Rose-Marie Boylan on Getting to yes: Payer/Manufacturer Partnerships
- R.M. Boylan
- Feb 27, 2022
- 4 min read
Updated: Oct 24, 2024
#Negotiatingprices
Author: Rose-Marie Boylan BSc. M.A.
Getting to yes negotiations
The below research is an excellent historical review of the research on "Quality-adjusted life- year" (QALY) metrics. The QALY is a key metric or starting point for preparing a partnership-based negotiation plan between payer and the pharmaceutical manufacturer. The QALY is instrumental for making health economic decisions in medicine. It is critical for measuring value in health outcomes and identifying price value gaps. When you prepare your negotiation "with the end in mind" as Stephen Covey says you can build value in the budget impact analysis deliverables for negotiating trade-offs. The QALY allows academics & negotiation strategists to determine your BATNA-Best alternative to a negotiated agreement using the Harvard Negotiation Project model.
In my years in the pharmaceutical industry, I have seen no one use the Harvard Negotiation Project for developing budget impact models and price value negotiations. For this reason, I have seen many manufacturers fail at negotiating price value as a negotiator vs. a bargainer. Negotiations require discipline and planning. Placating this part of the process invariably results in failed outcomes.
When the details of the negotiation strategy are pooh-poohed, manufacturers end up in a bargaining position. There is no power in being in a "bargaining" position; it essentially means you are check mated. Bargaining is "Bad Selling" where conflict, contempt & strife occur between bargainers. This is what we are seeing with Russia & the Ukraine, absolutely no trade-offs were planned so force is used as the only option to obtaining a BATNA. Negotiators understand that negotiation is about creativity not bargaining using force and/or manipulation due to poor planning or lack of patience with the negotiation process.
In negotiations with payers there are always gaps between the payer and the pharmaceutical manufacturer. These gaps need to be addressed in negotiations with trade-offs to develop partnership value with payers. "The goal of the cost-effectiveness analysis is to help inform policy so that treatments that improve patients’ lives are rewarded fairly, while neither patients nor society overpays for care that doesn’t offer a significant benefit to patients." (5)
This study provides a historical overview of why the QALY was developed.
The use of QALY measures provide us with insights for creating price ranges for drugs that improve patient outcomes. "The quality-adjusted life-year (QALY) is the academic standard for measuring how effective different kinds of medical treatments lengthen and/or improve patients’ lives. The metric has served as a fundamental component of cost-effectiveness analysis in the world for more than 30 years. If evidence shows that a treatment helps lengthen life or improve quality of life, these benefits are comprehensively summed up to calculate how many additional QALYs the treatment provides. This added health benefit is then compared to the added health benefit of other treatments for the same patient population." (5)
Understanding the history of the QALY & how the cost-effectiveness analysis is done helps us understand how we can improve value dossiers or compliment them with more value metrics. "To complement the use of the QALY, ICER’s reports also include a calculation of the Equal Value of Life Years Gained (evLYG), which evenly measures any gains in length of life, regardless of the treatment’s ability to improve patients’ quality of life. In other words, if a treatment adds a year of life to a vulnerable patient population – whether treating individuals with cancer, multiple sclerosis, diabetes, epilepsy, or a severe lifelong disability – that treatment will receive the same evLYG as a different treatment that adds a year of life for healthier members of the community. By understanding a treatment’s cost per evLYG, as well as its traditional cost per QALY, policymakers can take a broader view of cost-effectiveness and be reassured that they are considering information that poses no risk of discrimination against any patient group." (5)
The setting of pharmaceutical prices by manufacturers is not always scientific. It can be based on a desirable revenue projection. Oftentimes, price strategists & experts like me need to justify the price chosen by the CEO and marketing. Without proper data price value is exposed. This is where payers in private insurance companies & health technology assessment organizations can benefit systematically from consultants and experts that have set prices for years in the pharmaceutical industry. Specifically to make sound decisions on the optimization of the use of limited healthcare resources & priorities for population health.
The QALY is a measure used in Health Technology Assessment to determine the cost-effectiveness of a treatment. It supports decision-makers in evaluating the value of a drug vs. its acquisition cost or maximum allowable price (MAP). Health economists, drug manufacturers use the QALY as a standard metric to measure how well different kinds of medical treatments lengthen life or improve quality of life.
Some drugs may not extend life expectancy but they do improve quality of life. The QALY measure allows us to evaluate these important differences and apply a value or cost to that value. This is a driver of price value and a key determinant for negotiating agreements for drug access for patients. Gaps may require a social value or bioethical argumentation to justify a premium price differential for the government, the buyer or the payer. This is where things get messy when manufacturers do not build the correct metrics to justify the price for reimbursement.
QALYs in the United States
The debate about how to pay for the cost of pharmaceuticals and what defines value in a post-pandemic reality will become a big challenge for manufacturers. Payers & governments need to find billions of dollars to cover the unforecasted spend on the pandemic vaccines.
The use of QALY's in the US has been controversial because of the Americans with Disabilities Act (ADA). However, the Institute for Clinical and Economic Review (ICER) have developed objective assessments of the therapeutic value of drugs relative to their costs. ICER has implemented protective language to ensure that the QALY and evLYG (Equal Value of Life Years Gained) are not used in a discriminating fashion. As a result expertise & knowledge of HTA, external reference pricing from Canada will be sought after by stakeholders worldwide. (2, 3, 4).
References:
5). https://icer.org/our-approach/methods-process/cost-effectiveness-the-qaly-and-the-evlyg/
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