Pharma Economic Evidence Has Little Impact on Access or Sales

In recent years, pharmaceutical companies have invested heavily to develop data about the economic impact of new drugs, hoping to persuade insurance companies and other payers that it makes sense to grant market access to their products. But overall, these efforts have produced few results.

This is one of the principal findings of “A New Key to Access: Solve the Payer's Problem,” a new report from the Health & Life Sciences practice of Oliver Wyman. The firm analyzed the 122 new molecular entities (drugs not previously approved in any form in the United States) that launched in the U.S. between 2005 and 2010, looking at the quality of the data manufacturers provided about the economic impact of each drug, the cost of bringing the drug to market, and peak annual sales.

"The results were a surprise,” says Mark Mozeson, a partner at Oliver Wyman and one of the authors of the study. “We expected to see at least some statistical correlation between economic data and market performance. But there is none.”

The reason: “Payers want to know how a new drug will affect total cost of care. They are willing to pay a premium for a new drug if it pays for itself by eliminating other costs, for example, hospitalizations. But in our sample, drug manufacturers provided that kind of information only about 5 percent of the time.” Instead, Mozeson explains, manufacturers tend to request premium pricing because their drug outperformed competitors in clinical trials. “At a time where there are lots of good, cheap generic drugs, this strategy doesn’t work unless the clinical differentiation is substantial if not breakthrough,” he adds.

Oliver Wyman’s suggestion for pharmaceutical companies:

Understand what payers need. Today payers have unprecedented influence over what drugs are prescribed. And payers are most interested in controlling the total cost of care.
Remember that real clinical breakthroughs still trump everything else. “The drugs in the study with the best economic performance were the ones with that made the biggest difference in the standard of care,” says coauthor Pete Gilmore, a partner at Oliver Wyman. “They command a premium price. We expect that to continue.”
Recognize that different diseases have a different economic profile. “In some disease areas, you need to show payers that you can lower the cost of care,” Mozeson says. “In others – some cancers or Alzheimer’s disease, for instance – it’s enough just to show that the drug works. Drug companies need to be much smarter about what sorts of evidence they invest in.”

The study is available at www.oliverwyman.com/5196.htm.

About Oliver Wyman

Oliver Wyman's Health & Life Sciences practice serves clients in the pharmaceutical, biotechnology, medical devices, provider, and payer sectors with strategic, operational, and organizational advice. Deep healthcare knowledge and capabilities allow the practice to deliver fact-based solutions. For more information, visit www.oliverwyman.com/health.htm.

Oliver Wyman is a global leader in management consulting. With offices in 50+ cities across 25 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, organizational transformation, and leadership development. The firm's 3,000 professionals help clients optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC). Follow Oliver Wyman on Twitter @OliverWyman.

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