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Blog Series: Payer Coverage Changes in the Time of COVID-19 – What to Track to Minimize the Impact on Manufacturers
Three Payer Switch Scenarios: What to Consider and How to Adjust Strategy
Brian Fallica, Director, Market Access Analytics Solutions , IQVIA
Sep 29, 2020

Throughout IQVIA’s webinar series, Payer Coverage Changes in the Time of COVID-19 – What to Track to Minimize the Impact on Manufacturers, we provided insights into the scope of possible pandemic-driven patient impacts, as well as considerations for how to track the resulting changes over time.

Additionally, the webinar series underscored the importance of adopting or modifying strategies for managing payer plan switches. Consider the following three scenarios to further understand what types of manufacturer strategies and/or considerations are most appropriate. Keep in mind that individual manufacturers could experience more than one scenario depending on the diversity of their portfolio and the scale of sub-national variations within their markets.

Scenario 1: High rates of switching to a Health Insurance Exchange (HIX)

In many ways, this is the simplest scenario because there are a number of commercially insured patients who are switching coverage plans, but are remaining commercially insured. 

While payer mix does significantly impact brand financials, we do not expect rebate rates to experience dramatic changes in this scenario. What will change are patient assistance programs. Patients on Bronze tier plans will likely have deductible and high-cost sharing benefit designs, and these individuals may have to buy through a second deductible phase in the same calendar year. For branded products, this will result in a spike in copay offset spend as patient copays increase due to plan switching.

Additionally, many locations do not offer multiple consumer options on the Health Exchanges, so many patients could potentially switch into the same payer/plan that they were on previously. Manufacturers should be cautious about payers gaining additional local market share to the point where an individual plan represents a dominant formulary in a specific market. A payer achieving such local market volume can have major impacts on physician perception and spillover, as well as position the payer with more leverage during rebate negotiations.

Scenario 2: High rates of switching to Medicaid

This is the scenario most impacted by local regulatory environments, as the ACA Medicaid Expansion states are much more likely to see high rates of Medicaid switching. In recent months, Nebraska, Missouri, and Oklahoma have voted to enact Medicaid expansion, so this scenario is likely to become more prevalent over time.

The biggest impact on manufacturers resulting from higher Medicaid volume is on net-price management. In this scenario, Mandated Medicaid rebates and Best Price regulations become increasingly important to a brand’s P&L as Medicaid volume increases. Mature brands may be at penny pricing in this channel, completely eroding the profitability of patients with Medicaid insurance.

As more patients become Medicaid enrollees, we also expect to see the 340B Drug Discount Program continue to expand as more hospitals qualify for the program. Many manufacturers have invested heavily in 340B tracking and rebate auditing capabilities to prevent double-dipping, but these functions will take on even greater importance as Medicaid volume grows.

Scenario 3: High rates of switching to Cash/Discount Care

For branded products, patients filling as cash do not represent a major gross-to-net risk, but they do represent a greater top-line risk. Cash costs for uninsured patients filling prescriptions for branded products are extremely high, and discount cards only offset a relatively small amount of copays. Manufacturers can choose to take the volume loss from patients abandoning high-cost scripts, or they can attempt to provide assistance to these patients via traditional copay cards or Patient Assistance Programs (PAPs). Both options have the drawback of eating into profitability, so the path forward for manufactures will depend on a delicate balance supporting volume growth without eroding net price.

The role of discount cards moving forward is something to monitor in this scenario. We have already seen these companies form partnerships with pharmacy benefits managers (PBMs) to enable rebates to be passed through to patients, but it is unclear if this capability will be extended to truly uninsured patients. 

No matter the scenario, capitalize on opportunity

One thing is consistent across all three scenarios: major disruption is occurring and will only expand over time. Manufacturers need to be able to consistently track ongoing market trends in as close to real-time as possible, and to also develop the strategic agility to capitalize on transient opportunities.

With the help of IQVIA’s COVID-19 tracking tool, which uses a patient-based tracker approach, manufacturers can do this with ease and accuracy. To learn more, contact Brian Fallica.

This resource is Part 3 of a blog series dedicated to Payer Coverage changes in the time of COVID-19. Read Part 1 and Part 2 for additional insights on this topic.

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