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Title: Prepared for: PMRG Meeting


1
The Employer Payer PerspectiveWhy Employers are
Important and How to Understand Them
  • Prepared for PMRG Meeting
  • September 10, 2006
  • Prepared by Susan Carney Fahey
  • Lauren Bolen

Custom Research Solutions Health Industries
Research Companies
2
Custom Research Solutions (CRS)
  • Serving the pharmaceutical industry with custom
    primary market research
  • Specializing in Employer and Managed Markets
    information
  • Timely and cost-effective research conducted by
    professionals with years of pharmaceutical
    market research experience.
  • Spend your research dollars finding out what YOU
    want to know

3
Health Industries Research Co. (HIRC)
  • Founded in 1990 to examine the trends and
    implications of managed care and national
    accounts via syndicated market research
  • Serving the pharmaceutical industry for over 15
    years with syndicated multi-client research
  • Health Industries Research Companies services
    include
  • Health and Disease Management (1995)
  • Employer and Coalition Service (1997)
  • Best Programs and Best People Service (1999)
  • High Cost Injectable Service (2004)

4
PMRG Employer Payer Perspective
Introduction Overview
Introduction Overview
The What Employer Trends and Perspectives
The So What Future Trends and Implications
The Do What Next Steps
Conclusions Recommendations
5
Employer Payer Perspective Introduction
Overview
  • Employers are more than a passive player in the
    health care arena, and have evolved into a
    leading participant in key health care decision
    making
  • Large employers with on-site medical facilities
    or personnel are initiating and managing both
    benefit design as well as health, wellness and
    prevention programs
  • While Benefits Managers are always critical,
    companies with Corporate Medical Directors are
    excellent conduits to a more integrated decision
    making process
  • Employer Coalitions are increasingly targeting
    their efforts toward Rx and health benefit design
    initiatives, as well as purchasing assistance for
    their members
  • Benefits Consultants friend vs. foe
  • Information and training resource
  • Program development partner
  • Potential obstacle to product access as benefits
    advisors to employers

6
Employer Payer Perspective Introduction
Overview
  • Why Employers are now a key payer segment
  • They have the data to identify high utilizers of
    health care services
  • Budget constraints necessitate better cost
    management
  • Despite downward trends, employer-based benefits
    still exceed 50 of the market
  • Increased focus on enhancing the health status of
    their employees, including changing behaviors and
    fostering prevention

7
Employer Payer Perspective Introduction
Overview
  • Reality Check not all employer organizations
    are receptive to pharmaceutical company direct
    relationships
  • Many still perceive the industry as pill
    pushing
  • DTC ads do not help the situation
  • Success breeds Success true with this segment
  • Critical Success Factors for Employer
    Relationships
  • Common platform for alliance a must
  • Mutual business objectives foundation for long
    term relationships
  • Must research and understand employer issues

8
Employer Payer Perspective Introduction
Overview
  • Know the market
  • Secondary research
  • Primary research
  • Account Management training
  • Integration with product/brand goals and
    strategies
  • Like almost all market constituents less than
    linear decision making
  • Know the players and understand
    interrelationships HPs, PBMs, Benefits
    Consultants, Coalitions
  • Determine most effective strategy for interaction
    based on your own strategy and resources
  • Be prepared to remain flexible as market
    continuously evolves

9
PMRG Employer Payer Perspective
  • Health Benefit Trends
  • Rx Benefit Structures
  • Health, Wellness, Disease Management
  • Perceptions of CDHC Health Conditions
  • Contracting Initiatives
  • Value of Rx Spend

Introduction Overview
Introduction Overview
The What Employer Trends and Perspectives
The So What Future Trends and Implications
The Do What Next Steps
Conclusions Recommendations
10
Employer Payer Perspective Evolution in Health
Benefit Trends
11
Employer Payer Perspective Health Insurance
Drug Costs
  • Employers are the principal provider of health
    insurance in the U.S.
  • Close to 60 of Americans
  • Nearly all covered workers have an Rx drug
    benefit
  • Share of Rx drugs paid for by private health
    insurance rose dramatically from 1990 (24) to
    early 2000s (46)
  • Employer-sponsored health plan have adopted
    various cost-sharing approaches to curb rising
    drug cost

12
Employer Payer Perspective Pharmacy Benefit
Structures 06 07
Three-tier copays remain the standard in pharmacy
benefits within the employer market but appear to
have peaked in 2004 as they are replaced by
percentage (or mixed) copay structures.
  • Close to one-half of all employees are currently
    covered by a three-tier fixed dollar copay but a
    continued decline in the use of dollar copays is
    projected for the future.
  • Use of percentage copays is growing as employers
    attempt to increase their employees
    cost-sensitivity.
  • A significant increase in mixed copay structures
    is predicted as employers experiment with more
    creative approaches to drug benefit structures.

Employees Covered by Pharmacy Benefit Design
Structures Employer Market Aggregate Results
NoteResults reflect survey responses from all
four employer panels. Projected estimate by
HIRC panelists.No Pharmacy Coverage and
Other (most often a CDHC offering) each had
0.4 reported for both years. Weighted
percentages b active employees. Source HIRC
Employer and Coalition Service, Spring 2006, N181
13
Employer Payer Perspective Health Benefit Trends
More employers are focusing on employee health
initiatives as they work to slow rising health
care expenses while nearing the limits of
cost-shifting opportunities.
Cost-shifting
  • Rising health care costs
  • Increasing drug utilization
  • Heightened focus on employee productivity/presente
    eism

14
Employer Payer Perspective Employee Health,
Wellness Disease Management
Employers are embracing disease management
programs as a critical component to health
strategies that support their financial
objectives as well as their employees health and
productivity.
Disease management as part of a total health
management program. The philosophy is to try to
identify the segment of the population that is
driving high health care costs. If you can make
some changes in that population you might be
able to make some good health outcome changes, as
well as decrease some costs. (CMD)
15
Employer Payer Perspective Perceptions of
Consumer- Driven Health Care
  • A growing number of employers believe that CDHC
    provides potential benefits for both employers
    and employees
  • Many employers expect to offer a HDHP/HSA option
    as a first step toward creating a more
    consumer-driven health care culture although
    their adoption of consumer-driven health plans to
    date appears to be less rapid than projected
  • Concerns about selection bias and the risk of
    employees poor health care choices remain
  • Negative impact on utilization of prescription
    drugs is anticipated
  • Reduced utilization of prescription drugs
  • Increased use of generics
  • Patient compliance at risk with specific customer
    segments

16
Employer Payer Perspective Perceptions of Health
Conditions
Cardiovascular conditions are of highest concern
to employers because of their cost implications
and long term impact on the overall health and
productivity of their employees.
  • Employers attribute their concerns to the high
    claims costs these conditions generate as well as
    their prevalence within their employee population
  • Diabetes ranked second in terms of overall level
    of concern as employers became more aware of the
    conditions co-morbidity issues
  • Cancer and obesity also cause significant
    concerns for most segments of the employer market
    because of their impact on costs, employee
    productivity and the overall health status of
    employees

17
Employer Payer Perspective Employers
Contracting Initiatives
Although a number of employers contract with PBMs
as a group through a Benefit Consultant or
Coalition, few are prepared to contract directly
with pharmaceutical companies.
  • Key issues limiting their interest include
  • The belief that the purchasing power of PBMs will
    result in the best prices
  • The logistics of contracting with multiple
    pharmaceutical companies are too burdensome
  • Employers do not have the expertise to perform
    the myriad tasks required for contracting
  • Representative comments from employer panelists
    include
  • We dont have expertise in that sort of role so
    I cant see contracting directly with
    pharmaceutical companies. Well stick with our
    business and let the PBM experts handle the
    negotiations. (EBM)
  • We havent looked at directly contracting with
    pharmaceutical companies because I dont know how
    an individual company who is volume-based can
    compete with the volume of a Medco or a Caremark.
    That would be my only drawback. I just couldnt
    believe that wed be able to purchase drugs with
    our volumes at the same price that these huge
    PBMs can get them for. (EBM)
  • I dont see us doing direct contracting with
    pharma. I welcome and am interested in doing it
    but I dont see pharma doing it. A Wall Street
    Journal article indicated that Pfizer was going
    to some of the mega-large employers directly. I
    called them to ask them when that will be
    extended to our groupThe bottom-line is Pfizer
    told me that they are not contracting directly
    with employers, they are contracting directly
    with managed care plans, but theyre not
    contracting directly with employers. (EHC)

18
Employer Payer Perspective Perceived Value of
Drug-Spend
  • Pharmaceuticals are generally cost-effective but
    employers admit they lack the information
    necessary to assess the relative value of
    specific brands or therapeutic classes
  • I dont know if most of our employers know the
    answer to what value is. I think that very few
    if any are able to really look at things like,
    Has my productivity increased, is my
    presenteeism better, my days absent, is that
    going down? (EHC)
  • Availability of an alternative generic therapy
    (or therapeutic equivalent) significantly dilutes
    value proposition for branded pharmaceuticals due
    to the substantial price disparity
  • It is the cost, in combination with the efficacy
    that determines value. There may be a lower cost
    alternative that would provide 95 of the
    benefit. We need to do a better job of steering
    people to try the lower cost alternatives first
    for cardiac drugs. Lipitor is a great drug,
    but does everybody need Lipitor? They might be
    fine with the generic to start with unless
    (cholesterol) is really high, etc. There are
    some great depression drugs out there but I would
    prefer people to start with less expensive drugs
    first. (CMD)

19
Employer Payer Perspective Perceived Value of
Drug-Spend (contd)
  • Limited patient compliance and lifestyle issues
    diminish the overall value of drug therapies
  • If its the right drug for the right patient at
    the right dose and the patient is taking it as
    theyre supposed to, then its got great value.
    But if the patient doesnt cooperate, or the drug
    is not the right one for that patient, then they
    dont get the full value. Theres a huge issue
    in this country with compliance and adherence to
    treatment. People dont fill scrips they dont
    comply with the right treatment. Regardless of
    what the employer does or how wonderful the
    medication is, its not effective if its not
    being taken. (EHC)
  • DTC advertising and promotion to physicians drive
    over-utilization of newer, more expensive,
    prescription products
  • For the ulcer drugs, I dont think we are
    getting good value because a lot of people are
    using PPIs and they are very expensive compared
    to generic products or the over-the-counter H2s
    that would probably also be effective. Most
    people should be on over-the-counter stuff, the
    Tagamet or the Pepcid or the Zantac...The over
    utilization is caused by the advertising on TV
    and doctors to a certain extent because doctors
    dont want to say, You dont need me. You can
    go to Walgreens so they prescribe something.
    (EBM)
  • Drugs providing longer term benefits face more
    significant challenges in demonstrating value for
    employers facing high employee turnover
  • I think there are still some categories we need
    to work on. For example, we are having everybody
    in the world take the hyperlipidemics and they
    havent had a heart attack, they are 32 years old
    and they are trying to keep their cholesterol
    down. We may be buying those drugs for 25 or 30
    years before they have a heart attack when they
    really need to start taking them. (EBM)

20
PMRG Employer Payer Perspective
Introduction Overview
Introduction Overview
  • Employer Health Care Priorities
  • Future Drug Benefit Strategies
  • Rx Company Program Opportunities
  • Impact on Rx Sales
  • Rx Value Proposition

The What Employer Trends and Perspectives
The So What Future Trends and Implications
The Do What Next Steps
Conclusions Recommendations
21
Employer Payer Perspective Health Care
Priorities
Three key factors influence which health
conditions employers decide to focus on for
employee-focused initiatives
  • Prevalence in employee population
  • Generate employee interest and participation
  • Company kudos for service to employees
  • Greatest potential impact on employee population
  • Overall cost to employer
  • Health and drug costs
  • Productivity/presenteeism
  • Disability/workers comp.
  • ER visits/hospitalizations
  • Ability to impact condition/treatment
  • Influence likelihood of employee developing
    condition (e.g., high cholesterol)
  • Wide flexibility in treatment options (e.g.,
    allergy)
  • Concerns about compliance

22
Employer Payer Perspective Future Drug Benefit
Strategies
Projected Evolution of Employers Drug Benefit
Strategies
  • Generic vs. Brand Copays (2-tier)
  • Closed Formularies via PBM/MCO
  • 3-Tier Copays
  • Increased copays and differential between tiers
  • Experimentation with 4- and 5-Tiers
  • Percentage copays (flat and tiered)
  • Rx Utilization Mgt. and spending limits for
    high-cost categories
  • Defined contribution
  • Coverage for discretionary vs.
    non-discretionary drugs
  • 4-tier and mixed (/) copay structures
  • Mandatory mail order and specialty pharmacies
  • Value-based copays
  • Collective purchasing

23
Employer Payer Perspective Rx Company Program
Opportunities
  • Pharmaceutical companies can distinguish
    themselves by developing programs that
    demonstrate the productivity and cost/benefits of
    their products in terms that are meaningful to
    the employer
  • Thats something from a drug company
    standpoint, if they can put an return-on-investmen
    t onto some of their drugs rather than just
    pushing the advertising, thats going to resonate
    with plan sponsors.
  • Employers also express significant interest in
    receiving disease- and medication-specific
    information from pharmaceutical companies because
    of their recognized expertise and access to
    important clinical data
  • I would work with a pharmaceutical company on
    disease-specific materials because they have the
    information. A health plan is more about claim
    processing and dealing with providers. I think
    physician education should link with the
    pharmaceutical companies because they know what
    the drugs do and physicians need to keep on top
    of that information as it changes by the minute.

24
Employer Payer Perspective Rx Company Program
Opportunities
  • Partnering with coalitions can provide
    significant benefits for pharmaceutical companies
    as coalitions value their programs broad
    applicability across multiple employers
  • Its easier for me to work with pharmaceutical
    companies because Im not perceived as playing
    favorites. We have three major health plans that
    operate within our region, and I feel like I
    always have to be much more sensitive about who I
    do things with. I dont have that pressure or
    obligation when I work with the pharmaceutical
    companies.
  • Pharma has more information available and they
    seem to make, for example, patient education or
    disease-specific materialstheyre very
    well-researched, well-thought out, and
    well-presented.
  • By working with CMDs, pharmaceutical companies
    can leverage opportunities to increase disease
    awareness and support market expansion objectives
    through employers health fairs and wellness
    programs
  • We have health fairs at least once a year and
    sometimes twice a year. It is effective to
    have a health and wellness-sponsored program
    with demonstration projects on lifestyle changes.
    We really like the handouts pharma gives.

25
Employer Payer Perspective Employers Impact on
Rx Sales
As employers implement initiatives that directly
impact pharmaceutical utilization, pharmaceutical
companies can benefit by identifying specific
product situations that are favorably aligned
with the employers areas of interest.
26
Employer Payer Perspective Rx Value Proposition
  • Like any customer segment, Employers are looking
    for value.
  • Historically, Pharma value propositions focus on
  • Physicians
  • Intermediaries (PBMs, HPs, distribution channels)
  • Patients
  • Rarely do we see Employer value propositions
  • Metrics most likely different from historical
    venues
  • Productivity key, but hard to measure save for a
    few therapeutic areas (e.g., smoking cessation,
    asthma)
  • Selling proposition different, so why not value
    proposition!

27
PMRG Employer Payer Perspective
Introduction Overview
Introduction Overview
The What Employer Trends and Perspectives
The So What Future Trends and Implications
  • Understand Impact of Benefit Designs
  • Expand Knowledge of Market
  • Program Development
  • Five Easy Steps

The Do What Next Steps
Conclusions Recommendations
28
Employer Payer Perspective The Do What
  • Expand knowledge of employers role in Rx benefit
    design and selection process, and the impact
    employers initiatives have on employees
    behavior
  • Current metrics and data enable employer to know
    who is using what and how much it costs
  • Data advertising perceptions
  • Productivity a key area of focus
  • Direct and indirect health care costs on the
    radar screen

29
Employer Payer Perspective The Do What
  • Develop employer-based initiatives that are
    aligned with targeted employers interests and
    capabilities
  • I am most interested in programs targeting
    cardiovascular conditions, depression and
    diabetes, because they are chronic conditions
    that require employees active and ongoing
    management and people have difficulty staying
    adherent with their treatment regimens.
  • Costs are an issue, and productivity, which also
    drives costs. I think some of the disease
    management issues are important smokers, heart
    cases and cancers. Diabetes is another thing
    that we are really trying to attack.
  • We have disease management programs through
    Aetna and we do a fair amount of education with
    our work force.
  • Source HIRC Employer Service 2006

30
Targeting Employers for Collaborations
Step 1 Identify potential employer partners
based on key quantifiable data.
  • Target companies with employee demographics
    consistent with product profile
  • Focus on employers with a critical mass of
    employees in accessible location
  • Verify that employers health and drug benefits
    support utilization of promoted product

31
Targeting Employers for Collaborations
Step 2 Assess employers attitudes toward DM
initiatives and cost-containment strategies.
  • Carrots or sticks
  • Positive incentives for participation in DM
    programs (carrot)
  • Increased cost-sharing for Rx products (stick)
  • Friends or foes
  • Recognize value and expertise provided by
    pharmaceutical companies (friend)
  • Perceive pharmaceutical companies as biased and
    profit-motivated (foe)

32
Employer Payer Perspective The Do What
  • Five easy steps for understanding the Employer
    as a Payer
  • Research the segmenttrends, issues, competitors
    initiatives, etc.
  • Assess and quantify (if possible) employers
    impact on existing and future products and
    therapeutic categories
  • Disseminate findings internally - product
    marketing, market research, sales account
    management
  • Gain support from corporate leadership and
    product/brand teams
  • Integrate employer strategies with brand
    strategies and operationalize employer strategies
    via marketing, sales and recognition metrics

33
PMRG Employer Payer Perspective
Introduction Overview
Introduction Overview
The What Employer Trends and Perspectives
The So What Future Trends and Implications
The Do What Next Steps
Conclusions Recommendations
34
CRS and HIRC Recommendations
  • Ensure organization recognizes critical role
    employers play in determining patients access
    to, and utilization of, pharmaceutical Rx
    products
  • Know the marketplace both players and
    competitors
  • Capitalize on employers growing desire to
    actively manage healthcare costs
  • Growing health, wellness, prevention platform
  • Establish compelling value proposition for
    employers and employees
  • Productivity metrics
  • Cost/benefit versus alternative treatment options
  • Patient tolerability, compliance, etc.

35
CRS and HIRC Recommendations
  • Expand knowledge of employees role in Rx
    selection process and impact employers
    initiatives have on employees behavior
  • Price sensitivity
  • Impact of health condition on selection process
    and priorities
  • Relative importance of key information sources
  • Understand impact of drug benefit structure on
    utilization of specific product categories and
    financial implications for employee
  • Asymptomatic vs. symptomatic
  • Chronic vs. acute
  • Branded Rx vs. OTC/generic
  • Physician- or self-administered injectables
  • Develop employer-based programs and resources
    that are aligned with targeted employers
    interests and capabilities

36
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Research Companies
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