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Market Access 101: Understanding the Basics

By Carolyn Zele

For many pharmaceutical companies, planning for commercialization only begins in earnest when a drug has been submitted for FDA approval—which is far too late. Ideally, a company’s commercial and market access teams should be fully functional long before the approval stage, as many decisions must be made in the early phases of the drug development life cycle.

According to Deloitte, the average cost of bringing a pharmaceutical asset to market is $2 billion, yet more than a third of all product launches in the U.S. fail to meet expectations, due in large part to insufficient market access strategy and execution.

To help you gain the foundational knowledge needed to ensure success—whether you’re new to the role or a long-time market access veteran—we’ll unpack the complexities of market access in a series of upcoming blog posts. Today, we’re starting with the basics.

What, exactly, is market access?

Essentially, market access is synonymous with patient access: ensuring that patients have the right access to the right therapy at the right price and the right time. The role of a manufacturer’s market access team is to secure appropriate payer coverage for their products. The teams must also lay the groundwork for each drug’s pricing, contracting, reimbursement and fulfillment strategies.

The cornerstone of a manufacturer’s market access strategy is the process of defining and communicating a product’s clinical and economic value to payers, providers and patients, as each is involved in the decision to initiate therapy. Market access is a critical function of a drug’s development and go-to-market strategy, as it sets the stage for a successful product launch.

How do health plans and formularies come into play? 

According to the U.S. Department of Health and Human Services, in early 2022 the national uninsured rate fell to 8%, an all-time low. Most Americans are now members of at least one of the nation’s estimated 7,500 health plans, whether it be a commercial plan or a government-regulated plan like Medicare or Medicaid.

Each health plan utilizes a formulary, or a list of covered therapies, to which plan members and their attending physicians must adhere; typically, a formulary will serve a group of health plans. The formulary specifies which drugs are covered and whether utilization management restrictions—including prior authorization requirements, quantity limits or step therapy prerequisites—are in effect for a particular drug. At MMIT, we refer to these access rules with the acronym PAR, for policies and restrictions.

Most formularies separate drugs into tiers, such as generics, preferred brands, nonpreferred brands and specialty drugs, which are associated with different levels of cost-sharing for the patient. The actual amount of a patient’s copay is specific to each health plan, and often differs for each plan using the same formulary.

Pharmacy vs. medical: Why does the benefit structure matter? 

Most therapies on the market are oral, self-administered drugs, which are managed under the pharmacy benefit. Members can go to a retail or specialty pharmacy and fill their prescription on their own, without requiring a doctor. Each of these drugs has its own National Drug Code (NDC) on the package, which serves as an FDA identifier. Currently, there are approximately 90,000 active NDCs on the market.

Drugs that require administration by a doctor or other medical professional are instead managed by the medical benefit, which covers the care a member receives in person. These drugs are associated with J-codes, CPT codes and HCPCS codes, and are often part of a medical procedure.

Many specialty drugs straddle this division, as they are often managed across both the medical and pharmacy benefit structures. To reduce expenses, some payers practice cost-splitting, in which they process the cost of the drug itself under the pharmacy benefit, while processing the cost of physician administration under the medical benefit. This is especially common with Medicare and Medicaid plans.

For manufacturers, understanding the governance of a product can be pivotal to improving market access. Many denied claims are rejected because a physician’s office verified the member’s benefits under the pharmacy benefit, but the drug is in fact managed under the medical benefit. When physicians must resubmit or appeal prior authorizations due to an administrative denial, the resulting delay in treatment can be consequential for patients’ health—and can result in decreased sales.

Who makes formulary and coverage decisions? 

While patients might assume that payers are responsible for determining which drugs their health plans cover, that’s not necessarily the case. Within MMIT’s solutions, we list the entity that controls the formulary decision as the controller.

The controller may be a payer, a pharmacy benefits manager (PBM), a managed care organization (MCO), or a government entity. For example, for a managed Medicaid plan with a state-mandated formulary, the state itself is the controller. In addition to deciding which drugs to cover and which will require utilization management restrictions, a controller is also responsible for reviewing any formulary exceptions or appeals.

Knowing which entity is responsible for assessing a drug’s efficacy and price point is of critical importance for manufacturers hoping to influence coverage decisions. These relationships are not always transparent or easy to determine. For example, an employer group might have a payer-managed medical plan benefit, but the payer has relegated drug formulary and coverage decisions, in addition to claims processing, to a PBM.

The recent rise of group purchasing organizations (GPOs) further complicates the process of identifying the controller of the coverage decision.  Many PBMs have now created their own GPOs. Manufacturers may mistakenly believe that negotiating a rebate contract with a GPO means their drug will automatically be covered on the formulary in a preferred position. They may be surprised to discover that while the GPO will negotiate the rebate contract, only the controller’s pharmacy and therapeutics (P&T) committee holds the responsibility for coverage and formulary decisions.

What is the timeline for formulary decisions?

The decision that a controller makes to cover or exclude a drug, and even to impose access restrictions, is always a strategic one. Contrary to popular belief, controllers do not necessarily review a drug as soon as it is approved by the FDA. Their timelines vary depending on several factors.

After the FDA accepts a manufacturer’s application for approval, the company may begin outreach to payers and PBMs to discuss the new therapy. Each P&T committee will meet several times to evaluate the drug’s clinical use and efficacy, the applicability of regulatory mandates, and whether the drug provides sufficient benefits or clinical differentiation to justify its cost.

Once the drug is FDA approved, each controller’s P&T committee will meet—typically within the first 90 days—to determine whether to place the drug on formulary, with or without access restrictions. During this waiting period, most payers and PBMs have overarching policies regarding how the new drugs will be covered or blocked prior to the P&T review decision.

After a controller chooses to cover a drug, the process of officially placing it on a formulary may take up to four weeks, or even eight weeks if utilization management policies must be developed. Sometimes this delay is inadvertently caused by the manufacturer. Before the drug can be listed on any formulary, manufacturers must set and communicate a marketing start date to the drug compendia. This date becomes the earliest date the compendia will release the drug’s code to their various customers to be added into a payer’s or PBM’s adjudication system.

Why are new-to-market blocks deployed? 

More and more controllers are now instituting new-to-market blocks, which block access to new drugs for up to 180 days, on at least a subset of newly launched drugs in therapeutic areas with other available treatment options.

These blocks function largely as a risk mitigation strategy. If the payer allows a drug to be covered for a patient immediately after launch and the P&T committee subsequently decides not to cover the drug, the payer is then obligated to allow any patients on the drug to continue treatment or accept the risk of switching medications. This creates a burden for the payer, especially for high-cost specialty medications.

Many controllers use new-to-market blocks to allow for the collection of additional real-world evidence of efficacy and success. They might also track which payers are covering the drug and determine how patients are using it before making a coverage decision. This wait-and-see period is quite common for drugs that have been fast-tracked by the FDA, which do not yet have long-term efficacy data.

When should you develop a market access strategy? 

For a successful launch, manufacturers need to start market access planning 12-18 months prior to FDA approval. Otherwise, companies risk launching their product without firmly establishing their coverage, distribution, or reimbursement strategies—which can lead to low uptake and suboptimal sales figures upon launch.

In recent years, the FDA has begun to reject drug applications if the pharma company hasn’t yet established a valid manufacturing and distribution strategy. If this occurs, resubmitting on the FDA’s timeline can cost a company millions of dollars in forecasted revenue.

Investing in a strong market access strategy—and the data necessary for market access analysis—is essential for commercialization. There are so many ways that market access can go wrong, from poor product differentiation to unfavorable formulary placement to underestimating providers’ willingness to switch therapies. With a data-driven game plan, pharma companies can better anticipate and solve these challenges in advance. 

Stay tuned for our next post in the Market Access 101 series, “Improving Your Drug’s Formulary Position.” We’ll cover 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.

© 2024 MMIT
Carolyn Zele

Carolyn Zele

As a solution consultant for MMIT, Carolyn Zele helps pharmaceutical manufacturers simplify market access and prepare for launch success. Prior to MMIT, Carolyn spent numerous years in the payer/PBM space managing formulary teams and technology across both regulated and non-regulated lines of business.

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