Coming out of the global COVID-19 pandemic, the future holds both opportunity and increased complexity for the pharmaceutical industry. As COVID-19 transitions to an endemic virus, policy changes emerge, and economic factors continue to put pressure on revenue and margins, there are many important issues for pharma to watch in the near future.

Here's what’s in store for the pharma industry, at a high level. Read IQVIA's blog series to go deeper into these trends and more.

Policy changes altering pricing and reimbursement

Recent precedents with the legal challenges to the Centers for Medicare and Medicaid Services (CMS) rules indicate that the path forward for substantive drug pricing reform lies with the legislative pathway. As reforms like rebate safe harbor removal, international reference pricing, and drug reimportation get debated, new bipartisan ideas, such as Medicare benefit redesign, have begun to emerge.

The effects of policy change will be long-lasting and have many outcomes. The shifting of responsibility from CMS back to manufacturers and payers will help improve Medicare solvency, but will come at a cost of billions of dollars annually for which CMS currently holds responsibility.

Copay Accumulator Adjuster Programs

Pharma manufacturers commonly offer copay offset programs to reduce patient costs. In response, the large Pharmaceutical Benefit Managers (PBMs) have introduced copay Accumulator Adjuster Programs (AAPs): a program designed to shift more financial burden indirectly to the manufacturer by extracting more out-of-pocket from the patient. AAPs disallow the patient copay, which is offset by the manufacturer, to count towards their deductible or out-of-pocket caps.

Many patients under these programs get surprised as they realize they don’t get the copay assistance they had expected and are stuck with a higher bill for their drug than they are used to. This surprise can prompt patients to discontinue treatment, which may lead to negative health outcomes and drive-up future costs of healthcare.

Chronic disease patient groups have been leading the pushback, and several states have passed laws prohibiting or limiting the use of accumulator adjusters for all individual and small group plans. 

The 340B drug discount program

The 340B Drug Discount Program (340B) — a mandatory discount program for manufacturers if they choose to participate in Medicare — has grown into a considerable market force. By the end of 2020, 340B program sales accounted for 13% ($80B) of total U.S. pharmaceutical sales.

While 340B is well-intended, the threshold to qualify is relatively low, and the number of covered entities that qualify for participation is growing. For a manufacturer, part of the challenge of the 340B program is that the 340B discount is provided up front, and manufacturers frequently find themselves having to pay an access rebate on top of the already discounted price. The effect of stacking discounts can be extremely complex to unravel and can quickly lead to negative margins and revenue leakage over large segments of prescription volume.

Pharmaceutical benefit managers’ rising purchasing power

Programs such as Copay Accumulator Adjusters and 340B are dynamics in a larger market access ecosystem that should be considered alongside rebates, copay cards, and other forms of patient assistance programs. As more prescriptions are pushed into vertically integrated specialty pharmacies, the large integrated entities are able to exert more control.

The growing purchasing power and control by payers is a challenge not only for manufacturers, but also for patient access. Over the past decade, as payer consolidation and control has increased, patients treated with specialty medications are feeling the pain.

A new era for value-based pricing agreements

As high-cost drugs come to the market with increasing regularity, the question of how these drugs will be paid for is growing louder. Value-based contracting will be a very important option for stakeholders to turn to as it will give a mechanism to ensure that needy patients have access to these higher-cost drugs and that they are used appropriately.

Health equity

People are more than just patients — and social determinants of health and vulnerability are critical factors in health outcomes. To fully grasp what patient support and engagement means, pharma companies need to understand patients' holistic human experience.

Certain populations in the U.S., particularly people of color, face reduced access to healthcare providers, treatment, and health education. The high costs of healthcare and prescription therapies often force patients to choose between paying rent and paying for healthcare. If pharma manufacturers redesign their patient support programs to reach and include the most vulnerable patients, they’ll likely see better results with therapy adherence and compliance.

Perceptions and reality of affordability economics

Patients, payers, pharmacies, policymakers, providers, health institutions, employers, and more are being challenged to address shifting healthcare economics and growing liabilities. For manufacturers, this has resulted in margin pressure and growing uncertainty for the future.

One of the drivers of public discourse is the perception that drug costs in the U.S. are higher than in other developed countries. While that may be true for raw dollars, it’s important to contextualize what that spend represents as a part of the whole. Drug costs make up 14% of the overall cost of healthcare in the U.S., a similar percentage of overall costs as compared to other countries.

New models for launch success

The pandemic may have permanently changed the definition of success for pharma launches. The old model of looking at performance in the first six months isn’t as relevant anymore, and even the model of comparing launch years may be obsolete.

Pharma companies need to examine their successful launches over the past two years and look at the ways they were different from, and the same as, pre-pandemic launches. Using this information, pharma companies can create a new way to define launch success.

Digital spend inefficiency

Pharma companies have been investing deeply into digital advertising, but vastly undermeasuring customer engagement and other metrics. This high spend with minimum insight and targeting in return is a red flag that pharma companies aren’t getting the return on investment (ROI) that they need from digital ads.

Strategically setting up an omnichannel marketing and customer engagement system will help pharma companies be more targeted with their ad campaigns and track results more closely. When they have the right tools to see what’s working and what’s not, pharma companies can invest more heavily where they’re getting results and achieve a better ROI.

Changes to Medicare access and reimbursement

Some redesigns in Medicare pricing and reimbursement policy have recently been proposed by the federal government. The changes will likely shift the responsibility from patients and CMS to manufacturers and payers. New liabilities and incentives will create the need for market adjustments to address these changing dynamics.

Payers will likely seek to tighten formularies even more, and manufacturers must prepare for an upward shift in specialty product liabilities. New out-of-pocket spending caps will also likely be introduced, making it easier for patients to stay on higher-cost therapies throughout the year, versus enduring the copay fluctuations that many experience under today’s design.

New models of care delivery

Patient care no longer happens exclusively in hospitals and doctor’s offices. Walmart, CVS, Walgreens, and other national retail chains are increasingly getting into the business of patient care and community health.

In response, the healthcare industry is becoming increasingly verticalized: organizations at different levels of the supply chain are creating alliances in an effort to enhance delivery. These alliances create the opportunity to offer a greater number of patient services, increase access to care and therapies, and lower the cost of delivery. But while vertical integration has many potential benefits to pharma companies and patients alike, it comes with costs and risks like any other business venture.

The issues above are just a few of the growing challenges facing the pharma industry, and all of these issues are nuanced and complex. To gain a deeper understanding of these trends and more, read IQVIA’s blog series or visit our website for expert healthcare insights.