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October, 2014

PBM Contracting Strategies: Impact on Biopharmaceutical Companies

PAYER AND INTERMEDIARY CUSTOMER SEGMENTS | RELEASED ON: 10/9/2014

PBM contracting strategies continue to evolve. Health Strategies Group analyzes this evolution, evaluating current and future PBM-client contracts and how they influence product access and utilization.

The Impact of Current Trends
Current PBM contracting strategies will impact biopharmaceutical companies in three key areas: formulary access, pricing pressure, and specialty and channel strategies.

Formulary Access
PBMs promote client alignment with more restrictive national formularies and increasing access barriers for brand therapies.

    • Product exclusion strategies are often adopted alongside rising pharmacy deductibles and increases in cost sharing across tiers, designed to create financial barriers/incentives that steer utilization to lowest-cost agents.
    • Clients electing to contract for a custom formulary design may include performance-based terms and incentives such as brand and/or generic utilization goals.


Pricing Pressure

Competitive therapeutic categories with multiple generic and/or branded options offer PBMs greater negotiating leverage with biopharmaceutical companies.

    • As the majority of PBM clients demand more thorough pricing detail within contracts, PBMs offer forecasts based on real-world utilization patterns that project costs for OTC, single- and multi-source generic, brand, and specialty therapies.
    • Many PBMs continue to access traditional brand rebates through contracts with Express Scripts and CVS Caremark, diluting their ability to make fully independent formulary decisions with some clients, while further increasing negotiating leverage for Express Scripts and CVS Caremark.


Specialty and Channel Strategies

Newer higher-cost therapies present unique client challenges, increasing PBM focus on channel management strategies for optimizing appropriate utilization.

    • FDA oversight promotes expansive and more expensive clinical trials, while market forces incentivize therapies for smaller target populations, driving biopharmaceutical development costs higher.
    • Clients will increasingly seek management of these therapies, conducting more cost-benefit analyses to determine coverage and adopting tighter controls to guide channel distribution across retail, mail, and specialty.


Taking it one step further – What does this mean to you?

Allow us to provide two examples around formulary access.

    • As formulary access barriers increase, biopharmaceutical companies must understand the ramifications of both retaining and losing access. Do the significant financial concessions needed to retain limited access represent the best strategy for all brands?
    • Biopharmaceutical companies should consider outcomes data as a potential tool to influence access decisions. However, outcomes data must align with PBM and client member populations to be effective.

 

Health Strategies Group’s recently released research PBM Contracting Strategies details the nuts and bolts of current PBM contracting trends and provides insights into how these strategies will impact you. 


Key Questions This Research Answers

  • How do PBMs structure contracts with clients?
  • What terms and conditions are considered in PBM contracts for value-added services?
  • How are mutual clinical and financial objectives negotiated in contracts?
  • How do PBM contracting strategies impact pharmaceutical companies?

Download the Research Agenda

 
Pharmaceutical and biotech managed markets executives and account management teams use Health Strategies Group’s Pharmacy Benefit Managers service to:

  • Evaluate the opportunities and risks involved in working (or not working) with targeted PBMs
  • Determine the impact of managed markets trends that create new opportunities or challenges when working with PBMs and their customers
  • Identify PBM programs and initiatives that support brand strategies and those with negative impact on brands
  • Prioritize and allocate resources to proactively monitor or respond to emerging changes in the healthcare environment

 
Visit our Pharmacy Benefit Managers webpage to learn more about this research.

 

Need another pharma fact?

What are the key strengths and weaknesses of the five leading PBMs?
Click here to learn.

What are three ways PBMs promote their distribution channels? How do PBM channel strategies impact your brand?
Click here to learn.

Want access to more leading research? Click here to request more information.

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