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Thought Leadership

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What Does Member Disruption Mean to Payers?

By Jory Fleischauer, Pharm.D

Recently, payers have started to use the phrase “member disruption” to refer to the potential impact of an impending formulary change on their members. This qualitative term is mentioned with increasing frequency during contracting discussions and P&T sessions, although the weight of these considerations varies between organizations.

Member disruption describes the impact of formulary changes across three spectrums: how a plan is perceived by both members and employers; the workload and logistics required for a payer to execute a change; and the overall cost-benefit impact of a change across all therapeutic areas. While payers also weigh the effect of a change on healthcare providers and regulatory agencies, these factors do not typically play into the concept of member disruption.

Let’s take a closer look at what member disruption means to payers when making P&T decisions.

  1. Member and Employer Perception
    Members and employers, or plan sponsors, are more attuned to changes in their payer’s formulary than ever before. Employers often have a heightened sensitivity to any proposed changes that would directly affect their employees. For members in high-profile disease states, such as multiple sclerosis, being required to switch therapies can create considerable logistical and clinical difficulties. These members may be especially resistant to a formulary change, and especially committed to advocating against it.

    Depending on the extent of the change and how it is communicated, plans can also face vocal opposition via direct complaints and/or social media posts. In addition to upsetting current members, this negativity can also influence prospective members, who may be less likely to choose the payer in the future due to their process for managing formulary changes.

    In this context, being mindful of member disruption means managing the perceived goodwill between a plan and its members to best minimize friction. For many payers, being aware of potential patient perceptions to policy changes is a relatively new concept. However, member disruption will be of increasing importance in measuring success in the coming years.

  2. Workload and Logistics Planning
    Executing a formulary change for a particular health plan requires considerable workload and logistical planning, as touchpoints must be made in such a way as to meet all contractual and legal obligations. Payers must expend a significant effort to process and mail notification letters to inform their members about any formulary changes. When you consider the millions of lives that can be affected by a formulary change, it’s clear how much effort is needed to communicate such changes.

    Lastly, payers must ensure that members who are unable to switch products do not experience a therapy interruption. This complex process, which varies depending on the therapeutic area in question, can prove quite burdensome for a payer. As payers continue to identify areas of operational efficiency, they could gain considerable time and cost savings by simply avoiding unnecessary member disruptions.

  3. Cross-Therapeutic Cost-Benefit Analyses
    When a payer weighs whether to accept a manufacturer’s proposed contract, they must first ensure that any proposed change does no harm. It is critical to conduct a cost-benefit analysis not only within the therapeutic space of the product, but also across the organization, to minimize any damage to downstream rebating.

    Due to previously existing contractual requirements, shifting members from one product to another can endanger the rebating of other products. If there is any uncertainty about how a potential change might play out, payers can be hesitant to accept a new contract—unless a cost-benefit analysis shows them the quantified value of making a change. Payer decision-makers must walk a tightrope between accepting a large delta in cost savings for one therapeutic area without disrupting cost savings in others. Without an assured large delta between contracts, payers may be too risk-averse to accept a contract that disrupts a large number of members.

For payers, the idea of member disruption encompasses all three of these arenas. Member disruption is a way of qualitatively measuring the impact a formulary change may have on the broader organization as a whole. Using a more holistic approach to formulary management can result in a more efficient, effective plan management strategy for both payers and employers—one which minimizes discord and prioritizes the member experience.

In recent years, the business needs for payers have grown beyond merely identifying the best contract for their bottom line. Instead, payers must include consideration of all levers which may affect their profitability. In today’s payer environment, manufacturers must do more than just sell a product’s value proposition. Instead, they need to understand each payer’s unique business characteristics in order to better tailor their product’s value and ensure market access.

To better understand how P&T decision-makers will perform cost analyses on your brand and competitors, learn more about MMIT’s P&T Perspectives solution.

© 2024 MMIT
Jory Fleischauer, Pharm.D

Jory Fleischauer, Pharm.D

Jory Fleischauer, Pharm.D., is an Associate Manager of Market Research for P&T Perspectives at MMIT.

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