Market Access 101: Improving Your Drug’s Formulary Placement
Welcome back to MMIT’s Market Access 101 series, in which we unpack the complexities of market access via a series of blog posts. In our first post, Understanding the Basics, we covered the difference between the pharmacy and medical benefit structure, the typical timeline for drug review, and why it’s critical to determine which entity makes formulary and coverage decisions.
In this post, we’ll address how to research and articulate your drug’s value proposition, how to overcome access barriers like prior authorization, and how to engage controllers during formulary decision-making.
How can manufacturers create a strong value proposition?
While we all know that a drug with a better formulary position is easier for providers to prescribe, how to achieve that goal is the million-dollar question. Every new drug needs a convincing value proposition, which will differ quite a bit depending on the therapeutic area, the treatment options available, and the current landscape. The trick for manufacturers lies in determining how payers will weigh the drug’s efficacy versus its cost.
Well before launch, pharma companies need to have a firm grasp on the market access dynamics for the therapeutic area in question. What is the prevalence of this condition among a payer’s covered lives, and how do they currently manage this patient population? What unmet needs still exist? What’s the average cost of treatment for both payers and patients, and what kind of utilization rates are payers seeing? What clinical attributes will be most appealing to payers in a formulary review? Which contracting terms and price points would be well-received?
After conducting this market research, manufacturers can leverage the drug’s clinical and financial proof points to create a clear, compelling narrative of the value of this therapy. Ideally, pharma companies should begin planning for market access early in drug development, as a well-designed clinical trial can provide pivotal data for inclusion in a value proposition.
If the drug has competitors, the value proposition should include a comparison, such as “this drug improves two-year survival rate at a lower cost than this competitor” or “this drug also reduces readmissions, unlike competitor B.” Prior to launch, pharma companies should test and refine these value propositions, as well as their drug’s target product profile (TPP), with both payers and providers.
Why is formulary placement so important?
The factors that drive formulary placement can vary significantly across therapeutic areas, ranging from the number of treatment options available to the cost of treating a given population. Within most areas, gaining a favorable position depends upon tracking coverage and restriction details for both the new product and its competitors.
Prior to launch, pharma companies need to keep a close eye on the coverage landscape, as this information will help them better understand their brand’s access advantages and disadvantages. This requires understanding the current benefit landscape, predicting payer responses to new drugs, and tracking changing formulary coverage and restrictions. (In this post, we’ll talk exclusively about coverage as it pertains to the pharmacy benefit; we’ll cover the medical benefit in a future post.)
Pharma companies can learn which drugs are covered in each payer’s published formulary documentation, which explains the tiers, edits, and codes used by a particular formulary. This document or database lists each drug’s tier placement, as well as the presence or absence of utilization restrictions. Although every health plan has a different benefit structure, first-tier drugs are associated with the lowest copayment, and copayment amounts increase with each tier.
A new drug’s placement on a high tier can mean lower utilization and reduced revenue for its manufacturer. Physicians are reluctant to prescribe drugs that they believe might create a cost burden for their patients. If a patient’s out-of-pocket cost is higher than expected, the patient will likely complain to their doctor. And if the patient can’t afford the co-pay, the treatment may be abandoned, which will impact the physician’s ability to help them get better.
How do utilization restrictions impede access?
If a payer has placed utilization restrictions on a medication, a pharmacy will be unable to dispense it at the point of sale unless those restrictions have been met. For example, a quantity limit restricts the amount of a particular medication that can be dispensed within a given time frame. This restriction is usually aligned with the directions on the drug’s label; a drug that is given twice daily might have a quantity limit of 60 tablets within 30 days.
Prior authorization (PA) restrictions are commonly used for expensive medications, drugs that have dangerous side effects, or drugs that a payer considers to be overused. To prescribe these drugs, the provider must first complete a PA request and receive advance approval from the payer.
While PA may be appropriate for certain drugs, this restriction can act as a powerful deterrent to providers. Despite recent legislation supporting electronic PA standardization, the PA process is still complex, time-consuming and highly manual. Providers are often unsure if they are including the right documentation with the request, which contributes to denials and unnecessary care delays. As a result, the presence of a PA restriction can lead providers to prescribe a different medication altogether.
Payers can also impose step therapy restrictions, sometimes called “fail first” requirements, to ensure that patients try a generic or less expensive drug before a more expensive one. If only one step is mandated, issuing a prescription for the higher-cost medication will not necessarily require PA. When a patient tries to fill the prescription, the pharmacy’s adjudication platform will automatically review past claims to determine if the patient has already tried the first-step therapy and is compliant with their plan’s coverage rules.
How can pharma companies influence controllers?
Understanding which payers are restricting your brand—and why—is key to improving market access. Before launch, pharma companies can engage in several activities to predict potential coverage and restrictions. They can track the new-to-market policies for every payer and PBM, identify controllers (the entities that control the formulary decision) with significant influence, and use historic analogues to guide their forecasting. Pharma companies can even interact with P&T committee members to get a better understanding of how controllers are analyzing the cost and efficacy of competitive products. This information can help pharma companies evaluate and mitigate potential access barriers.
After launch, the details of a particular utilization restriction may reveal that a payer is using criteria that aren’t supported by clinical standards, or that are more stringent than the prescribing information published on the product’s label. Pharma companies also need to know how many patient lives are impacted by these access restrictions, as this data helps them create and prioritize target lists for their account managers.
Pharma companies can then initiate conversation with controllers regarding their rationale for imposing these access restrictions. In some instances, this is a matter of education: the controller may not fully understand the drug’s label or perhaps even the disease that is being treated. When a payer has made it more difficult for a patient to begin therapy than the FDA believes is necessary, manufacturers can make a strong case for revisiting these restrictions.
In other instances, pharma companies can use contracting and rebating to gain a better position on a health plan’s formulary. By monitoring geographic areas in which a brand is currently disadvantaged, manufacturers can leverage competitive contracting strategies with the right payers and PBMs to increase market access. Depending on the therapeutic area and the brand’s value proposition, controllers may be open to negotiating an indication-based drug contract, a cost-cap contract, or an outcomes-based contract.
As these types of complex contracts require sophisticated risk modeling and analytics, manufacturers must choose their contracting strategy wisely. With indication-specific pricing, a payer is charged different price points for a drug depending upon which indications it is used for. Cost-cap contracts can be patient-, population-, or volume-based, and are designed to reduce financial risks for payers. Outcomes-based contracts link the cost of a drug to its clinical efficacy and/or the total cost of care in actual patients.
How can pharma companies influence physicians?
When access to a drug isn’t fully open, the manufacturer needs to understand the impact of payer policies on prescribers. What is specifically required of physicians for compliance?
By pairing market access data with claims data, pharma companies can better understand the realities of drug utilization. While market access data shows payers’ intentions, claims and reimbursement data reveal the details of the patient’s journey in practice. Are patients able to fill their prescriptions, despite PA restrictions? Is a specialist required to write the prescription for this drug? What access barriers are proving insurmountable for physicians?
As the pharma company begins to improve a drug’s market access, any changes should be immediately conveyed to prescribing providers. Lack of coverage information is the primary reason physicians fail to write prescriptions for a new brand. The company’s sales team can use practice-specific data—such as a list of payer formularies used by the physician’s patient population, along with local coverage information—to assuage physicians’ concerns.
If a physician has had difficulty prescribing the drug in the past, the sales team will need to explain that the drug is now in a preferred position versus its competitors. The sales team will likely need to walk through the details of payers’ current requirements and restrictions, and perhaps review competitors’ access requirements as a comparison. Most importantly, manufacturers will need a TPP that clearly and convincingly articulates the brand’s value proposition for both patients and providers.
As we’ve seen, securing a prime formulary position requires a great deal of legwork long before a product’s launch. Once the new therapy is on the market, pharma companies need real-time market access data to monitor coverage and policy changes, optimize contracting and rebating strategies, and drive provider engagement as its access evolves. By preparing a comprehensive, data-driven market access strategy in advance, manufacturers can secure a favorable formulary position right out of the gate.
Stay tuned for our next post in the Market Access 101 series, “Securing Coverage Under the Medical Benefit.” We’ll explain the importance of medical policies and treatment pathways and discuss the details of pre-certification and treatment requirements