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THE PHARMA REVIEW (MAY - JUNE 2011)

Changing Market Access Strategies in Pharmaceutical Industry : A Preview

Rajaram Iyer

Executive Summary
Market access strategies in pharmaceutical industry have changed a lot in last 2-3 decades. During the 1970s and 1980s, branded pharmaceutical companies were very powerful and used to get reimbursed for all their drugs. Entry of generic drugs was very difficult; and physicians did not have a lot of choices. In 1984, Hatch Waxman law was passed and generic entry became relatively easy. Entry of generics through Hatch Waxman was the first major step towards cost containment. Payers started putting pressure on physicians to prescribe more generics and less branded drugs. Branded drug manufacturers started campaigning against generic drugs and generic companies fought their way, supported by political will and strong cost rationale.
1980s also saw the upcoming of biologics industry. Oncology was an area which witnessed launch of a number of biologics which started a new trend of high priced therapeutics for niche indications, underserved by small molecules. During this time science also advanced and lot of new treatment modalities entered the markets which were very high priced. Due to the increasing cost and marginal benefits of newer therapies, payers started controlling the amount they paid for various treatments. Payers initially started by tightening their formulary status, providing incentives for generic prescription and increasing the co-pay for branded drugs. Later on they started newer ways of controlling costs such as pay-for-performance, price capping, price sharing, outcome-based pricing, etc.
Clearly the power has been shifting steadily away from pharmaceutical companies and into the hands of payers. Payers have, and are trying innovative ways to reduce costs and the over burden. At the same time, pharmaceutical companies are also trying to respond to these changes and it will be interesting to see how the landscape evolves in future. This article reviews various market access strategies being adopted by payers and pharmaceutical companies in the new world of pharmaceutical marketing.
Introduction / Background
Prior to 1984, branded pharmaceutical companies dominated the scenario. Entry of generic drugs was very difficult as they had to conduct full clinical trials to demonstrate both safety and efficacy to obtain approval. This acted as a big barrier for generic drug entry, as there was no commercial incentive1 to spend big money on conducting clinical trials for generic approval. As a result, branded pharmaceutical companies enjoyed monopoly and controlled the market even after patent expiry. Due to this monopoly of branded companies, payers had no choice but to reimburse for branded drugs. They use to reimburse without a lot of restrictions or pre-conditions. As payers had no cost containment measures, so the overall healthcare expenditure started to rise.
During this period, pharmaceutical companies were very powerful and other stakeholders (patients, physicians and payers) had limited say in the overall healthcare scenario.

 

 

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