Understanding Managed Markets

Understanding Managed Markets: Effective Marketing Research Structures & Activities to Maximize Payers Access & Insights

Understanding Managed Markets:
Effective Marketing Research
Structures & Activities to Maximize
Payers Access & Insights

STUDY BACKGROUND
While bio-pharmaceutical companies still direct the Benchmarking Report
bulk of their marketing and market research efforts at-a-Glance
towards physician customers, the reality today is that
Featured Study Participants
physicians are rapidly losing their influence over • Abbott Labs
patients’ drug utilization decisions. • Alcon
• Amgen
• GlaxoSmithKline
Commercial and government payers are gaining
• Jazz Pharmaceuticals
importance; third-party payers now manage the vast • Johnson & Johnson
• Novo Nordisk
majority of prescription drug expenditures. In fact, it is • Sepracor
• Solvay
estimated that third-party payers in the Managed • Ther-Rx
Markets sector currently control more than 80 percent • Xanodyne Pharmaceuticals

of patient access to prescription drugs in the United
Information Types
States. As a result of this shift, commercial success of
• 43 Figures and Tables
new pharmaceutical products increasingly depends • 24 Data Graphics
• 18 Information Graphics
upon anticipating the wants and needs of payers. • 14 Best Practices Spotlights

This shift, driven in part by the Medicare
Combined Participant Facts
Modernization Act and Medicare Part D, has Annual Revenues: From $500M to $10B
Average of 21 years in Pharma Industry
profoundly affected the pharmaceutical industry; and
Each average 8 brands in-market
many companies are now struggling to adjust to the
new order. Companies are refocusing marketing Report Length

strategies and revamping business operations to 65 Pages

Best Practices, LLC © (919) 403-0251 1


strengthen their relationships with Managed Markets customers. Pfizer, for
example, devoted a separate business division to managed care strategy and
access during a reshuffling of its organizational structure in 2007. And industry
observers have seen R&D platforms increasingly influenced by anticipated payer
response.

To succeed within this new market reality, pharmaceutical companies must access
payers and build relationships to develop the best possible Managed Markets
insights before product launch. Thus, it is vital that pharmaceutical leaders build
market research capabilities that are structured and tasked to effectively capture,
understand and communicate to their companies the concerns and interests of key
Managed Markets organizations.

STUDY METHODOLOGY
This report provides metrics, executive insights and best practices for the effective
operation of the Market Research function that is charged with collecting insights
from the pharmaceutical Managed Markets sector. Leaders of Market Research
and Managed Markets functions at pharmaceutical, biotech and medical device
organizations can use this report to identify tactics and critical success factors for
effectively accessing and acting upon the needs of third-party commercial and
government payers.

This report identifies the Market Research structures and activities that best
support the Managed Markets function in gaining payer access and insights
around pharmaceutical products, as well as captures executives’ best practices and
lessons learned for working successfully in the current payer-driven environment.

The report was created using a quantitative survey and field interviews. Best
Practices, LLC fielded an online benchmarking survey with managers and
executives representing Managed Markets or Market Research functions at
leading pharmaceutical and biotech companies. Analysts then conducted in-depth



interviews with selected research participants. The survey and interview collected
benchmark data on the following aspects of Managed Markets Market Research
(MMMR) organizations:

• Current and optimal structure and organizational fit
• Effectiveness of current structure
• Pre-launch research objectives
• Key global MMMR activities with greatest impact on strategic choices
• Timing of activities by product development phase
• Activities most effective for generating insights
• Activities most effective for accessing hard-to-reach partners
• Principal drivers of MMMR activities
• Percentage of research that is qualitative vs. quantitative
• Top Three most important types of pre-launch studies
• Anticipated changes in resource allocation levels
• Trends in use of vendors to gather payer information
• Projected changes in MMMR focus
• Best practices and pitfalls

KEY FINDINGS AT A GLANCE
A number of key findings and insights emerged regarding the effective operation
of Managed Markets Market Research organizations within pharmaceutical and
biotechnology companies. The following insights can be used to guide bio-
pharmaceutical leaders in evaluating and improving their own MMMR
operations.

No Single Structure Is Optimal: Many structure types can work effectively
for the Managed Markets Market Research function, and benchmark partners
use several different models. A more critical success factor than the structure
type is the level of research staff knowledge and understanding of the



Managed Markets sector. Developing staff specialization and expertise is the
key to making any structure begin to work from an MMMR perspective.

Manage Resource Competition: Brand team and Managed Markets research
projects generally have different targets (physician/patient vs. payer) and find
themselves competing for resources and attention. Avoid MM priorities being
defused or fragmented through resource competition. This can be a critical
pitfall.

Don’t Wait Until It’s Too Late to Develop MM Insights: MMMR
activities peak during Phase 3, though most benchmark partners are moving to
push these into earlier phases. This may prove most viable for breakthrough
medicines where pharmacoeconomic differences can be identified, and may
prove less effective for me-too drugs, as pushing research earlier may give
payers more time to develop strategies against undifferentiated products.

Role of Account Managers Is Expanding to Access MM Insight: Account
managers’ roles are expanding due to the increase of Managed Markets
influence in the pharmaceutical industry today. Account managers are seen by
most participants as the most reliable method for accessing hard-to-reach
partners. MM account managers play different valuable roles depending on
the type of product, its market-entry order, and its clinical profile.

Performance Guarantees/ Warranties: Eighty percent of benchmarked
companies have explored the concept of offering warranties but most find
usefulness limited due to unpredictable patient compliance and complex
Medicaid-related CMS submissions. The warranty concept seems best applied
for novel drugs in unique therapeutic categories where Medicaid is not a
major payer.



PITFALLS AND LESSONS LEARNED AT A GLANCE
Benchmark participants shared their collective experience of pitfalls and lessons
learned in developing a successful Managed Markets market research function.
Among these are the following:

• Duplicating research efforts between MM and MR groups. “Managed
Markets is not the only group that needs payer research anymore. Brand
teams and others are asking Market Research for payer information. If
Managed Markets is doing its own research, there can be unnecessary
duplication. There needs to be coordination of efforts.”

• Believing everything payers say – sometimes they don’t have as much
power as they say they do. “When you’re negotiating on tiers, you take
some payers very seriously—those with ability to deliver on their access.
Others exaggerate their influence. Account managers need to know when
they can walk away.”

DATA EXCERPTS AT A GLANCE
MMMR Structure Can Influence Effectiveness (an Excerpt)

Interviewed executives said organizations with dedicated research staff and
budgets—regardless of departmental location—are likely to be more effective
than those without. Dedication has several advantages, such as:

• Allows researchers to develop subject matter expertise
• Enables long-term or ongoing projects, where researchers produce regular
MM updates
• Eliminates competition with brand teams for limited resource availability
• Puts the budget in the hands of the people asking the research questions
• Reduces potential duplication of work



For smaller companies, dedicated staff for Managed Markets market research may
not be realistic; however, MM ownership of a
research budget can be a solution. For “I think a lot of Managed
Markets’ success comes
example, an interviewed executive director of down to where the dollars
Managed Markets at an emerging company reside.”
–Interviewed Executive Director
credited her success to budget access.

Figure 2.6 MMMR Structure Can Influence Effectiveness

MMMR Structure Can Influence Effectiveness
Benchm ark partners described three structural models for the MMMR function.
Those using the two models involving dedicated resources noted improvements
gained from reduced resource competition and increased subject matter expertise.

No Dedicated Resources Dedicated Resources Models
When Managed Markets has no dedicated
resources for its market research needs, the group Managed Markets Group
must compete with brand teams, commercial
Dedicated Dedicated MR
operations and other organizations for limited MR
resources Resourceswithin MM
support. This model does not facilitate research
within either
staf f development of MM subject expertise.
Managed
Markets or
Market Research Market Market Research
Department Research Department
gives MM
without dedicated with dedicated
Competing direct
MM Resources access MM Resour ces
requests for
shared MR t o subject
resources matter
Dedicated
experts.
MM
Resources
within MR

BEST PRACTICES ,
®
Copyrigh t © Best Practices®, LLC LLC

Successful Access to Hard-to-Reach Payers (an Excerpt)

Account management is the approach that best opens doors to hard-to-reach
payers, according to survey respondents. More than three-quarters (78%) of study
participants ranked account management as “highly effective” for reaching
payers. Other approaches were ranked “highly effective” by no more than half the
benchmark class. “One-off” informational discussions with payers and peer-to-
peer meetings between clinical experts, physicians and contracting specialists
each were scored “highly effective” by 50 percent. A third of partners identified



quantitative online surveys and qualitative interviews/focus groups conducted
either online or via telephone as “highly effective.”

Figure 4.3 Account Manager Provide the Best Access to the Hard to Reach

Account Managers Provide the Best Access to the Hard to Reach
More than three-quarters of study participants find account managers a highly
effective way to access hard-to-reach Managed Markets partners. No more than half
rated any other activity as highly effective for access.
Q. Which activities are most effective for gaining access to hard-to-reach Managed Markets
channel partners? (Rank each activity from 1 to7.)
Approaches for Gaining Access
Account management 70%

One-off” informational discussions with payer (telephone) 40%
30%
Peer-to-peer meetings between departments (in person)
Advisory board 20%
One-off” informational discussions with payer (in person) 20%

Qualitative interviews/focus groups (online) 20%

Qualitative interviews/focus groups (telephone) 20%

Quantitative surveys (online) 20%

Quantitative surveys (mail) 10% None of the
companies
Mock P&T committee 0%
in the study
Peer-to-peer meetings between departments (telephone) 0% give high
rankings to
Qualitative interviews/focus groups (in person) 0% four of the
Quantitative surveys (telephone) 0% activities.

Ranking Scale: 1=Not at all effective to 7=Extremely effective.
37 Copyright © Best Practices®, LLC BEST PRACTICES,®
LLC

Interviewed study participants shared a variety of tactics and strategies that they
use successfully to improve access to hard-to-reach payers. The most widely used
of those are employing third-party vendors to ask the necessary questions of
payers and focusing on science, industry and overall customer value when
interacting with the Managed Markets sector.



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APPENDIX

TABLE OF CONTENTS
Table of Contents........................................................................................................................... 1

Figures and Tables ........................................................................................................................ 3

Executive Summary ....................................................................................................................... 4

Introduction .................................................................................................................................... 4

Objective & Research Approach......................................................................................... 4

Project Participants ............................................................................................................. 5

Definitions & Abbreviations ................................................................................................. 7

Key Findings & Insights ...................................................................................................... 8

Structure & Organization ............................................................................................................ 11

Introduction ....................................................................................................................... 11

Organizational Fit .............................................................................................................. 11

Inability to Measure Value Limits Resources for Managed Markets................................. 20

Focus of Managed Markets Market Research.......................................................................... 24

Introduction ....................................................................................................................... 24

Pre-Launch Objectives...................................................................................................... 24



Study Types ...................................................................................................................... 27

Research Drivers .............................................................................................................. 28

Data Types........................................................................................................................ 29

Effective Activities & Approaches for Payer Access & Insights............................................. 32

Introduction ....................................................................................................................... 32

Activities with High Decision Impact ................................................................................. 32

Best Approaches for Insights From MM Sector ................................................................ 33

Best Approaches to Hard-to-Reach Payers: Access & Insights............................................. 34

Understand and Demonstrate Interest in Customer Issues to Open Payers’ Doors ........ 36

Viewpoints on High-Rated Approaches..................................................................................... 40

Reduce the Size of Ad Boards to Facilitate Better Conversations ................................... 41

Expand Participant Parameters to Increase Advisory Board Diversity and
Broaden Perspectives ....................................................................................................... 41

Account Management Viewpoints..................................................................................... 42

Timing of Key Activities .............................................................................................................. 45

Begin Managed Markets Research Activities before Phase 3 to Ensure Clinical
Trial Design Produces the Data That Payers Will Request .............................................. 47

MMMR Roles................................................................................................................................. 50

Current Trends in MMMR ............................................................................................................ 52

Companies Are Adapting Slowly to the New Paradigm:................................................... 53

Best Practices, Pitfalls & Success Factors .............................................................................. 57

Participants’ Best Practices .............................................................................................. 57

Pittfalls and Lessons Learned........................................................................................... 60

Appendix: Full Source Data ........................................................................................................ 63



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