The US is the leading global drugs market in terms of sales and profit margin. However, drug companies are facing an unprecedented number of challenges in maintaining revenue growth: fewer drugs are being approved, a wide number of blockbusters are facing patent expiry, and payers are implementing stringent cost-containment policies in the face of sky-rocketing healthcare costs.

Highlights

US drug developers need to prioritize P&R as an important factor in drug development, and in particular should place significant emphasis on performing robust pharmacoeconomic analysis to strengthen the case for setting a strong launch price and securing adequate reimbursement.Drug developers should increasingly focus on securing strong P&R justification before green-lighting me-too drugs. If it is not possible to clearly differentiate the drug, then the developer should carefully assess potential ROI, and consider discontinuing development if necessary to optimize resource allocation.To capitalize on changes to the P&R environment, drugs companies must optimize P&R team interaction both internally with other teams such as brand management, and externally with payer decision-makers.

Scope

Identification of the pressures facing the drugs industry and examination of the implications for P&Rh3>
Overview of the US healthcare market, focusing on identifying key P&R stakeholders
In-depth analysis of global P&R controls, examining which are important in the US market both currently and in the future
Best-practice recommendations to help drugs companies capitalize on pricing and reimbursement opportunities to maximize drug ROIh3>

Reasons to Purchase

Review P&R trends in the US, based on Datamonitor analysis and primary research conducted with key stakeholders in the industry
Benchmark company performance against best-practice P&R recommendations to develop stronger P&R strategies
Gain insight into how P&R fits into drug company strategy in the US and identify specific opportunities and threats within this area

Chapter 1 Executive Summaryscope Of The Report
Chapter 2 Overview Of The Us Drugs Market: Identifying Why Pricing And Reimbursement Is Important And Where It Fits In
- Introduction: why is drug pricing and reimbursement important?
- Pharma is facing a reduction in productivity
- Blockbuster patent expiries are also damaging Big Pharma
- Pharma pipeline strategy needs to adjust to market demands
- Public and private payers exert pressure on profit margins
- Pressures on drug developers rise because healthcare expenditure is set to continue to increase
- Although drugs make up a relatively small percentage of healthcare spending, they are a highly visible target
- Spending on drugs is set to rise
- The drugs industry is being squeezed on drug pricing and reimbursement
Chapter 3 The Us Healthcare System
- Introduction
- There is a wide range of P&R stakeholders in the US healthcare system
- An overview of private and public healthcare in the US
- Private healthcare insurance dominates US healthcare provision
- The cost of private insurance is rising, however most patients believe they are receiving value for money
- The role of COBRA in insurance coverage for the unemployed
- Public healthcare in the US covers a significant percentage of the elderly and disabled
- An overview of Medicare
- An overview of Medicaid
- Reimbursement through Medicare/Medicaid
- A small but significant percentage of the US population are uninsured
- A summary of the US Healthcare System
Chapter 4 Drug Pricing In The Us
- Introduction
- Setting the price for a new drug
- An overview of pricing controls
- Drug pricing controls in the US
- The US market favors reimbursement controls over pricing controls
- High US drug prices drive R&D investment
- The increasing role of government as healthcare prodider raises pressure on pricing and R&D investment
- An overview of government-led price controls
- Cost-plus pricing is not used in the US
- The use of profit controls is more of a European measure than a US strategy
- Implicit reference pricing is set to be incorporated into US cost containment strategies
- An overview of reference pricing
- There are a number of issues with reference pricing
- Reference pricing in the US
- Price ceilings are used in the US but are not a key pricing control
- Price cutting and price freezing do not play a significant role in US cost containment
- Linking pricing with Consumer Price Index
- The use of pharmacoeconomics (PE) in US pricing controls
- Using healthcare economics, outcomes research and pharmacoeconomics to justify pricing
- Overview: how does PE fit into healthcare economics?
- How does PE fit into drug development and marketing?
- Methodologies of pharmacoeconomic evaluation
- PE analysis: Cost-minimization analysis
- PE analysis: Cost:benefit analysis
- PE analysis: Cost-effectiveness analysis
- PE analysis: Cost-utility analysis
- The use of pharmacoeconomics in HTAs
- Issues with pharmacoeconomic analysis
- Discounts and rebates have a significant impact on US pricing
- The use of discounts and rebates in the public arena
- A range of public payers leverage drug discounts in the US
- The introduction of Sections 601, 602 and 603 transformed drug pricing in the public arena in the US
- States have introduced additional measures to secure discounting
- Rebates in the public arena vary by country
- Private payers in the US
- Cash customers pay the greatest for drugs
- PBMs and institutional purchasers are the largest purchasers of drugs
- Modulating pricing while the drug is on the market
- Parallel importation can reduce profit margins for drugs companies
- Drug distribution infrastructure can impact on drug prices
- Health informatics may lead to increased pricing transparency
- Marketing is an effective tool in supporting drug pricing
- Generic incursion reduces profit margins for drugs
Chapter 5 Drug Reimbursement In The Us
- Introduction
- Reimbursement favours innovation-focused drug development
- A wide range of factors influence reimbursement
- Controlling doctors budgets is used in Europe but is not widely used in the US
- Volume and expenditure limitations is not a key reimbursement control in the US
- Tiered co-pay and formularies are key reimbursement controls in the US
- Overview of formularies
- There are a number of stakeholders that impact on formularies
- Tiered formularies are widely used in the US for cost containment
- Formulary access and Positive/Negative lists are a popular cost containment tool in the US
- Drug companies should avoid getting onto negative lists
- The relationship between positive lists and prior authorization
- Cost is an important factor in formulary access
- Taxes on reimbursed drugs
- Some countries require drugs to be included on reimbursement lists of a number of countries before reimbursement is granted
- Pharmacoeconomics and risk-sharing agreements are increasingly important in the US
- Step therapy or fail first plays a central role in cost containment in the US
- The role of restricting pharmacy networks in the US
- Enforcing a switch to OTC status is another reimbursement restriction tool
Chapter 6 The Future Of Pricing And Reimbursement In The Us: Best Practice Recommendations
- Introduction
- Best practice recommendations
- Recommendations focusing on improving how P&R is carried out internally in a company
- Prioritize P&R as an important functionality in drug development
- Broaden the remit of PE analysis and shift it into earlier-phase clinical trials
- Optimize the P&R team's interaction with other internal teams within a company
- Ensure full, up-to-date understanding of P&R legislation
- Avoid green-lighting mediocre or me-too drugs
- Use external organizations more effectively
- Carry out better market analysis and competitive intelligence analysis
- Recommendations focusing on enhancing how the company carries out P&R activities externally in the marketplace
- Enhance public image to boost P&R
- Identify and establish extensive contact with decision-makers
- Actively manage interaction with formularies
- Obtain greater patient feedback
- Target physicians to overcome prior authorization
- Carry out more effective lobbying
- Drug-specific recommendations
- Carry out effective brand strengthening
- Determine whether to launch in the US first
- The future of pricing and reimbursement in the US
Chapter 7 Appendix : Supporting Data
- Glossary of terms
- References
- Publications and online articles
- Datamonitor resources
- Conference literature
- Online resources
List of Tables
- Table 1: NGO stakeholders in US healthcare
- Table 2: Categories of Medicare coverage
- Table 3: Quality improvement programs for PDPs and MA-PDs
- Table 4: Examples of macroeconomic pricing controls used globally
- Table 5: Advantages and disadvantages to CUA
- Table 6: Examples of pharmacoeconomic analysis
- Table 7: Examples of reimbursement controls used globally
- Table 8: Key recommendations to improve the use and effectiveness of PE data in clinical trials
List of Figures
- Figure 1: Key pressures facing drugs developers
- Figure 2: NME & BLA approvals, compared to PhRMA company R&D spend, 1990-2004
- Figure 3: Biotechnology companies are set to show a stronger 2004-10 CAGR than pharmaceutical companies
- Figure 4: The percentage of BLAs approved is falling, while the percentage of NMEs is rising, 1990-2004
- Figure 5: Generic risk facing leading pharmaceutical and biotech companies is rising through to 2010
- Figure 6: Biotechnology drugs targeting therapeutic areas related to an ageing population set to experience stronger growth
- Figure 7: US health expenditure set to rise steadily through to 2010, at a higher rate than GDP growth
- Figure 8: Medical goods account for a relatively small percentage of total healthcare expenditure in the US, 2003
- Figure 9: A large number of stakeholders makes the US healthcare market highly complex
- Figure 10: Private healthcare insurance dominates US healthcare provision
- Figure 11: PPOs were the most popular form of managed care in 2005 in terms of the percentage of patients offered different types of plans in 2005
- Figure 12: Increase in US health insurance premiums vastly outstrips increases in the rate of inflation and earnings
- Figure 13: Medicare spending, by type of provider, 2005
- Figure 14: Part D enrollment is dominated by United Healthcare, April 2006
- Figure 15: Standard Part D Benefit Design for a higher-income patient in 2006
- Figure 16: Standard Part D Benefit Design for a lower and middle-income patients, 2006
- Figure 17: A number of factors impact on the IPPS reimbursement, 2006
- Figure 18: Factors influencing DRG weighting
- Figure 19: Factors affecting drug pricing
- Figure 20: A number of public and private bodies impact drug pricing in the US
- Figure 21: Different US pricing levels and schemes command different drug discount levels, 2003
- Figure 22: Globally, a number of factors can affect the price of the drug following launch
- Figure 23: A low percentage of drugs approved by the FDA undergo priority reviews
- Figure 24: Best Practice Recommendations for P&R in the US
- Figure 25: PE tasks to carry out in each drug development phase

Pharmaceutical Market Research

Pricing and Reimbursement in the US