Industry Insights

Pharma Wars - Episode V: The Payer Strikes Back

Posted by April Giarla on Nov 29, 2016 6:00:00 AM

Way back in the early 1990s, the well-known and respected newspaper The Washington Post ran a lengthy supplement examining the future of health care. In this special edition, and perhaps for the first time in mainstream media, they described a strange force that was growing and converging like a Death Star to change health care.

One of their key conclusions was that Payers around the world would begin to play a decisive role.

Impressive…..most impressive.

Up until this time, hardly anyone knew who a "Payer" was. They were just some nameless, faceless drone-like administrator who rubber-stamped reimbursement decisions.

Everyone knew that prescribers had all the power. The thought that this practice would somehow come to an end sounded like science fiction. 

But then a new president of the U.S. was elected with a first lady named Hillary. She was tasked to lead the new administration's efforts in health care reform and people began to take it seriously. 

The pharma industry held its breath for a while, but the rumors of the demise of prescribers' power turned out to be greatly exaggerated, at least for that moment in time.

Do or do not. There is no try.

Despite all the efforts and hoopla, nothing serious happened with health care reform. On the contrary, the blockbuster era had officially begun (see Episode IV: LEX & The New Slope) and a shift in decision-making power to Payers seemed laughable.

But meanwhile, in other parts of the galaxy,the OECD had studied the issue and determined that health care spending as a percentage of GDP was rapidly growing around the world and the trend was unsustainable. 

Populations in developed countries were ageing and, as a consequence, new expensive treatments directed specifically at older people were under development. This trend was putting greater strain on health care budgets.

Further compounding this trend, populations in developing countries were rapidly growing, which, in turn, caused different kinds of pressures on their respective health care systems.

As a response, The Force began to grow strong with Payers. In markets like the U.K. and Australia, entirely new ideas about health technology assessment were surfacing.

Key thought-leaders and policymakers felt that not only was it a good idea to assess the value of a new pharmaceutical in terms of cost effectiveness and cost utility, but these evaluations should also shape actual reimbursement decisions.

In many other markets, government-run social security systems were constantly underfunded and Payers quickly took over reimbursement decisions. As their primary goal shifted to simply maintaining solvency, Payers often based their treatment decisions on immediate fiscal impact and little else. This phenomenon was growing in Latin America and would soon spread to other regions.  

The Payers’ rise in decision-making power in many systems was not just some cheap Jedi mind-trick that would soon pass. In fact, it was the result of inexorable forces bearing down on the practice of reimbursement in health care.

Initially, the response of Senior Management and Marketing was to meekly hope that it would all just all go away. 

When that strategy didn't work, Big Pharma formed Health Economics Departments. Problem solved, right?

These departments were unsurprisingly staffed in separate silos. Management and Marketing would "throw some documents over the wall" for the health economics experts to read and, in turn, they would come back with the "right answers" on how to raise prices.

The conventional wisdom was that those pesky Payer-types would just go along with it all, like they always had done in the past. But this type of thinking is rarely conventional, and scarcely wise.

Looking back, these archaic attempts at Market Access had about as much chance of succeeding as the Ewoks in their first resistance to the Storm Troopers. It was cute, fun to watch…and futile.  

But let’s save that for another episode.

It Is Useless to Resist

It's hard to say exactly when this naive approach to Market Access came to an end, but Astrazeneca's launch of Nexium to replace their own predecessor drug Losec/Priolosec does spring to mind. 

This should have come as a surprise to no one, because the real surprise was that it took so long for the prophecies to be fulfilled. Amazingly, almost every major pharma player had to run into their own Market Access brick wall before it became completely apparent that The Force really was being wielded by a new stakeholder and it had become a case of The Payer to Strikes Back!

When industry players finally did wake up to the new reality and take Market Access seriously, it was clear that the game had changed. And with that, their approach had to change as well. 

Market Access evolved into a strategic function that must be integrated into cross-functional brand teams.

To achieve this, it was not enough to simply change the organizational diagram. Attitudes needed to be changed within the organization and teams had to understand Payers' needs from their perspective.

At StratX, we can help with this. Our focus is on building the ‘thought-ware’ and human capital needed to navigate challenging new environments. We strive to find creative ways to deliver real and lasting value to Payers in order to compete and win in the market.

Our experiential learning approach is tailored to marketers and cross-functional teams in order to address your particular situation. StratX programs engender long-lasting strategic thinking and boost decision-making abilities to equip your teams for the challenges of today and tomorrow.

Contact Yann Cartier ( to see how StratX can help.

Stayed tuned for our final installment – Episode VI: The Return of the Innovator

Article written by Richard Hainsworth and Alan Slavik. 

You can find our previous installments here:

·       Episode I: The Multichannel Menace

·       Episode II: Attack of Patient Centricity

·       Episode III Episode: Revenge of the Net

·       Episode IV: LEX & The New Slope

Topics: Biopharma

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