With public press to alleviate drug spending, payers are progressively using formulary tools to aid manage market access. This write-up examines factors driving the success of market accessibility strategies.

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Executive summary

Market access strategy is complex, dynamic, and also constantly evolving. Biopharma leaders can optimize market accessibility across a investment portfolio of products by examining how therapeutic area (TA) dynamics, including the level of competition, might influence the use of payer tools to manage access. End the last several years, payers have actually increasingly supplied formulary tiering together one tool to help control and manage sector access. V intensifying public pressure to minimize drug spending, this trend is likely to continue. However, no all TAs are affected equally. Our analysis of the degree to i m sorry competition cd driver formulary positioning throughout eight TAs discover insights top top what additional dynamics could be driving formulary positioning, a proxy for the success of market access strategies.

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thedesigningfairy.com analyzed the branded portfolios that the biggest 19 biopharma carriers (by revenue) and also the level of competition (branded and also generic, direct and indirect) and the formulary tier position for every product. Interestingly, we discovered that formulary positioning appears to be propelled by competition in part TAs (metabolic, cardiovascular, central nervous system, and gastrointestinal), however not rather (oncology, contagious disease, immunology, and respiratory).

Comparing metabolic through oncology provides some understanding into why competition could drive formulary placing in part TAs and not in others. Medicine in the metabolic TA attend to diseases that affect a huge proportion of the population, space effective, and also offer restricted clinical differentiation within classes. ~ above the other hand, drugs in the oncology TA treat conditions with high unmet need, are expensive, and have varying levels of efficacy in various tumor types. Currently, payers might be less willing to limit market accessibility for assets that can address much more immediate life-threating conditions. However, as newer and much more efficacious treatments come to be available, and competition increases, we expect to see much more efforts come control and also manage access to oncology drugs together well.

Some of these dynamics could change as a an outcome of ongoing discussions about reducing the affect of rebates ~ above market accessibility at both commonwealth policymaking and private sector levels. Some personal payers are currently establishing strategies to reduce the influence of rebates top top market access by passing on rebates in ~ the point of revenue or creating new formulary types, yet it is however to it is in seen how this could affect pricing and market access.

Favorable formulary positioning alone go not constantly dictate ultimate product performance and profitability. The cost and benefits that market access strategies such together rebating, value-based contracting, or patient services must be closely considered. In addition, numerous tools have the right to be leveraged to get over payer pharmacy advantage designs and also less favorable tiering. Market access leaders have to develop innovative decision-making and analytics capabilities come track sector dynamics as they evolve to help build the organization case because that investing in specific market access strategies.

Understanding sector dynamics

One method to gauge the success—or failure—of a product’s market accessibility strategy is to look at where it sit on formularies. Placement on reduced co-pay tiers often suggests a successful strategy, while gift on a high tier, with higher cost-sharing requirements of patients, deserve to mean lower utilization and revenue, though no always. The profitability of methods to attain preferential formulary positioning have to be considered. For this analysis, formulary positioning (and assumed connected co-pay amounts or co-insurance levels) is supplied as a proxy to measure the success of market access strategies.


We score 286 commodities according to your competitive intensity (branded, generic, direct, and also indirect competitors) and also formulary positioning (weighted score for percent of covered populaces under each tier level, or no covered). The formulary data was current as the September 2018. The higher the competitive soot score (x-axis in the figures throughout this article), the much more competitive push the product faces. The greater the formulary score (y-axis), the better the percentage of the populace covered under higher formulary tiers and/or execute not have coverage.

We mapped these against one an additional to understand exactly how competitive determinants drive formulary positioning. Medicine that autumn in the upper-right quadrant face the greatest competitive intensity and have the highest formulary positions, if those that fall in lower-left quadrant have lower competitive intensity and lower formulary positioning.

We did this separately for commercial and also Medicare populations.

Competition through straight (in-class) or indirect (outside that class) share or branded rivals can affect formulary positioning. A drug with tiny competition in the market and strong clinical evidence may have the ability to secure better positioning top top a formulary since the manufacturer has leverage. In contrast, a branded drug through multiple competitors, especially ones because that which over there is greater evidence roughly efficacy, might need to use different tools to improve market access.

We analyzed the relationship between competitive intensity and formulary placing by therapeutic area, focusing on the top-selling branded drugs of the top 19 biopharma providers by their revenue because that 2016. (See more details top top the methodology in the “Methodology” sidebar and in postposition I.)

As compete intensity because that metabolic medicine rises, so does formulary positioning

This is no the case, however, because that oncology drugs

We analyzed the eight largest TAs among our set of drugs, and after remove outliers, we witnessed that part TAs show a correlation through formulary positioning in commercial plans, while others carry out not. The TAs that present a correlation room metabolic (figure 1), cardiovascular, gastrointestinal, and main nervous mechanism drugs. Meanwhile, drugs in oncology (figure 2), transmittable disease, respiratory, and also immunology TAs execute not display a correlation. (See postposition II because that the figures for the various other TAs).


Why walk competition journey formulary positioning in some TAs and not others?

The level that unmet need, the price to act a patient population, the differentiation among drugs classes, the nature the the therapeutic, and the level the personalization room some determinants that could be driving distinctions in exactly how formulary positioning is determined. Comparisons between metabolic and also oncology offer some insights right into why competition might drive formulary placing in one TA as opposed to another (figure 3).


Level the unmet need

Regardless of vain intensity, drugs the treat illness with high unmet medical need—conditions where therapy or diagnosis is not adequately handle by currently treatments, such together cancer—are most likely to have actually preferable formulary placing that provides patients better market access. Present treatment options for diabetes have the right to significantly hold-up the development of the disease, whereas patients enduring from part cancer types are still encountering high mortality rates. In oncology, despite increasing level of competition across drug classes, most drugs loss in Tier 2 or 3 (figure 2). However, in metabolic we view a broader range the formulary positioning for drugs together the level of competition increases, consisting of a better proportion of drugs that room not spanned (figure 1).

Pharmaceutical price to act population

The pharmaceutical price to act a patient populace is one more factor that might influence the use of tiering to regulate market access. At the population level, the cost to law diabetes, for example, is much higher than the expense to treat plenty of cancer subtypes. This is driven by the much higher incidence the diabetes as compared to cancer types. In 2014, total prescription medicine spending ~ above cancer to be US$10.9 billion, while because that diabetes it to be US$47.3 billion.1 Payers are an ext likely to use formulary tiering to control and also manage market access for drugs that treat conditions that impact a far-ranging portion the the population and have a bigger influence on their budgets. However, payers may use other tools come control and manage market accessibility for drugs that are more expensive in ~ the individual patience level, such as those the treat cancer (see the discussion on the nature the the therapeutic below).

Differentiation of medicine classes

The number of treatment options and the differentiation in clinical outcomes amongst them can also influence how much competition cd driver formulary positioning. For example, there are much more drug classes accessible to act metabolic illness such as diabetes and also hypercholesterolemia 보다 for certain cancer types. Among those drug classes, there is better variability in patient response in cancer 보다 in metabolic. Because that example, part cancer therapies room only efficient on particular tumor types, whereas solution rates for part diabetes drugs may be more consistent. In this context, payers may want come offer suppliers greater flexibility when determining what treatment option to choose for cancer patients.

In addition, clinical differentiation among branded metabolic drug classes and also those the have currently gone generic may not be that significant. The accessibility of cost-effective generics offers payers more leverage come use devices such as formulary positioning to control and manage market access and associated costs.

Nature the the therapeutic

The nature the the medicine in a TA in terms of their structure (small molecule or biologic), the means they are yielded (via specialty pharmacy or retail), and also typical pricing can likewise influence the species of devices that payers use to control and manage industry access. In oncology, countless drugs are complex biologics that call for special handling and also are relatively greater priced. In contrast, metabolic drugs have tendency to be tiny molecules (though no always), are obtainable in sleeve pharmacies, and also are comparatively lower-priced. The nature of the compound additionally influences the ease of access of share competition—the pathways to build biosimilars room more complicated than the pathways to construct generic tiny molecule drugs.

Our data says that payers tend to count on pharmacy advantage designs such as prior authorization or step therapy an ext often because that complex, specialty drugs than for tiny molecule drugs accessible through sleeve pharmacies. This is likely driven by the truth that many specialty drugs are fairly expensive, and also payers may seek to implement controls to ensure the the patience receiving the drug is likely to benefit.

Our evaluation suggests that completing branded drugs may be inserted on the exact same tier, but prior authorization and also step treatment are used to control market accessibility instead. Because that example, thedesigningfairy.com reviewed formulary positions and prior authorization language from select health plans for 18 immunology drugs. This drugs were normally in the very same tier (typically tier 5). However, we found that plans used different prior authorization criteria and also language because that each in bespeak to affect use the and, thus, safety on those drugs. The design of the prior authorization regimen cannot be determined by reviewing the formulary alone; one must analyze the certain prior authorization language to determine which commodities are advantaged or disadvantaged. However, prior authorization language is no standardized and can be complex to analyze and interpret throughout plans.

Degree of treatment personalization

Personalized, targeted therapies can assist payers ensure ideal use and increase the likelihood of market access. Companion diagnostics can aid distinguish in between patients who may benefit and those who might not or aid identify who could be at higher risk because that side effects.2 In our analysis, a cancer drug through a companion diagnostic supplied to act lung cancer has actually a formulary score that 25.85, reduced than the mean score, 41.57, of 2 hypercholesterolemia drugs. The higher formulary score of the cholesterol drugs can be associated with the greater price loved one to present treatments, and also lack that a method to ensure suitable use. Without a companion diagnostic, payers might struggle come ensure that patients who would benefit from the drug are the people receiving it. Together a result, these drugs have experienced low acceptance even after proving their clinical superiority to the present standard of care.

What drives preferential positioning within drug classes?

Drugs in a course competing directly with every other frequently have the same competitive strongness score yet may end up through varying formulary placing for various reasons, including clinical differentiation, nonclinical differentiation, and also use of an ext strategic pricing and also contracting levers, such together value-based contracts.

Clinical differentiation

Drugs the have better clinical efficiency and fewer side effects often attain preferential formulary positioning. Ideally, the drug with finest patient outcomes would be desired over others in a competitive drug class. Because that example, consider two hepatitis C drugs. Post-marketing data demonstrated that the risk of development to decompensated cirrhosis is greater for patient who are treated v one drug versus those treated through the other.3 In ours analysis, the drug linked with lower risk has preferential formulary placing (formulary placing score of 27.52) vs. The drug linked with higher risk (formulary positioning score of 48.66).

Differentiation past the product profile

Plans may be much more willing to pay for drugs the provide much more benefit come the patient. For example, a drug that is taken as soon as weekly that has the very same outcome as one that is taken as soon as daily might offer greater patient convenience. Patient adherence is most likely to increase, as is patient satisfaction with the product. In addition, patient solutions that aid patients control their medication and their an illness could help drive better adherence and also patient outcomes. These components can be solid differentiators, particularly as health care becomes much more responsive to customer demands.

For example, among a course of three type 2 diabetes drugs in our evaluation that have actually the very same competitive strongness score, the drug with the shortest formulary placing score (27.36) has been displayed to have much better patient retention 보다 others in the class.

Pricing and also contracting approaches

Companies offering reduced net prices through rebates typically acquire preferential formulary placing as a result. Sometimes, exclusive contracts (in advertising plans) are readily available in exchange for preferential formulary positioning.

We are starting to see indications that the market is shifting away from volume-based agreements and toward more value-based contracting. Because that example, 16 medicine in our analysis currently have actually or have had a value-based contract in place.4 an ext than fifty percent were because that drugs in the metabolic TA, but others consisted of drugs in oncology, cardiovascular, immunology, and infectious diseases.

In metabolic, the instances that we space seeing are generally for brand-new drug classes that room leveraging value-based contracts as a means to demonstrate value and also encourage better use. For example, a class of new cholesterol drugs presented value-based contract to aid reduce clinical uncertainty around who would benefit from the drug. In addition, manufacturers of three drugs in a reasonably newer course of diabetes drugs employed a similar approach to help demonstrate the class’s value beyond currently established treatment options.

Different types of to plan use devices to manage market access differently

The use of formulary positioning as a device to control and also manage market accessibility may differ depending upon the arrangement type. The patterns described above are certain to commercial plans, yet other plan varieties may use tools to manage market accessibility differently. Because that example, while ours data reflects that both commercial and also Medicare plans usage tiering, front authorization, and step treatment to regulate market access, us find distinctions in how they usage these tools.

Looking in ~ the entire collection of drugs, it appears that Medicare plans use greater tiers than commercial and also have a higher percentage of medicine that room not extended for part populations. In many commercial plans, most drugs autumn in tiers 2 or 3. In many Medicare plans, the spread out is much wider, through some drugs put as high together tier 5 (figure 4). Drugs that show up to have actually even greater formulary placing scores space those where a proportion of the populace does have accessibility to the drug. Medicare plans run in a different regulatory setting than commercial plans, so that might be contributing to few of these differences.


We likewise found differences in use of former authorization or action therapy (figure 5). Advertisement plans show up to use both on drugs throughout TAs, regardless of formulary positioning, while Medicare plans appear to use much more prior authorization and step treatment for drugs on lower tiers (especially because that specialty TAs) than those in higher tiers.

Both often tend to affect utilization and also market access by making use of prior authorization and also step therapy much more often in specialty TAs such together immunology and oncology. However, Medicare plans have tendency to rely on front authorization and step therapy an ext heavily because that drugs that space on reduced tiers, particularly in these TAs.


Understanding the differences between Medicare plans and commercial plans in exactly how they usage tiering, front authorization, and step therapy to control access may assist companies devise specific strategies for each stakeholder.

Uncertainty surrounding the future that the rebating system

Market dynamics approximately drug pricing space under scrutiny through policymakers, health and wellness plans, pharmacy benefit managers (PBMs), and other stakeholders. One controversy on drug pricing centers roughly the rebate exchanges in between PBMs, exclusive companies that negotiate drug prices on behalf of payers, and also drug manufacturers.

PBMs are passing on rebates at the suggest of sale. Several huge PBMs have announced lock will start passing 100 percent of the rebates they get from medicine manufacturers along to arrangement sponsors.

If the rebate system changes, manufacturers will require to consider how to it is adapted their market accessibility and pricing strategies. For example, removing medicine rebates and also transitioning to a brand-new model can accelerate the usage of value-based contracts for prescription drugs if brand-new safe harbors address some the today’s legal and regulatory hurdles. Future value-based contracts might need to take a different type since most have been design in the context of today’s rebate programs.

At this point, that is unsure which, if any, that these policies will pass or get traction indigenous the management and/or Congress. But drug pricing is likely to proceed to it is in a emphasis for the management as it focuses on advancing policies outlined in that is Blueprint to reduced drug prices and reduce out-of-pocket costs.9 Market accessibility leaders should continually monitor these alters as they evolve and change strategies according to brand-new market dynamics.


Optimizing market accessibility requires an expertise of how payers might leverage tools differently amongst TAs or an illness areas or throughout segments. Market accessibility leaders have to make decisions approximately what techniques to prioritize and also implement in this context. Medicine manufacturers have the right to leverage several different strategies to affect or do the ideal of formulary positioning, including:

Differentiating ~ above clinical outcomes utilizing real-world evidence. Evaluate additional outcomes to show superiority in class, enhancements in standard of care, or efficacy in certain patient sub-populations.Incorporating “market access”-relevant endpoints in clinical-trial design. Leverage endpoints that are beneficial to payers, i beg your pardon will aid differentiate the worth of the drug, together as in its entirety clinical cost offsets.Learning just how to execute in disadvantaged formulary positions. Achieve greater profitability with a less-advantaged position, and also learn just how to execute across the go-to-market version in that place (for example, better field execution).Differentiating based on patient preference. Differentiate based on patient convenience or by providing other patient services (for example, methods that rise adherence).Patient assistance services. Offer remedies to aid patients know their disease, manage their medication, and navigate former authorization needs (especially in specialty areas). Targeted therapeutics. aim to alleviate payer budget impact by identify target populaces that get the preferably benefit.Value-based contracting. implement value-based contract to help demonstrate the value of a brand-new product or product class, or to reduce the clinical apprehension of a high-cost treatment.

Deciding what techniques to implement needs an assessment of the service case and ultimate influence on sector share and profitability. For example, using rebates to boost the formulary placing of a medicine in an regardless of whether drug class could it is in expensive. Instead, companies might consider alternative strategies to rise market accessibility for drugs that fall on higher tiers. For example, patient assistance programs have been offered to support uptake in those situations; likewise, far better field execution and targeted office assistance have additionally helped allow revenue generation in more complicated environments. These strategies might be much less costly than increasing rebates come secure preferential formulary placement.

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The relative prioritization the these tactics might readjust as the market continues to emphasize the value of pharmaceuticals. The climb of value assessors such together The Institute because that Clinical and also Economic review (ICER), the boosted use that value-based contracting, and also public scrutiny that the rebating system are clear signals the the market is relocating away native volume-based pricing and toward value-based pricing and contracting. In this context, market access leaders should increasingly think about what methods will assist tie price to value, including value-based contracting (see the sidebar, “Expanding the use of value-based contracts”).