidenced by Accountable Care initiatives driven by some of the industry’s largest payers.  For instance, the pharmacy benefit manager (PBM) Express Scripts leverages a “Value Assessment Committee” to weigh in on coverage and reimbursement policy.  The impact of these appraisals can be seen in the 2016 formulary guidance recently released by the large PBM where many leading brands will be excluded in lieu of competitive brands with a perceived value advantage.

Other noteworthy indicators of this economic pressure are price controls and compulsory licensing imposed in emerging markets.  Biopharmaceutical products and medical devices increasingly compete with a broad range of alternative investment opportunities for a decreasing number of healthcare dollars.

How should biopharma respond?

In response to this trend, life science companies should view their markets and products from the perspective of each country’s overall budget, rather than simply focusing on product-level market share.  A key consideration is how the industry might influence policy to optimize public and private investment in healthcare – and ensuring reimbursement is commensurate with value creation is a good start.  One approach could be to reduce cost-sharing for specialty drugs based on patient characteristics identified using biomarkers in cancer treatment or based on prognosis.

This focus on comprehensive value-based pricing is essential, and life science firms will need to adopt a population-level view of their market to complement their individual patient-level view in order to address governments under financial duress and alleviate some of the economic pressure in the system.  That means providing a clear demonstration of how the product generates strategic value for the country -- not just the individual.  For instance, a company may be able to show that a product will increase GDP by bolstering the productivity of a healthier workforce.

The focus on value should be perceived as an opportunity for life sciences companies to open the aperture on the definition of value and consider the direct, indirect, and intangible benefits and incremental risks that are conferred by their products and services to a broader population.  This will all contribute to building a stronger foundation for the focus on patient outcomes going forward.