A new rate-limiting step has emerged in drug and device development. For more than half a century, meeting the exacting clinical standards of the FDA, EMA and other government regulators has been the central, if not exclusive, focus of premarket clinical study design. With the growing value orientation of global healthcare markets, a new rate-limiting step has emerged in drug and device development.

Early product revenues are falling as public and private payers increasingly delay coverage decisions and demand more extensive real-world evidence and a demonstration of value. The race to produce this evidence post- or peri-approval has become increasingly expensive, time-consuming, and complex.

This is in part due to the diversity of payer types — from national pharmacy benefit managers (PBMs), to regional managed care organisations (MCOs), at-risk integrated delivery networks (IDNs) and even individual hospitals and physicians groups — as well as evolving processes for making coverage and formulary decisions, all of which vary significantly by type and location.

A new approach — considering the perspectives of payers and end users in developing early trial designs — can pay big dividends by potentially shortcutting the new rate limiting step in product development. Strategically engaging payers early in development may get a new product on formulary six to seven months earlier, gaining millions in increased revenue and maximising time on formulary.

Real-World Clinical and Economic Data Needed

Payers, both public and private, are responsible for care quality, outcomes and cost for populations that are much larger and more diverse than those typically seen in regulatory clinical trials. Care is also delivered differently in community settings than controlled research sites. These disparities can greatly affect predicted clinical and cost outcomes, which is why payers want different data than regulators.

In addition to data for broader patient populations and treatment settings, payers also need to know how a product affects overall treatment costs. This is particularly true for products that are more expensive than current treatments, but justify a higher price by claiming lower costs for other services, such as reduced hospital admissions for heart failure or fewer liver transplants for hepatitis C. Payers are sensitive to past incidences where such claims have not panned out.

This is a key contributor to why US payers typically take six to 12 months or more after FDA approval before approving coverage, especially for non-breakthrough drugs (1). Indeed, PBMs administering US Medicare drug benefits have six months from FDA approval to review a new drug, but can delay their decisions if they need more clinical evidence (2). The US Veterans Administration allows one year with similar extension provisions (3).

Hospitals and IDNs, which make more and more buying decisions as payers push more risk to providers, can take even longer. In part because they are concerned about their liability for long-term safety, many won’t even consider a product until it has been on the market for one year (4).

Outside the US, many countries base coverage decision on formal healthcare technology assessment (HTA) processes. While these generally are more transparent than private insurers’ processes, they can take much longer, and vary in how heavily they influence final buying decisions. In some countries public insurance coverage decisions are binding at the national level, as in France and Germany. In others, such as the UK, the national HTA advisory board make recommendations while regional or local health trusts have some discretion over how they spend their own budgets.

While those public HTA and coverage decisions overtly include cost-effectiveness, in the US the situation is more fragmented. The Medicare programme does not consider cost in approving inpatient therapy coverage. However, the many organisations it contracts with to provide outpatient drug benefits through Medicare Part D, and comprehensive benefits through Medicare Advantage, do consider costs, as do the growing ranks of hospitals providing services under bundled payment arrangements.

PBMs must also defend decision-making, in part, by using cost-effectiveness data. Anticipating the PBM’s decision-making process can determine success for new therapies, particularly those entering the market at the same time as a competitor. For example, CVS, a major US PBM serving more than 80 million plan members, added evolocumab (Amgen), one of two PCSK9 inhibitors approved in 2015, to its formulary within three months of regulatory approval based on its favourable efficacy profile and potential for preventing cardiovascular events.

Interestingly, CVS’s independent pharmaceutical and therapeutics (P&T) committee judged the two approved PCSK9 inhibitors therapeutically equivalent. The lower cost of going with a single supplier broke the tie, according to the public explanation in a CVS release (5).

Across all markets, comprehensive real-world evidence and impact data could become the new price of entry.

Early Collaboration Pays

Historically, manufacturers delayed investment in the broader observational and open-label studies needed to produce real-world clinical and economic evidence until a new product had been approved or cleared, or was close to it.

Manufacturers are finding that involving payers early in product development has many benefits. One is designing studies that generate needed safety and economic information either as part of clinical trials or in parallel to them. The US FDA and Medicare have a programme in which they jointly consult with manufacturers to design such trials, which have led to the two simultaneously approving at least one product, a non-invasive molecular test for colon cancer (6).

On the private payer side, CVS is working directly with manufacturers developing products that lower costs and improve care. In the wake of a huge public outcry over raising the price of EpiPen two-pack to $649.99 and introduction of the authorised generic for EpiPen at $339.99, CVS worked with Impax Laboratories to offer a generic epinephrine auto-injector for $109.99 for two. (7)

In December 2016, CVS launched a Transform Care Diabetes programme, which commits to holding diabetes-related drug cost increases to single digit year-over-year for participating formulary clients. CVS also pitches the programme to payers as potentially saving $3,000 to $5,000 in total annual treatment costs for each member who successfully improves control of their diabetes. (8)

Transform Care Diabetes entails engaging patients through devices such as networked glucometers and quick access to A1C testing and other services at its thousands of pharmacy and MinuteClinic locations. On the supplier side, CVS works with drug and device manufacturers developing products that can demonstrate improved blood sugar control and medication adherence. It is the first of a suite of care transformation programmes for managing chronic conditions that CVS will roll out.

Those proactive risk and cost reduction programmes are increasing in number, potentially serving as a key facet of future business models for payers according to an industry forecast by EY, and offer opportunities for manufacturers to not only deliver more effective products, but align interests to accelerate development.

Another way to collaborate with payers is using the same data they do to assess effectiveness. Data aggregated from millions of medical and claims records helps design trial inclusion criteria and recruit patients that better reflect the real-world populations payers cover. It can also help establish unmet need for products, as well as other service costs they may affect, on a population basis.

Real-world data also helps identify information that could help construct a value proposition for a new product. This helps design studies that generate the data needed to make the case, as well as predict which items in your portfolio are most likely to generate a return as certainty about a product’s performance and utility evolves. This helps optimise return not only on a given product, but your entire portfolio.

In addition to straight-up payment approval, identifying real-world issues early can help develop innovative pay-for-performance plans. Linking payment for a new heart failure drug to its impact on hospital admissions is one example.

The bottom line is that developing a value proposition that addresses the needs of both payers and regulators could get your product to market sooner. This can be especially valuable when competitors are working on similar offerings. Inviting payers, government HTA assessors and even representatives of large private delivery systems in early — and making full use of the Big Data sources they rely on — can help you shape more effective and more profitable development strategies.

To consult ICON’s pricing and market access experts on the potential for payer partnerships to help your organisation, contact us.



 (1) Edwards L, Fox A, Stonier P. Principles and Practice of Pharmaceutical Medicine – Third Edition. John Wiley & Sons, 2011 ISBN 1444348124, 9781444348125

(2) US Centers for Medicare and Medicaid Services. Medicare Part D Drug Benefits Manual, Rev. 18, 01-15-2016. Chapter 6, Section 30.1.5 Formulary Management. https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf

(3) US General Accountability Office. Drug Review Process Is Standardized at the National Level, but Actions Are Needed to Ensure Timely Adjudication of Nonformulary Drug Requests. GAO-10-776: Published: Aug 31, 2010. http://www.gao.gov/products/GAO-10-776

(4) Ventola, CL. P T. 2010 Jan; 35(1): 24–29. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2816153/

(5) CVS Health Announces Formulary and Therapy Strategy for PCSK9 Inhibitors. Press release, Nov 23, 2015. https://cvshealth.com/newsroom/press-releases/cvs-health-announces-formulary-and-therapy-strategy-pcsk9-inhibitors

(6) Pomager J. Bridging the FDA-CMS Divide: An Optimized Rout to Market for Medical Devices. Med Device Online. Oct 21, 2014

(7) CVS Health Offers Patients Lowest Cash Price in the Market for Generic Epinephrine Auto-injector to Treat Allergic Reactions. Jan 12, 2017. https://cvshealth.com/newsroom/press-releases/cvs-health-offers-patients-lowest-cash-price-market-generic-epinephrine-auto

(8) CVS Health Introduces New "Transform Diabetes Care" Program to Improve Health Outcomes and Lower Overall Health Care Costs. Dec 13, 2016. https://cvshealth.com/newsroom/press-releases/cvs-health-introduces-new-transform-diabetes-care-program-improve-health

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