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Benchmarking Survey: Can we reduce procurement time in HEOR & RWE?

As healthcare moves towards an increased focus on outcomes and value, health economics & outcomes research (HEOR) and real-world evidence (RWE) are being used to guide value-based decisions, improve outcomes, reduce costs, and achieve market access. This move toward new ways of defining value has led to growth in the number and complexity of HEOR and RWE initiatives as well as increased diversity in the types of stakeholders involved in them.

Outsourcing of HEOR & RWE is increasing

As a result of expansion in HEOR/RWE initiatives, many companies are outsourcing to keep up. A 2017 survey conducted by ISR Reports found that companies outsource an average of 75% of their HEOR work, a trend driven by limited internal resources, lack of time, and the need to foster great credibility by using trusted third-party partners.1

To better understand the challenges and opportunities in the procurement and contracting of HEOR/RWE projects, HealthEconomics.Com and Scientist.com conducted an online survey of researchers and suppliers in HEOR, RWE and related areas with over 150 respondents. The HEOR and RWE Sourcing and Procurement Challenges and Opportunities Benchmarking Survey represented a wide variety of companies including biopharma/medical device (35%), research consultancies including CROs (37%), private payers/pharmacy benefit management companies (5%), and academia (7%). Forty percent of respondents were from large organizations with 1,000 or more employees. About one-third (31%) categorized themselves as a buyer of services, 38% were a supplier, and 25% were both a buyer and a supplier. 


Consistent with the ISR survey1, the HealthEconomics.Com and Scientist.com benchmarking survey showed that three-fourths (71%) of respondents outsource one-half or more of their work.

Contracting time is a challenge in HEOR & RWE procurement

One of the most serious stumbling blocks identified was long contracting times.

More than one-half (55%) of HEOR/RWE professionals found that average contracting time exceeded 2 months and 10% found that it exceeded 6 months.

Consequences of long contracting time

Long contracting times delay insights, impede market access, hinder decision-making by providers and payers, and may result in increased costs of drug development and commercialization. Ultimately, this leads to delays in how quickly an intervention gets to the patient. As one Medical Affairs professional from a consulting company put it: “[Procurement] takes a very long time, making [study] results less meaningful”.

Need for standardization

Many respondents grappled with overly complex administrative and legal processes during the HEOR/RWE sourcing and procurement process. Eighty percent of respondents (both buyers and suppliers) agreed that buyer requirements are not standardized. This finding was echoed by an editorial in Clinical Leader, stating, “HEOR procurement can be intricate due to the lack of standardized requirements and regulations.”2 This results in a longer period in the negotiation and set up phase of contracting before the actual work can even begin.

While both suppliers and buyers identified a more standardized and expedited contracting process as a major need, there were key differences in how their comments approached the issue.

Suppliers focused on problems with buyer processes with 8 out of 10 agreeing that it is difficult to navigate through the buyer’s procurement process. Seventy percent agreed that buyer compliance requirements hinder successful contracting.

Buyers focused on the time spent working with their own internal procurement team. A Director of Outcomes Research from a pharmaceutical company said that, “…timelines certainly are [affected] when having to jump through hoops to demonstrate why one supplier is needed over another”. Indeed, over 60% agreed that it is challenging to compare suppliers for a project.

A solution that simplifies administrative and legal requirements while allowing buyers to easily differentiate suppliers is clearly needed.

A marketplace solution for sourcing challenges

Scientist.Com, the world’s leader in scientific services marketplaces connecting buyers and suppliers, found that an online marketplace approach improved contracting time and saved money. As shown in the figure below, the online marketplace resulted in a first proposal within 7 days of a highly complex request, provided for easy comparison of 5 different suppliers, and resulted in a realized cost savings of >$20,000. Applying this approach to HEOR and RWE could result in a similarly expedited contracting process and the potential for cost savings.

Figure: Impact of Online Marketplace on Supplier Response Time and Costs
[source: Scientist.Com data on file]

HealthEconomics.Com and Scientist.com have partnered together to launch the HEOR & RWE Marketplace, an online solution that accelerates the sourcing and procurement process for researchers and suppliers of HEOR, RWE and market access services.3 By streamlining the process for buyers and sellers, the HEOR & RWE Marketplace will deliver reduced time to contract, quicker time to insight, and faster market access, while saving costs.

The HEOR & RWE Marketplace

Powered by two trusted life science brands

The HEOR & RWE Marketplace is comprised of a global network of suppliers with access to a host of data sources, and placing an order is simple:

  • Researcher places a request
  • The details of the request are sent to several qualified suppliers
  • Researcher receives responses within days
  • An experienced Research ConciergeTM team quickly narrows the pool of eligible suppliers
  • Researcher receives proposals to compare
  • Researcher selects the best one for the particular study
  • Researcher receives requested services upon internal approval and completed PO

As HEOR and RWE are increasingly required by payers and providers, outsourcing and procurement are critically important to the research process of evidence development. It is imperative that administrative, sourcing, and legal hurdles do not prevent much needed interventions from reaching patients. Solutions like a marketplace approach should be fully evaluated in terms of their ability to simplify procurement, reduce time to contract, deliver quicker time to insight and facilitate faster market access, while saving costs.


References:

  1. ISR Reports. Benchmarking the Pharma Industry’s HEOR Function. (2017). Available at: https://www.isrreports.com/wp-content/uploads/woocommerce_uploads/2017/09/2017-Benchmarking-the-Pharma-Industrys-HEOR-Function-2nd-Edition-Enterprise.pdf.
  2. Parikh, H. An Overview Of Offshoring HEOR. Clinical Leader (2015). Available at: https://www.clinicalleader.com/doc/an-overview-of-offshoring-heor-0001.
  3. HealthEconomics.Com, Scientist.Com Partner on RWE/HEOR Initiative. HealthEconomics.Com (2018). Available at: https://www.healtheconomics.com/industry-news/healtheconomics-com-scientist-com-partner-on-rwe-heor-initiative.

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Pharmacy benefit managers: a mechanism for containing costs or a contributor to rising drug prices?

While pharmaceutical companies are often the focus of conversations about high drug prices, more recently pharmacy benefit managers (PBMs) have come under increased drug price scrutiny. The American PBM business model, developed in the early 2000s, was designed to identify treatment-eligible patients, reduce health insurer administrative burden, and price negotiate with the pharmaceutical manufacturer. By managing these prescription drug programs on behalf of health plans, PBMs exert wide-reaching influence on drug formularies and rebate negotiations with manufacturers.

A PBM’s revenue comes from upfront and secretly negotiated discounts and rebates following sales for including the pharma company’s medications on their formulary (a powerful leverage for negotiating prices), as well as through charging health plans a higher amount than they reimburse pharmacies. The latter practice is called “pharmacy spread”.

The Pharmaceutical Care Management Association (PCMA), the national trade association representing America’s pharmacy benefit managers, claims that PBMs reduce prescription drug costs for consumers, employers and government programs.1 However, the National Academy for State Health Policy (an independent academy of state health policymakers)  summarizes concerns around the PBM business model, highlighting anti-consumer practices including2:

  • Drug formularies that may benefit PBMs but not patients;
  • Gag clauses that restrict pricing information pharmacists can share with consumers;
  • Restrictions on drugs purchases to PBM-controlled pharmacies; and,
  • Lack of fiduciary transparency in operations.

Are PBMs contributing to high drug prices?

One key question is whether PBMs actually help contain costs for insurers and consumers. Theoretically, their pricing power should benefit insurers, which then pass on savings to their customers through better benefits and lower premiums. In actuality, only a portion of the rebate is passed onto insurers, so the impact at the health plan (and consumer) is diluted.

Moreover, the Medicare Payment Advisory Commission raised concerns that PBMs are not choosing the lowest-cost drugs.3 Since the rebate received by the PBM is based on the drug price, the higher the price of the drug then the higher the rebate. This business model results in conflicts of interest because rebates have the potential to shift incentives towards drugs with the highest rebate rather than the most cost-effective price. DHHS Secretary Alex Azar went further to suggest that PBMs prevent pharmaceutical companies from lowering list prices in order to secure a higher rebate by threatening to remove drugs from their formulary.4

PBMs pushed back, with the PCMA releasing a report that lays the blame for high prices on drug makers, asserting that list prices are rising even when there are no rebates to PBMs.5

The Ohio Department of Medicaid criticized PBMs after an audit found they used the practice of “pharmacy spread” to collect over $208 million from generic prescriptions during a single year by charging Medicaid more than pharmacies were being reimbursed.6 CVS Health and its PBM, CVS Caremark, hit back, claiming that PBMs have saved Ohio taxpayers $145 million annually.7

If PBMs do lower costs, are these savings being passed on to patients? Dan Leonard, President & CEO of the National Pharmaceutical Council (a health policy research organization representing American biopharmaceutical companies), pointed out that while PBMs have been able to keep commercial plan drug spending slow, out-of-pocket spending by consumers was at the highest level in a decade in 2016.8 This suggests that even if PBMs are saving money for insurers, these savings are not being passed on to patients.

Lack of transparency has also been a key point of contention with PBMs. In a September 14, 2017 Health Affairs brief, Cole Werble of the health care policy firm Prevision Policy, LLC called PBM price negotiations, “…opaque by design,” suggesting that PBM leaders believe that full transparency around rebates could prevent future discounts. 9This black box surrounding rebates and net pricing makes it difficult to know what role PBMs have in increasing drug prices and whether they are passing on rebates to consumers and insurers.

The landscape is moving towards increased regulation of PBMs

How is the healthcare ecosystem reacting to criticism of PBMs?

At the federal level, the Senate recently voted to ban ‘gag clauses’, a practice where PBMs prevent pharmacists from telling customers when prescriptions would cost less if purchased outside their plan.10 State legislatures are also pushing for more transparency and fewer anti-consumer practices, with over 80 PBM bills introduced into state legislatures to address concerns ranging from gag clauses to making rebate amounts publicly available. The National Academy for State Health Policy has drawn together these bills to create a model for PBM legislation.2 After its audit controversy, Ohio plans to ban spread pricing, only allowing PBMs to charge small administrative and dispensing fees while requiring rebates to be passed back to the state.11

Some PBMs are responding to criticism with increased cost control measures. CVS Caremark announced in August that it would allow self-funded insurers to exclude any drug launched at a price greater than $100,000 per QALY with the reasoning that this would push pharmaceutical companies to lower launch prices.12

How federal and state legislation will evolve remains to be seen. However, mandating increased transparency promises to clarify the role of PBMs in rising drug prices, making it easier to address any anti-consumer practices. With the pressure to contain costs rising, scrutiny towards all players in healthcare will only increase.

Let us know what you think by commenting on the blog. To stay up on news related to pharma pricing and healthcare value around the globe, subscribe to the HealthEconomics.Com weekly newsletters.


  1. PCMA. Our Mission. (2018). Available at: https://www.pcmanet.org/our-industry/.
  2. 2.  Horvath, J. Pharmacy Benefit Manager Model Legislation: Questions and Answers. (2018). Available at: https://nashp.org/pharmacy-benefit-manager-model-legislation-questions-and-answers/.
  3. MedPAC. Factors increasing Part D spending for catastrophic benefits. MedPAC Blog (2017). Available at: http://www.medpac.gov/-blog-/factors-increasing-part-d-spending-for-catastrophic-benefits/2017/06/08/factors-increasing-part-d-spending-for-catastrophic-benefits.
  4. Sweeney, E. Senators press PBMs to clarify Azar’s ‘extremely disturbing’’ drug pricing allegations’. Fierce Healthcare (2018). Available at: https://www.fiercehealthcare.com/payer/elizabeth-warren-tina-smith-pbm-alex-azar-drug-prices-optumrx-express-scripts.
  5. PCMA. Reconsidering Drug Prices, Rebates, and PBMs. (2018). Available at: https://www.pcmanet.org/wp-content/uploads/2018/08/Reconsidering-Drug-Prices-Rebates-and-PBMs-08-09-18.pdf.
  6. Ohio Auditor of State. Auditor’s Report: Pharmacy Benefit Managers Take Fees of 31% on Generic Drugs Worth $208M in One-Year Period. (2018). Available at: https://ohioauditor.gov/news/pressreleases/Details/5042.
  7. CVS Health. CVS Health Statement on Ohio Auditor of the State’s Report on Pharmacy Benefit Managers. (2018). Available at: https://cvshealth.com/newsroom/press-releases/cvs-health-statement-on-ohio-auditor-of-the-states-report.
  8. Leonard, D. PBM rebates’ impact at the Rx counter. Chain Drug Review (2018). Available at: https://protectaccessandinnovation.org/pbm-rebates-impact-rx-counter/.
  9. Werble, C. Pharmacy Benefit Managers. Health Affairs (2017). Available at: https://www.healthaffairs.org/do/10.1377/hpb20171409.000178/full/.
  10. Firozi, P. The Health 202: Senate passage of ‘gag clause’ ban is just a tiny step to lowering drug prices. Washington Post (2018). Available at: https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2018/09/18/the-health-202-senate-passage-of-gag-clause-ban-is-just-a-tiny-step-to-lowering-drug-prices/5ba012221b326b47ec9596b8/?utm_term=.6da753bc8a40.
  11. Inserro, A. Ohio Tells Medicaid PBMs That 2019 Will Be a Time for Transparent Contracts. (2018). Available at: https://www.ajmc.com/newsroom/ohio-tells-medicaid-pbms-that-2019-will-be-a-time-for-transparent-contracts.
  12. CVS. Current and New Approaches to Making Drugs More Affordable. (2018). Available at: https://cvshealth.com/sites/default/files/cvs-health-current-and-new-approaches-to-making-drugs-more-affordable.pdf.

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