Best Practices: Demonstrating Product Value

By: Charles A. Stevens, JD, MBA
Vice President and General Manager, Reimbursement and Market Access

With the continuing growth of evidence-based medicine across the healthcare environment, receiving regulatory approval is just one of the many hurdles that a biopharmaceutical company must overcome to achieve commercial success for a new drug or medical device.  A sponsor must also ensure that the new product is readily available to physicians and patients, that public and private insurance plans will cover its use for the approved indication, and that reimbursement rates will be adequate.  Without favorable decisions on coverage and pricing, even the best product will fail to thrive in the market. 

More important, a product’s overall value – not just its safety, efficacy, or cost – is becoming a key factor in determining whether it will attain optimal market results.  “Evidence-based medicine” and Comparative Effectiveness Research (CER) are the new mantras of the healthcare system, with most payers now requiring that novel products reduce treatment costs, improve medical outcomes, or provide some other tangible benefit over current therapies if they are to be placed on formularies and approved for reimbursement.

Given the estimated $800 million cost to develop a new drug, no biopharmaceutical company can afford to bring a product to market only to have it fail because major healthcare payers will not include it in their formularies or provide adequate payment for its use.  By analyzing current therapies and reimbursement practices, selecting the most appropriate initial indication, and understanding the impact of evolving public and private healthcare policies, sponsors can adapt their development strategies to ensure that they have the right data to demonstrate product value to patients, physicians, and payers.

All of these healthcare stakeholders are looking for therapies that provide better outcomes compared with current treatments.  For example: Does the product allow the patient to be treated in a more cost-efficient setting, such as outpatient vs. inpatient, with the same outcome?  Do patients experience fewer side effects, have shorter hospital stays, or need fewer follow-up visits?  It is important for biopharmaceutical companies to examine the complete treatment process to make the most appropriate case for the value of new therapies.

To prove product value, sponsors need real-world data derived from well-controlled clinical trials.  That is why strategic planning for CER must take place before pivotal Phase III clinical trials.  The strategy should include a “product value proposition” for the new therapy that takes into account the current standard treatments, and how payers view the value of those treatments.  The clinical development program should be aligned with the value proposition and designed to produce clinical endpoints that will support optimal patient access and reimbursement.  The study protocol might include:

• Comparing the new therapy against the current standard of care, rather than a placebo
• Incorporating quality-of-life markers in the trial
• Having investigators track the incidence of unscheduled follow-ups, improved management of chronic conditions, or other indicators of better outcomes

The critical element is to determine as early as possible in the development process the information needed to support the value proposition, then design clinical trials that will produce meaningful outcomes data for the targeted payers, patients, and healthcare providers.

Other best practices to consider when planning CER and reimbursement strategies include:

Know your target market

• Understand how each payer views the value equation
• Identify the stakeholders, and their financial risks and incentives 
• Evaluate the impact of prevailing co-payment and co-insurance obligations on the market success of the product
• Review coverage and payment policies of major payers in the targeted market
• Examine existing codes for the targeted therapeutic area, and determine if your product will be adequately supported by current codes

Assess current standards of care

• Identify the current standard therapy in the target market, the complete costs (both direct  and indirect) of existing therapies
• Investigate the perceptions of payers and providers about efficacy and cost of the current therapies
• Determine if your product is likely to change the standard of care or replace current therapies
• Review how any competitive products are classified, as well as the commercial tactics of those products, such as contracts, rebates, or discounts
• Understand the treatment setting where your product will be used and all the associated reimbursement issues (inpatient, outpatient, home health, etc.)

Align regulatory and reimbursement strategies

• Build strong reimbursement endpoints into trials
• Collect cost and pharmacoeconomic information in trials
• Collect evidence to support proposed coverage, coding, and payment strategies

The bottom line is that biopharmaceutical companies must understand and incorporate the market realities of product value into every aspect of their development and commercialization strategies to maximize product access and reimbursement success in this new era of evidence-based medicine.