EP456: Advice to Pharma at the Intersection of Product Value, Reputation, and Patient Affordability, With Brian Reid

Relentless Health Value™

This show is going to be a little bit different because what we’re going to do today is offer some advice to those who may work at a pharma company. But before we get into this advice portion of the discussion, let’s start here.

For a full transcript of this episode, click here.

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Probably we’re gonna have people listening to this episode who maybe are not in our normal tribe of Relentless Health Value listeners. While there are, for sure, regular listeners who work at pharma companies, there might be some newbies on the scene here. And to you, I say welcome. I hope that you feel right at home here.

You know what, though? Many of us, including myself often enough, are slightly uncomfortable. Because this is the place where we all kind of look at ourselves in the mirror. We all live in glass houses, after all—everyone in the healthcare industry. There’s no devils and no angels here. And the trick is maximizing the good and minimizing the not so good so that we all wind up with the highest net positive possible for patients.

So, around here, we do not shy away from saying what needs to be said so that we all can find a way forward to serve the patient. We cannot solve problems, after all, that we have not taken a cold, hard look at. Yeah.

So, today I am speaking with Brian Reid. I have been very much looking forward to speaking with Brian Reid, who many may know from his really great newsletter and really insightful LinkedIn posts.

Brian Reid’s advice, which he delivers in the episode that follows in sum. Spoiler alert here, but I also will say that he is much more eloquent than me, and the nuances are a thing. So, please do listen to the whole show.

But Brian’s piece of advice number one for Pharma (and really any product or service frankly), but piece of advice number one is this: Get a really solid bead on what value means—not just to PBMs (pharmacy benefit managers) or contract pharmacies or wholesalers who are middlemen but to the ultimate purchasers, the ones whose wallets the money is actually coming out of to pay the bill. Meaning, plan sponsors, such as self-insured employers or unions, patients themselves or members, and taxpayers. Again, how does value accrue to the ultimate purchasers like plan sponsors, patients/members, or taxpayers?

Everybody else in the drug supply chain, let’s be clear, is in the middle pushing money around that came out of somebody else’s wallet. These middlemen have their own interests that may, for sure, may or may not be aligned with the interests of the ultimate purchasers. Getting value realized by patients will depend on understanding what the value is to these ultimate purchasers and then not getting derailed by any middleman who may not be so aligned.

As a sidebar on this number one piece of advice, the whole “what’s your value” and influence coloring this value equation made by ultimate purchasers is the prevailing beliefs of these ultimate purchasers, relative to Pharma, how they perceive the pharma industry. Whether it’s earned or not—and this is not what we’re gonna discuss today—but earned or not, Pharma does not have a great reputation with these folks right now.

And this matters. Brian has a lot to say on this topic, which is fascinating. So, you should listen.

Number two piece of advice that Brian Reid delivers in the podcast that follows that we talk about: Consider inching into the fray around benefit design. Rightfully so, there’s always a lot of talk about patient affordability at pharma companies; but if I was gonna point to one thing that impacts affordability more than anything else, it’d be benefit design.

There’s only a small, underfunded cadre right now of folks out there (Mark Cuban aside, actually); but there’s only a really small number of folks who never have any money who are really helping plan sponsors understand the impact on patients of some of the choices that they are making. I mean, personally, I could think of 10 things to do right off the top of my head that could help plan sponsors not get inadvertently screwed in this realm alone, just thinking they’re saving money when, in reality, they are harming patients and not saving money.

There’s probably a lot of opportunities to communicate these kinds of things that are really win-win collaborations.

Number three piece of advice that we talk about in the conversation that follows with Brian Reid: Keep an eye on hospital consolidation and vertical integration in the payer space.

Consolidation raises prices and impedes patient affordability. This is as per study after study after study. Consolidation raises prices and sometimes considerably. Here’s a part B to this third piece of advice about consolidation. There’s sometimes wild swings in prices at different large, consolidated health systems in the exact same geography.

Listen to the show with Cora Opsahl (EP452) for more about how their health plan, as just one example, saved $30 million a year just pushing a huge expensive health system, consolidated one, out of their network and navigating patients to more affordable sites of care. This matters to pharma companies because hospital system prices are currently crushing in many areas of the country, really impacting patient affordability.

But there are better or worse options from an affordability standpoint in some of these geographies. To state the obvious, if an infusion of the same drug costs 10 times more if a patient shows up in one care setting versus another, that latter place, not affordable for patients. And by the way, that is not hyperbole of any kind. There are plenty of examples where literally an infusion of the same drug, same dosage will cost 10 times more if a patient goes one place versus another.

But, again, it’s not affordable. The patient cost share might be 10 times higher if it’s coinsurance, if the patient goes to that latter place. And that latter 10x more of the cost place also just added 10x the cost to the PAP program or the foundation debit column. All of this is really relevant to Pharma.

And just to pile on here because now I’m on a roll, another reason why this matters, these striking price variations between care settings, if we’re talking about product value, and if the price the patient or the plan sponsor is paying is 10x the cost of the ingredients, nobody’s doing that math and separating out the cost of ingredients from the, you know, total cost of the infusion. It is one lump sum number.

So, if we’re defining value as outcomes divided by cost and now the cost to the plan sponsor is 10x, product value just got reduced by 10x. Just in case anyone is confused here, and you probably know this, but many forget that the whole ASP (average selling price) plus 6% provider reimbursement—so, if that’s what you’re thinking and you’re wondering how the 10x transpires—that ASP plus 6% provider reimbursement is only for Medicare kinds of plans.

Hospitals can and do negotiate much higher reimbursements for commercial plans, and those carriers that have commercial lines of business and also MA (Medicare Advantage) books of business even allegedly actually negotiate higher commercial reimbursements so that they can get lower Medicare Advantage rates.

Right, and you can see why, because the MA dollars are coming out of their own capitated pockets, whereas the commercial rates are being paid for by the ultimate purchasers, the plan sponsors.

Also mentioned in this episode are Reid Strategic; Mark Cuban; Cora Opsahl; Bruce Rector, MD; Shawn Gremminger; Nina Lathia, RPh, MSc, PhD; Autumn Yongchu; Erik Davis; and Marty Makary, MD, MPH.

Additional related episodes:

EP380 with Mark Miller, PhD, on pharma communications. EP371 with Erik Davis and Autumn Yongchu on buy and bill versus pharmacy bagging. EP426 with Nina Lathia, RPh, MSc, PhD, on cost containment versus value-based drug purchasing. EP435 with Dan Mendelson from Morgan Health on how employers should consider pharma purchasing. EP365 with Scott Haas on PBM contracts and drug rebates. EP293 with Dea Belazi, PharmD, MPH, from AscellaHealth on co-pay cards, co-pay accumulators, and co-pay maximizers.

You can learn more by subscribing to Brian’s newsletter and by following him on LinkedIn.

Brian Reid has nearly three decades of experience in healthcare journalism, public affairs, and public relations with a specialty in explaining the economics of the healthcare system. He is the founder of Reid Strategic, a communications consultancy, and a senior fellow at the Center for the Evaluation of Value and Risk in Health (CEVR) at Tufts Medical Center.

At Reid Strategic, Brian counsels industry leaders on the best way to communicate on complex policy, access, pricing, and reimbursement issues in ways that critical audiences can understand. Brian’s core belief is that we can’t build a better healthcare system until everyone understands the system we have today.

Reid Strategic offers communications strategy and execution around corporate, brand, and policy challenges, from prelaunch approaches to lifecycle management.

Prior to founding Reid Strategic, Brian built and led Real Chemistry’s Value+Access Communications practice, the largest such group dedicated to issues of value.

Brian has written extensively for a range of audiences. At Reid Strategic, he publishes the daily Cost Curve newsletter; and his past experience includes coverage of the health science/policy beat for Bloomberg News, creation of patient education materials for the National Institutes of Health, and features in publications ranging from the Washington Post to Nature Biotechnology to Men’s Health.

He has a bachelor’s degree in biology and political science from Emory University and a master’s degree from the Columbia University School of Journalism.

08:29 Why is it important to understand the term “value” in respect to medicine?

10:07 Why is it important to consider all the players affected by the idea of this “value”?

11:06 Who are the ultimate purchasers in Pharma?

12:23 Findings of the Kaiser Employer Health Benefits Survey.

14:52 Why does it matter that we consider what value looks like to all players affected by Pharma?

16:46 EP300 with Bruce Rector, MD.

18:38 EP448 (Part 1) with Shawn Gremminger.

20:04 What does Pharma need to do to showcase their value when PBMs are often “locked in” at the moment?

23:11 Why Brian is celebrating companies that put their prices in their press releases.

32:31 Why does Pharma have an obligation to explain their value?

33:16 EP426 with Nina Lathia, RPh, MSc, PhD.

33:39 Why is it important for Pharma to keep an eye on hospital monopoly behavior?

35:55 EP370 with Erik Davis and Autumn Yongchu.

37:44 Why Pharma needs to capitalize on alignment.

You can learn more by subscribing to Brian’s newsletter and by following him on LinkedIn.

Brian Reid, of Reid Strategic, discusses #pharma and #patientaffordability on our #healthcarepodcast. #healthcare #podcast #financialhealth #primarycare #patientoutcomes #healthcareinnovation

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