Developing Competitive Contracting Strategies using Contract Simulation®

Abstract

RG+A’s client was preparing for the launch of a product for which there was a likely launch of a competitor within the same timeframe. They identified payer contracting as critical to meeting their brand access goals and engaged RG+A to help understand the contracting process from end to end. We utilized our proprietary Contract Simulation® approach, which consisted of exploratory qualitative and an online simulated contract negotiation between payers and RG+A moderators. This research was able to uncover the primary driver of coverage for the client’s product and identify optimal pricing and discounting approaches to gain preferred footing over the competitor’s product. RG+A’s recommendations assisted the client in the development of a focused contracting strategy that was more likely to have success among payers out of the gate.

Background

RG+A’s client was preparing for product launch and was facing two major challenges: nearly simultaneous launch of a competitor in the same class, as well as a strong generic standard of care in the therapy area overall. In order to ensure that their product met or came as close as feasible to brand access goals, RG+A’s client identified payer contracting strategy as a critical success factor. RG+A was engaged to help them identify the trajectory of the negotiation process from start to finish, to understand thresholds of acceptance for desired market access levels, to gain insights into attitudes towards discounts and rebates, and to identify the most successful negotiating strategies.

Methodology

To address the client’s objectives, RG+A employed our proprietary Contract Simulation® methodology, consisting of two phases. The first phase was an exploratory qualitative element of 24 in-depth telephone interviews with payers to gather information needed to set the stage for second phase. The second phase focused on an online simulated contract negotiation between payers and RG+A moderators, which took place over a series of days.

Key Challenges

  1. There was substantial pre-adjudication linked to use of the client’s product.
  2. The client had two very similar products coming to market at nearly the same time, accompanied by a competitor launch in the same timeframe.
  3. Different kinds of payer stakeholders may require different contracting goals.
  4. Contracting negotiation targets must be realistic.

How the Design Addressed the Challenges

Contract Simulation® was the right fit to address these challenges as it could:

  1. Explore, from the payer perspective, what the client could do to simplify the pre-adjudication burden.
  2. Determine the best way to address the competing product launch issue.
  3. Identify likely contracting goals for these varying stakeholders and create a plan to determine early in the process what different stakeholders value.
  4. Simulate negotiations to define realistic targets.

RESULTS

The research showed that the primary driver of coverage for the client’s product was comparison to the competitor product, and that entering the market at roughly the same time would focus brand access issues around relative net cost. The research also showed that most payers would require price protection, and would plan on a lookback/step edit, but the majority would eliminate this for an additional rebate. Relatively few plans anticipated a specialist restriction, and most of these were willing to negotiate this point against rebates.

GUIDANCE

RG+A recommendations focused on differing scenarios based on the relative launch of the competitor product, as well as how to best position the two, similar products our client was launching. If our client’s product came to market first, we recommended taking a high initial WAC price to set the market value, as well as offering a significant final rebate to achieve preferred tier with minimal restrictions. If the competitor’s product launched first, we recommended using the competitor as a benchmark and making sure that the net cost for their product was no more than 10% higher than the competitor. We also recommended packaging the client’s two, similar products as a portfolio.

ACTION

The client used RG+A’s recommendations to develop and focus their contracting strategy and approach payers on a more solid footing for success.