Marketing's Stepchild No More

A key source of competitive advantage in today's crowded therapeutic space is knowing what the customer wants. That's a mind set that starts not today, but yesterday. In fact, it depends on the capacity to anticipate need with the right mix of product, data, and support services that can yield coveted status as "partner of choice" with an increasingly powerful community of payers. To help readers make sense of this new environment, Pharm Exec looks at two recent product introductions, highlighting what to do—and what to avoid—in managing this business-critical function. — The Editors

Just a few years ago, most companies looked at reimbursement considerations as the last step in the commercialization process. Only after a product was close to launch was consideration given to reimbursement—and even then it was addressed bluntly, as in "What price can we get?" The reimbursement function was all but divorced from the product plan, the "red-headed stepchild" of the pharmaceutical business.

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This approach may have been effective when physicians, pharmacists, and care sites were the dominant decision makers in selecting pharmaceuticals. Today, however, payers are driving the agenda and demanding sophisticated clinical and economic data before agreeing to a price for reimbursement. The industry is now being challenged to demonstrate a strong value proposition for its products, and payers are helping drive the agenda.

The Power of Prediction

Simply stated, the objective of a reimbursement strategy is to support increased sales and premium pricing. But when companies develop and implement reimbursement strategies late in the product development process, the best opportunities may have already been lost. At that point, detailed product communications with external decision makers (e.g., government agencies, payers, customers, public advocacy groups, industry associations) should have been going on for years. These are not idle conversations, since getting appropriate reimbursement coding from the US Center for Medicare and Medicaid Services (CMS)—or its foreign equivalents—and securing a place on insurance formularies are keys to realizing the commercial potential made possible by market authorization.

Building a product's case for reimbursement must draw on evidence-based medicine that focuses on reduced cost and/or superior quality of patient outcomes. Demands by payers to support claims of superiority require that those responsible for reimbursement strategy become involved in data collection, organization, and presentation.

But the process has to go back even further. Effective reimbursement planning requires more than asking how to convince payers to reimburse at an acceptable price. The reimbursement strategy must provide quality input into company investment decisions. To ensure that the company builds a portfolio of products with good reimbursement potential, the function must shape the overall reimbursement environment, creating networks that influence payer thinking, establishing internal management processes that accurately guide and inform senior management's stage-gate decisions, and bringing a broad range of skills and functions into planning R&D's pre-development design specifications.

Cypher: Outreach for Outcomes

There are important lessons to be learned from "early adopters" in managing reimbursement as a strategic priority. Cordis Corporation, a Johnson & Johnson company based in Florida, achieved a landmark reimbursement success with its drug-eluting stent, Cypher, in April 2003. It was the first medical device ever to be assigned a coding classification prior to attaining FDA approval. (Typically, there is a delay between FDA approval and coding classification because the CMS has been unwilling to discuss reimbursement classification until a product has been approved for safety.)

In influencing CMS to become engaged earlier than required by law, Cypher's project team reminded them of instances where the agency had come under fire for a slow reimbursement coding response to revolutionary new technologies that had gained FDA approval. The team convinced CMS that this was a situation where expediency was in both the agency's and the population's best interest.

To accelerate time lines, the project team repeatedly encouraged CMS to consider reimbursement eligibility as soon as each round of data became available, going so far as granting CMS permission to look at reports submitted to the FDA for consideration. Not only did they share available clinical data with CMS, the Cypher team also built an economic case. Using actual Medicare data, Cordis showed that even if the agency paid more for the drug-eluting stent up front, the clinical value—in the form of fewer repeat interventions—would make long term costs even more efficient.

In addition to the collaborative approach to CMS, Cordis also structured and implemented outreach to other key constituents that could influence CMS's receptivity. They initiated communication to medical societies, encouraging them to contact CMS after the proposed rule came out. They called on key private payers, presenting them with the clinical and economic case they'd made to CMS. Finally, they set up a hospital awareness program, stressing physician surveys that showed practitioners would be eager to use it.

Not only was coding achieved prior to FDA approval, the project team managed to attain a new coding classification for its technology that carried with it a significantly higher payment rate than products at the current standard of care. Near total and immediate payer coverage translated to many additional months alone in an attractive competitive space. Lacking competitors with similar developed/approved products and boasting an incremental reimbursement payment, Cypher achieved high volumes and premium pricing.

Having successfully received new and unique coding for their product from CMS, Cordis next realized that if physicians' notes didn't reflect exactly what was done, and coders didn't enter the new code, the hospital couldn't be reimbursed at the proper rate. (This would then impede adoption of the Cypher stent.) So the project team implemented extensive reimbursement training of coding staff and physicians, confident that it would provide a high return on investment for the company through accelerated adoption.

Cypher owes much of its positive reimbursement results to exceptional planning and use of data to build an effective clinical and economic value case for its product relative to the current standard of care. Their outreach to multiple constituents and astute positioning of their product's value also stand out. Despite receiving very positive outcomes, the Cypher project team continued to develop economic models in an attempt to improve data and achieve still better outcomes evidence. For example, a new economic model and analysis was developed as soon as a competitive drug-eluting stent was launched since there was now a new appropriate comparison product.

Visudyne: A Cautionary Tale

As the first combination therapy for age-related macular degeneration (AMD), an eye condition that can eventually lead to blindness, Visudyne, like Cypher, represented a first-to-market breakthrough technology. In contrast, Visudyne's road to reimbursement was a long and bumpy one, marked by numerous gaps between what CMS wanted and what was delivered.

Biotech company QLT developed Visudyne specifically for "wet" AMD. In patients with this disease, abnormal blood vessels grow in the eye and then leak, ultimately resulting in blindness. Roughly a quarter of a million Americans over age 65 were afflicted. Visudyne was injected in the eye then activated using a laser administered at a specific frequency. Visudyne couldn't stop the disease, but it significantly slowed its progress. Novartis acquired the Visudyne trademark in late 2000 when it bought CIBA Vision.

FDA and CMS recognize different indications within wet AMD. These are known as "predominantly classic" (CNV), "minimally classic," and "occult," based on lesion size. Predominantly classic cases, which are easiest to detect, account for roughly 25 percent of potential patients, while the occult segment accounts for roughly twice as many patients. Visudyne received FDA approval for predominantly classic wet AMD in April 2000 and CMS approval for this same category in November 2000.

But since many doctors began to prescribe the drug off-label for occult and minimally classic lesions, the company continued to seek CMS reimbursement for off-label use. In subsequent reviews in November 2000, October 2001, March 2002, and January 2004, attempts were made to broaden coverage; all were rejected on the basis of methodological shortcomings in the data presented.

CMS' national coverage decision highlights the kinds of concerns that were raised. The time frame for data collection was deemed too short (no data was available after 24 months). Definition of treatment outcomes that would prompt cessation of Visudyne use had not been provided, and no guidance was given for the appropriate frequency of additional treatment. The Visudyne project team had suggested that additional treatment be given if CNV leakage was detected by a fluorescein angiogram. However, because there was no patient follow-up beyond the two-year trial period, it was impossible to estimate the implications this guidance would be expected to have on the average number of required treatments per patient or how additional treatment would improve patient outcomes. The fact that fluorescein angiograms are quite subjective and can lead to false negative and positive diagnoses was a strong factor in CMS' 2000 decision to restrict coverage to patients with predominantly classic CNV lesions.

Ultimately, in 2004, CMS approved Visudyne for occult and minimally classic types, but only under specific circumstances and monitoring conditions. CMS' reimbursement conditions are over and above FDA guidelines, and have had the effect of restricting coverage to a little over 50 percent of those patients who might otherwise have been eligible.

From the perspective of QLT, the broadening of coverage to include off-label indications and up to 50 percent of the target population was a victory. Similarly, much of the "gap" between what CMS wanted and what QLT provided by way of data has been ascribed to the novelty of the treatment area for wet AMD and the evolution of CMS' requirements as it became familiar with the clinical details.

Still, from a strategic reimbursement perspective, waiting four years to get coverage for half of the total projected market was a clear failure that blocked this product from obtaining its financial objectives. As it could not promote off-label use, QLT was constrained in its marketing, and patients had to pay for treatment out of their own pockets. Delays and restrictions on CMS coverage also indirectly constricted Visudyne's success in the US, as its decisions have a strong influence on other payer decisions.

While the project team scrambled to gather more suitable evidence and various constituents initiated legal proceedings to pressure CMS to reconsider Visudyne's case for reimbursement, the competition began to catch up. Pfizer's Macugen received FDA approval in December 2004, and CMS coverage in February 2005. Less than one year after Visudyne gained coverage for a sizable chunk of CMS' AMD patients, Macugen had gained coverage access to all of them. QLT's shares had risen to $115 after FDA approval in mid-2000, reflecting the market's anticipation of a new revenue stream. Since then it has slid. As 2005 drew to a close, it was below $8.

The lesson? Particularly for companies with a limited product portfolio, narrowly defining reimbursement strategy can carry significant costs.

Checklist for State-of-the-Art P&R

The ascendancy of payers as a negotiating power, the focus of healthcare reform on limiting costs, and the growth of cost-effectiveness agencies with a mandate to screen medicines for access to patients suggests that reimbursement strategy will be vital to commercial success in the future. Decisions that don't show hard evidence of economic and clinical value are a receding memory; companies will have to reorient their thinking about the business along the lines of value delivered.

That said, what conclusions can be drawn from these two examples on what constitutes best-practice in strategic reimbursement?

• Reimbursement planning no longer begins at the point of commercialization; it has to be part of the portfolio development process. As new information becomes available in clinical development, reimbursement input should inform decision making.

• Strategic reimbursement must establish and maintain close contact with payers, government agencies, and relevant professional and patient organizations, soliciting and using their input across the product development process. Equally important, the development of trust and credibility is an important base on which to build the case for both approval and reimbursement.

• As commercialization approaches, strategic reimbursement must play a role in articulating value propositions appropriate for all relevant constituencies, and in formulating plans to communicate them.

• Strategic reimbursement must drive fresh thinking about the collection of data on economic and clinical value, and effective presentation of such data to position products for reimbursement.

• The evolving strategic role of reimbursement call for a significantly broader range of competencies and a new set of expectations than has been the norm. Such "gaps" will need to be addressed through a thorough redefinition of reimbursement roles, requirements, and key accountabilities, along with selection and development processes to support staffing.

• Given the increased centrality of the function, reimbursement should be reconfigured as part of a strategic market-access function to ensure that its visibility and input are appropriate to evolving market demands.

Marketing and reimbursement need to take the lead in establishing a value-driven approach to the business that ensures identification and focus on economic, clinical, and other benefits to critical constituencies that can be used to influence overall regulatory, reimbursement, and market acceptance of the product. Among other approaches, this can include tactics like "service wraps" that bring additional value to key channel segments to differentiate and enhance product attractiveness.

Michael Abrams is managing partner of Numerof & Associates. Rita Numerof is president of Numerof & Associates. They can be reached at info@nai-consulting.com