Title: Prepared for: PMRG Meeting
1The 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
2Custom 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
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3Health 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)
4PMRG 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
5Employer 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
6Employer 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
7Employer 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
8Employer 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
9PMRG 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
10Employer Payer Perspective Evolution in Health
Benefit Trends
11Employer 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
12Employer 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
13Employer 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
14Employer 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)
15Employer 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
16Employer 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
17Employer 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)
18Employer 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)
19Employer 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)
20PMRG 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
21Employer 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
22Employer 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
23Employer 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.
24Employer 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. -
25Employer 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.
26Employer 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!
27PMRG 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
28Employer 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
29Employer 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
30Targeting 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
31Targeting 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)
32Employer 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
33PMRG 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
34CRS 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.
35CRS 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
36Custom Research Solutions Health Industries
Research Companies