The “lingering mistrust” between the pharmaceutical industry and payers over lowering drug costs and improving outcomes will make new approaches of engagement highly unlikely without a fundamental change in current approaches.
That is one of the key messages in Ernst & Young’s annual report on the global pharmaceutical industry titled Progressions: Navigating the payer landscape.
Mature pharma companies must move beyond basic drug-by-drug negotiations on price and access to develop more strategic, long-term relationships that line up with payers’ major concerns for comparative clinical trial data—rather than relying on placebo-controlled trial data.
With prescription drugs accounting for about 10% of healthcare expenditures, payers see curbing rising drug costs as a more important business challenge than non-drug costs, according to the report. The widest gap between both sides: 88% of payers strongly or somewhat agreed that “drug prices are a major driver of healthcare cost increases,” while 42% of pharma respondents said the gap reflects a lack of trust by payers and the public.
Those findings are based on an Ernst & Young survey of 30 U.S. payers and 30 European payers on their current and future needs and preferences, and 18 global pharmaceutical companies. They were asked how well they understood payers’ needs and attitudes. The survey was supplemented by in-depth interviews with industry executives both in the U.S. and Europe.
“What surprised me was the willingness of payers to move to a broader relationship with pharmaceutical companies over the cost of drugs and lack of trust,” said Patrick Flochel, EY’s global pharmaceutical leader. “They expressed a willingness to pursue a different relationship, a broader and long-term relationship, rather than focus on access and pricing one drug at a time. That is difficult to implement. So pharma needs to talk with payers differently if they want to restore trust and better explain why some drugs cost $100,000.”
The report also said nearly 80% of payers surveyed agreed that boosting drug adherence is a critical component for lowering healthcare costs, and many agreed pharma companies have data that is vital for measuring outcomes. But less than half of payers (43%) agreed pharma data are credible for measuring and improving outcomes.
Another lack of trust marker: most payers do not think pharma companies developing “beyond-the-pill” services can be unbiased between their products and those of competitors. Only 15% of respondents even somewhat agreed with that statement.
“From all of our questioning, what comes back all the time is that payers increasingly want comparative effectiveness research for improved outcomes, but that data is not always there,” said Gautam Jaggi, managing editor of the report. “So it becomes more and more difficult to differentiate one product from another, and the only difference winds up being drug pricing.”
The net result, said Flochel, is that while pharma companies have useful data and potential solutions in areas such as drug adherence, they are unlikely to get much traction, because payers simply don’t trust drug companies to have the required impartiality. Although payers say they are open to evolving types of interactions with pharma, drug companies will have to approach payers in a fundamentally different way to succeed.
“What we see today between pharma and payers is that everyone is doing just the bare minimum toward solving long-range pricing and comparative effectiveness concerns,” said Flochel. “Pharma companies need to develop offerings for payers that are customer-centric and built from the perspective of payers that address the challenges in the way payers see the world. Now pharma companies only think about what will make their product more successful to sell more pills.”