In my recent post, I described the underlying changes that are leading to today’s payer-empowered pharmaceutical environment. Now let’s consider the implications of these changes on the negotiation process.

You might wonder how this payer-empowered world of prescription drugs will impact the pharmaceutical industry. What do you do when a payer says no and asks questions after? Will it help to provide the payer with more evidence of value? Yes and no. Let’s analyze.

  1. Payers are generally very careful to ensure that their sometimes tough trade-offs between value and cost are well-supported by the medical community and are evidence-based. Why spend tight budget dollars on propositions that aren’t deemed essential to medical experts or where poor evidence provides an “easy out”?
  2. Increasing willingness of the medical community to make value trade-offs offers opportunities to payers to tightly manage high-cost treatments to patients that extract the highest demonstrated value. Well-designed clinical treatment pathways can build a bridge between evidence-based clinical practice and payer cost-containment objectives.
  3. Value-based payment initiatives and the evolving role of provider organizations are likely to further enable a focus on outcomes and outcomes-based contracts, not only between payers and providers but also between payers and pharma and perhaps providers and pharma.

In this more complex environment, we need to consider the interactions between payers, providers, clinical opinion leaders and other influencers to assess where our efforts have the highest impact on a host of decisions that each of these groups engage in. Lack of strong financial incentives or a patient value claim that’s strongly supported by the medical community make for very difficult negotiations simply because nobody besides the pharmaceutical company cares enough.

Many of you know that I like to use the “dinner for three” analogy, which is illustrative of how the prescription drug decision-making process is different from a typical consumer product. Rather than a simple buyer/seller transaction, this involves a complex tripartite communication between the physician, the payer and the patient. It’s as if we go with three people to a restaurant where one orders the meal (the prescribing physician), another one consumes the meal (the patient) and a third party (the payer) pays for the meal.


In the current environment, we need to not only consider this complex process between payer, physician and patient but also include the influence of a host of other stakeholders and influencers such as medical associations, patient groups and employers. In addition, provider organizations are increasingly influencing the behaviors of individual physicians (often their employees now) through treatment guidelines, outcomes metrics and incentives.


As we assess the impact of each of these stakeholders and influencers on treatments and drug choices, and ultimately the revenues of these drugs, we need to consider:

  1. Which decisions and underlying processes do these stakeholders make or influence?
  2. What are the decision-making criteria for these decisions? What unmet needs and benefits are most important, and what constitutes a relevant improvement to the decision maker?
  3. What evidence is required to convince decision makers that the claimed benefit is real?
  4. What are the implications on drug development and commercialization?

Optimizing the commercial potential of the prescription drug portfolio requires a partnership between the commercial and development teams in the company that goes far beyond the FDA and EMA considerations that are often still the cornerstone of clinical trials’ design decisions.


Given the importance to the company, imperfect alignment between team objectives and the complexity of the trade-offs, it’s critical to use a structured analytical framework to support trade-off analyses by a cross-functional team. That’s the topic of my next blog, so stay tuned.