When we’ve worked with a launch team after their product gets through phase 2, the team often already has a TRx sales forecast and then they want to plan their copay program. Our first question always is…What copay offer did you assume when putting together your forecast? To date, the answer has always been the same: “We just assumed we would have some type of a copay program. We didn’t give it much extra thought”.
Copay programs are an integral part of the go to market strategy for most drugs because the copay program will contribute more than 50% of the incremental volume for the brand’s first year sales. Any sales forecast done before the copay program is planned would just be a weak guess as there can be a significant variation between what one program structure could deliver in scripts vs. another.
In years past and prior to high deductible health plans (HDHP’s), developing a forecast was less involved as you would just have to look at the coverage level and the expected patient out of pocket costs and you could make a reasonable sales estimate.
Today brands can no longer rely solely on the forecasted out of pocket costs since such a large percentage of patients will be impacted by high deductible plans. I often hear from the managed care team that “we expect 90% of our commercially insured patients to be covered to tier #2 with an expected OOP cost of $50”. Even though that statement may be true, the result for the patients may be much different due to high deductible plans. Their OOP costs can be much higher than expected for at least the first several months of therapy.
That statement used to mean that 90% of commercially insured patients would actually have an OOP of $50. Now, approximately 45% patients who are commercially insured have a high deductible plan to deal with. If a patient is subject to a pharmacy or coinsurance deductible, he or she will have to pay the full retail price of the drug until the deductible is met.
If the team responsible for the forecasting process didn’t reflect this in their projections, both their TRx estimates and cost of their copay program will be much higher, causing the brand to miss their target. There are many different types of copay programs and delivery vehicles and the offer you choose makes a big difference in both your trial and adherence performance and in your program budget. For example, if you were expecting 90% of your patients to have a $50 OOP cost and you want to get them down to $25, you’ll have a much smaller budget expectation versus knowing 30% of your patients will be impacted by a deductible or will be paying full price and will have a $500 OOP cost.
The result of a lack of proper copay program planning will be a missed forecast, much higher costs and much lower profitability. This is why proper early planning for your copay program with the right tools needs to be an integral part of your launch planning process.
You Can’t Use the Same Old Launch Process
In the pharma industry today, most companies follow the same 30-year-old process for their product launch. Once the strategy and budget are set, the managed markets team is tasked with managing the brand’s efforts to contract with health plans and PBMs to gain what is hopefully a profitable access formulary position for their products.
The market access department must deal with several channels, i.e., Commercial, Medicare, Medicaid Fee-for-Service, Managed Medicaid, Federal (VA, DHA, etc.), GPOs and so on. During these negotiations there is probably only a slight chance that the market access team is thinking about copay program strategies and interactions.
Most managed markets teams don’t have a solid understanding of how the copay programs really work or how they can/should be integrated into the planning process. This is exacerbated by the fact that copay programs are most frequently handled outside of the market access department doors.
A comprehensive analysis supporting both market access and copay program impact must be done for maximum efficiency and effectiveness as these key areas must work hand in hand during launch planning. Are you better off filling in with a copay program around your expected managed care coverage? Or should your copay program take the primary position and managed care contracting take the back seat? You’ll need to understand the costs of both programs to make that decision. This is the piece that Pharma companies don’t have right now as 99% of the time Managed Care contracting comes first.
Copay programs are even more important now that the percentage of US households with high deductible health plans (HDHP) has passed the 40%+ mark. This has created large gaps in what used to be a solid market access approach. Brands can no longer rely solely on the forecasted out of pocket costs since such a large percentage of patients will be impacted by deductibles.
Some pharma companies are starting to link these two business functions, but these combined initiatives are not common. Planning for copay programs should begin 6-9 months before your launch date. The type of program you have and the offer you select will impact your TRx forecast and your net margin. Better to start planning early and get those “cats and dogs” to work together to overcome any issues you are expecting.
Two Processes Need to Happen Hand-in Hand
The Managed Care Contracting and Patient Copay Program strategies and execution processes are loosely linked in most pharma companies. Think of it as the right and left hands…and you know the old story about the right hand not knowing what the left hand is doing. This is happening every day at most pharma companies.
Managed care contracting has been a core initiative for many years now at many pharma companies. Usually there is a dedicated team focused on PBM accounts across the country. These teams are leading the efforts to contract with health plans and PBMs to gain profitable access position for your products.
The fact is that these teams operate in a vacuum where they have very little if any visibility to the outside world (retail). They usually start the ball rolling for the brand and may never even think of how copay interacts with their managed contracting strategies. There is a very good chance that these programs could overlap causing the brand’s spending to be much higher than it needs to be, negatively impacting gross to net.
In our co-authored white paper (with Access Value), we explore the problems in the current process and shed light on the solution to fix these issues. Planning for these two disciplines needs to be done side by side so that you can see the impact of all decisions you are making. It may cause you to negotiate towards a different goal or change your patient copay program structure.