Insights to Managed Care Contracting
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Transcript of Insights to Managed Care Contracting
11.12.12
Managed Care StrategyContracting
Managed Markets contracting
Manufacturers and Payers Share the desire to provide value
The objective is to provide optimal access to drugs that meet a patient’s clinical needs and are cost effective
Managed Markets contracting
Manufacturer specific objectives● Limit barriers from commercial and government payers to insure
patient access to appropriate care● Establish Company as a respected and valuable source for
Payers in the treatment of Disease State● Support with
– Proper place of therapy– Cost-effective treatment– Distribution management
Managed Markets contracting
Manufacturer Considerations when developing Contracting Strategy● What is your tier target? Tier 2, 3, or 4?● Short term and long term impact of contracting (effect discounts
will have on best price, net price, etc.)
● Current Market dynamics – New Class?– Where are your competitors on formularies, what they are doing currently?
● Other considerations– Other contracts and discounts (Specialty Pharmacy, wholesaler, GPO,
Specialty Distributor) have pricing implications– Potential step edits, prior authorizations
Formulary tiers
Commercial● Tier 3 (Non-Preferred Brand) access– will require no or low
discounts/rebates depending on position in therapeutic class – First in therapeutic class with significant clinical advantage = little or no
discount in commercial payer market– Third in class “me-too” = more aggressive discount for inclusion
● Tier 2 (Preferred Brand) access – will require higher discounts/rebates– First in therapeutic class with significant clinical advantage = little discount in
commercial payer market– Third in class “me-too” = more aggressive discount and will likely require “1 of
1”, “1 of 2” or “1 of 3” rebate tiers (“1 of 1” = highest discount and unlikely to achieve until you have significant market share…making it a “chicken or egg” scenario
● Tier 4 (Specialty) if plan has a 4 tier formulary can have similar attributes and considerations to tier 2 depending on plan.– Tier 4 has higher co-pays and most have co-insurance
Managed Markets contracting
● Determine government contracting strategies – Is there a significant potential patient population in Medicare Part D, Medicaid
and other Government (VA, DOD, PHS, FSS)?– What is your target coverage? Tier 2, 3, 4, 5?
Formulary tiers
Government● Tier 3 for 3 and 4 tier plans (Non-Preferred Brand) access – will
require lower discounts/rebates depending on position in therapeutic class – First in therapeutic class with significant clinical advantage = little or no
discount in commercial payer market– Third in class “me-too” = aggressive discount
● Tier 2 for 3 and 4 tier plans (Preferred Brand) access – will require higher discounts/rebates
● Tier 4 or 5(Specialty) if plan has a 4 or 5 tier formulary can have similar attributes and considerations to tier 2 depending on plan.– Tier 4/5 has higher co-pays and most have co-insurance
Medicare tier structure
Payers with a3 Tier Benefit
(5)
Payers with a 4 Tier Benefit
(12)
Payers with a5 Tier Benefit
(6)
Copay Ranges
Tier 1 Generic Generic Preferred Generic $0 - $12
Tier 2 Preferred Brand Preferred Brand Non-Preferred Generic
$5 - $4316% & 20%
Tier 3 Non-preferred Brand
Non-preferred Brand Preferred Brand $24 - $98
18% - 50%
Tier 4 Specialty or Injectable
Non-Preferred Brand
$70 - $9125% - 75%
Tier 5 Specialty or Injectable 25% - 33%
Notes: 14 National and 9 Regional Payers• National Payers – 50% = 4 Tier; 35% = 5 Tier• 52% have 4 Tier Structure, most have multiple formularies• Tier 3 Copay – majority are $60 - $83; Tier 4 copays are 25 - 35%
Need a source for this info
Managed Markets contracting
For a launch of a new product, perform a Payer Assessment to determine the Key Targeted National Payers ranked by priority
(typically number of lives) and the alignment of the regional payer sales team in order to effectively reach regional plans
Payer DPayer E
Payer GPayer S
Payer H
Payer F
Payer N
Payer J
Payer MPayer O
0
2
4
6
8
10
12
20
40+
0 1 2 3 4 5
Payer I
Formulary/Contract Enforcement Ability to Influence Market
HM
O L
ives
(mill
ions
)Weak
Strong
Weak Strong
“Size Matters” “Must Have’s”
“Keep the Door Open”
“Make or Break a Region”
Payer L
Payer A
Payer P
Payer BPayer C
Payer Q
Payer R
Payer K
Example: payer assessment
Contracting trends
Price Protection contracts
Steeper discounts for specialty categories
Rise in contracting for tier-3 to avoid exclusion
ACA Implications
Payers● Increased cost for mandatory
requirements● Increased competition● Ability to compete in
exchanges
Manufacturers● Plans to seek greater
discounts● Plans likely to increase use
of limited or closed formularies
● Increased Step edits (especially through generics)
Finally
● Contracting for access only provides you the “Ticket” to play in the game
● Well planned Pull-Through strategies are imperative for Brand Share Growth, which will dictate payers’ views on the Drug, which will drive future contracting considerations and relationships