The document discusses the growing importance of demonstrating value through evidence for biotech companies when engaging with payers. It outlines how health technology assessments and real-world evidence are being used by payers globally to determine coverage, reimbursement, and contracting. Additionally, it explores emerging innovative contracting models between payers and manufacturers that are shifting focus to outcomes over utilization and sharing risk.

1. BIOTECH 2011 The Impact of a Powerful Payer: Reimbursement and Pricing Roadmap Demonstrating Value in the Era of a Powerful Payer Nathan White, CPC Executive Director, Access & Reimbursement inVentiv Patient Access Solutions inVentiv Health October 24, 2011

2. Learning Objectives Understand the what, why, who and how of demonstrating value through evidence Learn about the global and domestic players in technology assessment and relationships to payers How does evidence tie into coverage and reimbursement? Benefit design Innovative contracting

3. What is evidence-based medicine? “ The conscientious, explicit, and judicious use of current evidence in making decisions about the care of individual patients. The practice of evidence based medicine means integrating individual clinical expertise with the best available external clinical evidence from systematic research.” Sackett DL, Straus S, Richardson S, Rosenberg W, Haynes RB. Evidence-based Medicine: how to practice and teach EBM, ed 2. London: Churchill Livingston, 2000

4. Number of Occurrences of Value Terminology by Year in Core Clinical Journals SOURCE: Reich, S., & White, N. (2010). Speaking of Value in Healthcare: The Need for Common Understanding of Terminology. Poster Session, International Society for Medical Publication Professionals.

5. Percent of Increase of Occurrences of Value Terminology from 2006 to 2009 in Core Clinical Journals SOURCE: Reich, S., & White, N. (2010). Speaking of Value in Healthcare: The Need for Common Understanding of Terminology. Poster Session, International Society for Medical Publication Professionals.

6. How Do We Define Value?

7. The Value Equation: Safety + Efficacy + Comparative Cost/Clinical Effectiveness Industry AHRQ NIH Patients and providers Payers (CMS, VA, DOD & Private) PCORI

8. What is Evidence Used For? Determining whether a medical technology is considered cost effective by an HTA and payer Determining relevant “access barrier” criteria Step therapy Prior authorization Quantity limits Deciding which benefit the therapy is placed in (medical v. pharmacy v. specialty) Reimbursing at an appropriate rate Measuring patient outcomes as part of a risk sharing agreement (innovative contract)

9. Who Needs Real World Evidence? Health authorities Pricing commissions Payers Regulatory authorities Physicians / providers Policy makers Patients WellPoint's CER Guide Describes How It Will Determine Usefulness Of Studies Observational Studies Of "Real-World" Questions The guidelines state that, "while randomized, controlled clinical trials remain the gold standard for producing reliable efficacy and safety data, WellPoint recognizes that there are circumstances in which RCTs alone may not be sufficient for decision-making. Accordingly, a well-conducted CER or observational study may complement RCT-based information by providing effectiveness data, or data on outcomes achieved in a 'real-world' setting.“ German Pharma Law Require Firms to Prove Drugs' Value Within a Year / Germany's Comparative Effectiveness Debate Concludes; Dossier Refinement Begins The holder of the marketing authorization will be required to hand in a comprehensive dossier to the G-BA, which needs to contain information on: the authorized indications; the actual medical benefit of the product; the additional medical benefit of the product compared with existing therapies; the number of patients and patient groups for which the product is relevant; the cost of the therapy to the statutory health insurance funds; and requirements for quality-assured use of the product.

10. Patient Centered Outcomes Research Institute (PCORI) Patient Centered Outcomes Research Institute Non-profit corporation Not “an agency or establishment of the federal government” Assists in making informed healthcare decisions Comparative clinical effectiveness research Health outcomes, clinical effectiveness, and appropriateness of treatment Governed by stakeholders in AHRQ and NIH in addition to other healthcare leaders (appointed in late 2010) Methodology Committee appointed in Jan. 2010 Release guidance for the Pilot Projects Grant Program last month

11. Patient Centered Outcomes Research Institute (PCORI) Administer funds for research from: Trust (PCORTF) Private insurance Appropriations and other federal Trust Funds Who can participate in PCORTF funded research? NIH AHRQ Hospitals and other institutions Commercial organizations (CRO’s) Pharmaceutical companies Identify “national priorities” for research (similar to IOM’s priority list released Summer 2009)

12. SOURCE: National Pharmaceutical Council, PCORI Methodology Committee: Resource Guide, February 2011

13. European HTA/Payer Landscape Coverage largely through government sponsored/managed insurance Well-defined health technology assessment (HTA) process HTA/Payer relationship is strong (i.e. UK’s NHS & NICE) Emphasis on medical innovation: “me too” products are not favored in HTA process HIT is a critical part of coverage and reimbursement systems Innovative contracting a standard practice

14. US HTA/Payer Landscape Complex evidence development and utilization Many national payers and PBMs have developed in-house HTA’s Research could be viewed as subjective Rely heavily on claims data and chart review CMS coordinates to some degree with AHRQ on evidence needs AHRQ-sponsored review of evidence for colorectal screenings NCD for treatment of actinic keratoses “ Me-too” products still have market potential National HIT standards implementation still has room for improvement Contracting based on volume discounts

15. BCBS TEC Criteria The technology must have final approval from the appropriate governmental regulatory bodies The scientific evidence must permit conclusions concerning the effect of the technology on health outcomes The technology must improve the net health outcome The technology must be as beneficial as any established alternatives (aka “comparative effectiveness”) The improvement must be attainable outside the investigational settings (aka “real world”)

16. Evidence Development: Pre- and Post-Approval Prospective Clinical study data May include PRO endpoints and cost-benefit analysis FDA approved label Retrospective Pharmacy claims analysis Chart review Budget impact modeling Cost effectiveness analysis (limited use in US) Registries Outcomes study with PRO Commercial marketing programs

17. Post-approval Research Today – Safety & Value Requirement In some countries, ‘real world’ post-approval experience data must be submitted to maintain market approval Increasingly, some form of safety surveillance / risk management program will be mandated and enforced (ie REMS) Responsibility Corporate accountability for post-approval safety is increasingly expected by various constituencies Documentation of clinical / economic / humanistic value is critical for commercial acceptance and accelerated product uptake Opportunity If managed proactively, safety surveillance obligation can be controlled An observational study or registry can be a cost-effective, high ROI mechanism for fulfilling the post-approval obligation for both safety and effectiveness data, while generating evidence to support value claims

18. The Future of Payer-Industry Relationships? Innovative Contracts! Innovative Contracting Contract Types Performance-Based Contracts An outcome or behavior is measured and tied to the structure of the contract. For example, the manufacturer can commit to an outcome or the plan can commit to programs to support behaviors such as adherence. The rebate level can be tied to whether the outcome or behavior is achieved. Risk-Sharing Agreements Manufacturer assumes some risk based on anticipated utilization, adverse events, performance, or some other factor. Variation to the expected level will require payment or concessions by a one of the parties. For example, the manufacturer can commit to effectiveness within 10 doses and cover the costs for patients requiring more than 10 doses—the manufacturer takes on the risk. Traditional With a “Twist” A standard contract with a rebate is tied to another factor besides market share or volume. This can include a price increase cap, escalating rebates, rewards for loyalty, portfolio contracts, or anything that is in addition to the standard contract. 2 3 1

19. A Glimpse Into the Future PT is a large national pharmacy benefit manager covering 17M lives for 12 BCBS affiliates CareCentered Contracting: New payer-manufacturer outcomes-based contracting initiative launched Fall 2011 Under agreement, in the event therapy does not “work as expected,” manufacturer agrees to either: Refund cost of therapy Pay for cost of event treatment (such as a bone fracture in osteoporosis) Goes beyond outcomes to include: Cost of care Adherence Patient education

20. Benefit Design Shift Focus shifts to outcomes vs. utilization. Clinical end points are key Effective use including adherence and compliance is a focus Outcomes Focus Both short and long-term costs considered. Short-term: Reduce cost of drugs Long-term: Reduce total cost of patient care such as high cost adverse events and disease progression Risk (and cost) shift to manufacturer. Manufacturer to stand by performance claims Shared incentive created to meet goals True patient value is becoming the focus. Value-based benefit design Consumer-driven plans Clinical pathways Value Focus New ways to reduce costs are constantly being explored. Formulary changes/new tiers Use of NDC Blocks Use of Step Edits Cost Reduction Responsibility for payment is shifting. Higher co-pays/coinsurance for patients Demand for higher rebates from manufacturers Cost Shifting Trends in Benefit Management Objectives of Innovative Contracts Cost Reduction Risk Shifting Some contracts have potential benefits. Price protection and escalating rebates considered innovative by some Outcomes data can be a cost predictor Payers need to better forecast costs. Price increases taken often and in excess of any benchmarks Payers seeking price increase caps Budget Predictability Budget Predictability Trends mentioned in benefit management align well with the goals of innovative contracting. 1 2 3 1 2 3 4 4

21. How Do We Communicate Value To Payers? Principles of Payer Communication Simplicity A complete story that can be told in a definite time window Concise and crisp takeaways that can stay in memory Transparency Avoidance of “black box” design and subjective assumptions Key foundations for audience to interpret study results Credibility Well-accepted methodology and validated design Third-party endorsement and KOL partnership Successful communication with payers requires following three principles: II III I

22. Organizational Requirements Hypothesis Validation Evidence Generation Value Communication Rigorous Scientist Credible Ambassador Strategic Visionary The right value evidence needs to be delivered to the right audience at the right time by the right people. Stakeholder mapping and engagement is pivotal in rolling out the study outputs efficiently and effectively.

23. Final Thoughts The call for evidence is loud and clear from payers, HTAs, providers and patients Observational research and registries are key tactics to gathering post-approval data to prove: Safety Efficacy Value (cost and comparative effectiveness) Continue to engage payers and federal stakeholders (AHRQ, NIH, IOM, PCORI) as you design your evidence development program Regardless of what happens in Washington in the next couple of years, the requirement to prove product value is here to stay