Managing Healthcare Reform: Winning Strategies for Engaging the Government Ecosystem That Shapes...

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Best Practices, LLC Strategic Benchmarking Research

Managing Healthcare Reform: Winning Strategies for Engaging the Government

Ecosystem That Shapes Healthcare Policy

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Table of Contents

I. Executive Summary pp. 4-17

Research Overview pp. 5

Universe of Learning pp. 6

Overview of Data and Issue pp.7-10

Key Findings pp. 11-17

II. Universe of Learning: Key Demographics of Participating Companies pp. 18-22

III. Align Structures, Resources & Groups To Manage The Healthcare “Ecosystem”

pp.23-40

IV. Intelligence Gathering: “The Capture” pp.41-55

Being well-positioned to capture vital information From Within The

Washington Ecosystem

V. Intelligence Dissemination: “The Routing” pp.56-64

How to share intelligence & insights with key executives and functions

VI. Intelligence Translation: “The Interpretation” pp.65-72

Determining what Information Coming from the Government Ecosystem

means for brands, functions & business lines

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Table of Contents

IX. Intelligence Implementation: “The Response” pp.73-90

Converting Government Ecosystem intelligence into strategies, plans, tactics

and messages

X. Government Affairs pp.91-97

How Companies Place Their Government Affairs Resources To Monitor &

Manage Public-sector Healthcare Reform

XI. Public Policy Benchmarks pp.98-109

How Companies Place Their Policy Resources To Monitor & Manage Public-

sector Healthcare Reform

XII. Government Affairs & Public Policy Staffing Benchmarks pp. 110-117

What Staffing Investments Are Companies Making To Manage the

Government Ecosystem?

XIII.Future Trends & Lessons Learned pp. 118-121

XIV.Appendix pp. 122-125

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Objectives:

Close gaps in how pharma engages CMS and other groups that influence federal healthcare policy, guidelines and reimbursement.

Close gaps in how Policy, Government Affairs and Marketing collaborate to manage public sector healthcare changes to the benefit of product portfolio.

Identify best practices in organizational form, focus, and function to best position organizations for the future where the government payer is increasingly influential.

Business Issue & Objectives

The influence of CMS on healthcare policy and reimbursement is increasing as the US population ages and

healthcare reform unfolds. Consequently, the importance of understanding, translating, and engaging with

CMS and other influential healthcare groups continues to grow.

Harvesting Insights & Analysis: Expert Sources: Study Objective:

23 Biopharma Companies

participated

6 Companies participated in

deep-dive interviews

Expert

Interviews

Industry

Benchmark INF

OR

M

Formulate a Strategic Approach for Optimizing

engagement with CMS and the ecosystem of agencies

and groups that shape U.S. healthcare guidelines and reimbursement policy.

4

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23 Healthcare Companies Provide Universe of Learning

This study engaged executives from 23 leading healthcare companies. Segmentation analysis was key to

examining trends and effective practices. Eight participants represent both the Large Pharma Segment

(LPS) and Mid-Cap Segment (MPS). The Emerging Segment consists of seven companies. In addition,

deep-dive interviews were conducted with six participating companies to gather additional insights.

(n = 8)

Large Pharma Segment: Mid-Cap Segment:

(n = 8) (n = 7)

Emerging Pharma Segment:

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Framework For Managing The Government Ecosystem

Managing The

Government

Healthcare

“Ecosystem”

3. Intelligence Dissemination:

(How To Share Intel & Insights With Key Execs & Functions)

4. Intelligence Translation: (Determining

What It Means for Brands, Functions & Business Lines)

5. Intelligence Implementation:

(Converting Intel into Strategies, Plans, Tactics & Messages)

2. Intelligence Gathering:

(How To Be Well-positioned To Capture Vital Information)

6. Resource Benchmarks:

(What Cross-Functional Resources Are Required To

Manage The Ecosystem)

1. Align Resources & Groups To Manage

The Healthcare Eco-system

Field insights and observations emerged across a full spectrum of management factors – including strategy, structure, staffing, process excellence, communication and cross-functional coordination. The analysis, benchmark review and insights have been organized into the following framework that represents key areas for engaging the government ecosystem.

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Pharma Coverage of the Federal “Ecosystem” Is Uneven –

With Largest Competitors Pursuing Most Strategic Approach

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Q. Coverage of Federal Healthcare Groups: Which groups do you monitor as part of covering federal

government? (Percentage of Companies Covering Federal Agency)

The patchwork of federal agencies and groups that shape healthcare policy is like an ecosystem of influence in Washington, DC. Field research reveals that there is significant variation in terms of how well different companies cover the various groups influencing public healthcare policy. The very largest biopharma companies invest resources to cover all these agencies and influence groups.

FDA,

78%

AHRQ,

78%

CMS,

94%

IoM,

44%

NIH,

56%

IRS

<15%

VA

<15%

HHS

<15%

1) Many Cover

FDA During

Product

Introduction &

CMS Regarding

Reimbursement

2) However, only

the largest

companies Cover

Other Agencies

That Influence

Healthcare Policy,

Tax or Therapeutic

Issues.

(n=18)

ONC

<15%

HRSA

<15%

PCORI

79%

CDC

39%

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The global revenues in 2011 for research participants ranged from $200 million to $67 billion – illustrating how the study attracted organizations of all sizes. To better reflect responses from like-sized companies, data is presented in three Segments when appropriate: Total Benchmark Class, Large Pharma, and Mid-Cap pharma.

Median Global Revenues for Participants Is $11.5 Billion

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Q. Revenues: Estimate total sales revenues for your organization for the last completed fiscal year

(2011).

Global Revenues:

Total Benchmark

Class

Max $67,400,000,000

75th Percentile $32,400,000,000

Mean $18,304,300,000

Median $11,500,000,000

25th Percentile $3,775,000,000

Min $200,000,000

(n=20)

Large Pharma Mid-Cap Emerging

Pharma

$67,400,000,000 $17,000,000,000 $6,000,000,000

$43,886,750,000 $11,500,000,000 $872,000,000

$36,905,875,000 $8,909,000,000 $1,695,200,000

$33,800,000,000 $11,000,000,000 $754,000,000

$29,250,000,000 $4,131,500,000 $650,000,000

$16,700,000,000 $3,100,000,000 $200,000,000

(n=8) (n=7) (n=5)

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Companies Monitor Most Major Agencies & Influencing Groups

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Q. Coverage of Federal Healthcare Groups: Which groups do

you monitor as part of covering the federal government?

Most companies monitor major federal healthcare agencies and influencing groups. The very largest companies also extend coverage to various groups – like HHS, VA, IRS and ONC – that smaller and mid-cap companies seldom engage. Scope of coverage reflect maturity.

(n=18)

Total Federal Agencies & Groups Covered

39%

44%

56%

78%

78%

94%

22%

0%None

Other

CDC

IoM

NIH

FDA

AHRQ

CMS

Other:

• HHS; ONC; VA, HRSA, IRS;

Various other agencies like

PCORI that resulted from

ACA

Q. Coverage of CMS Influencing Groups: Which groups do

you monitor as part of covering CMS?

26%

32%

47%

58%

58%

68%

79%

11%

5%Other

None

Quality Alliance Steering Committee

Regional CMS Offices

MACPAC

NQF

NCQA

MedPAC

PCORI

Total Influencing Groups Covered

(n=19) Other:

• MACs

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Many Mid-caps Fail to Forge Formal Strategies for Engaging the Federal

Government. Big Pharma Is Far More Strategic

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Q. Strategic Engagement Strategy for Federal Government: Please note whether your organization

has an engagement strategy (detailed plans with groups assigned roles, responsibilities and tactics)

for working with each of these Federal Government groups or healthcare agencies

With the exception of the FDA and CMS, most companies have yet to devise formal strategies for engaging and working with a wide range of federal agencies that affect healthcare policy. The Large Pharma Segment is more than twice as likely to have formal strategies to engage the Federal Government across multiple agencies.

5%

9%

14%

24%

19%

33%

57%

50%

19%

36%

48%

43%

52%

38%

29%

40%

76%

38%

33%

29%

29%

14%

10%

55%

Federal Drug Administration (FDA)

Center for Medicare and Medicaid Services

Veteran Affairs

National Institutes of Health

Dept. of Health & Human Services (HHS) At

Large (overseeing CMS, FDA, NIH, etc.)

Agency for Healthcare Research & Quality

(AHRQ)

Institute of Medicine (IOM) of National

Academy of Sciences

Center for Disease Control (CDC)

Total Benchmark Class: Informal Strategy Formal Strategy No Strategy n =

21

22

21

21

21

21

21

20

Formal Strategy:

100% 29%

88% 43%

43% 43%

43% 0%

43% 14%

71% 0%

14% 0%

29% 0%

LPS: MCS:

(n=8) (n=7)

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Merck Utilizes Influencing Groups to Promote Health, Business

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Few companies are as adroit as Merck when it comes to utilizing influencing groups to improve the positioning of its products. In the recent past there was Januvia and Gardasil, and most recently was Victrelis, the company’s new first-in-class treatment for chronic hepatitis C. Through its support of both the Viral Hepatitis Action Coalition and the CDC Foundation, Merck helped influence a more favorable environment for Victrelis. All of these products are important therapies that together could save tens of thousands of lives and billions of dollars in healthcare spending.

Merck launches public

education/support programs for

chronic hepatitis C (HCV) and

announces funding to CDC-

affiliated VHAC (Viral Hepatitis

Action Coalition)

The FDA approves

Victrelis, a 1st in class

HCV treatment costing

$26k to $48k. CDC launches National Hepatitis Test Day

and, in a major policy shift, proposes all 75

million Baby Boomers get tested for HCV

The CDC estimates 800,000

cases will be spotted early

through testing. Nearly 10,000

HCV patients die annually.

May 9, 2011

May 18, 2012 May 13, 2011

800,000 patients x $26k =

$20B Drug for Merck

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More than 50% of Companies Are Currently Engaging ACOs

Yes

55%

No

45%

12


Yes

62%No

38%

Yes

57%

No

43%

Q. U.S. State-Level Relationship Engagement Strategy: Does your organization have an engagement

strategy regarding state-level relationships revolving around Accountable Care Organizations?

Nearly two-thirds of the Large Pharma Segment have begun devising engagement strategies for Account Care Organizations. More than half of mid-cap companies have begun such work. Interestingly, mid-cap companies seem to have focused more closely on the ACO’s than state Medicaid or Health Insurance issues.

(n=20)

Total Benchmark Class: Large Pharma:

Mid-Cap Segment:

(n=8)

(n=7)

Accountable Care Organizations:

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The Connection Between State Health Exchanges (HIX), Essential Health Benefits (EHB) and Benchmark Plans

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What is a State Health Insurance Exchange?

State Health Insurance Exchange (HIX)

A set of standardized insurance plans regulated by states and offered by

private insurers.

Essential Health Benefits (EHB)

The EHB of the plans in the exchange will not

differ significantly and must be equal to “typical

employer plan.”

Benchmark Plan

Serves as a reference plan, reflecting the

scope of the services and any limits. Feds

suggest four benchmark plan types for 2014 and

2015.

• Feds say EHB will be defined by a

benchmark plan elected by each

state. States told to select a

benchmark plan by 4th quarter

2012.

• Plans in a State Health Exchange (HIX) must cover 10 Essential Health Benefits (EHB) - one of which is prescription drugs.

• All exchanges must be

fully certified and

operational by January 1,

2014 – if states don’t set

up, the feds will.

The Affordable Care Act is giving rise to the creation of state health exchanges – in short a state-approved list of health plans for consumers and employers to choose from. Individuals will choose from plans that will fall into four categories, from lowest premium to highest premium: bronze, silver, gold, and platinum. Metal levels relate to cost-sharing features (e.g. bronze covers 60% of cost, silver = 70%, gold=80%, platinum=90%).

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Most Policy Staff Located Where Legislative Action Is: DC

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Q. U.S. Public Policy Staff Mix: Estimate the percentage of your Policy-focused staff in each job

location below. (The total of your percentages should equal 100% of your Policy staff.

While organizations are divided about where Public Policy’s primary location should be, this slide shows that, on average, participants have a majority of their policy staff located in Washington, DC. Headquarters serves as the second largest location.

Brand or BU, 2%

Fractionally

dedicated, 6%

Headquarters

40%

Washington, DC

52%

Max 100%

75th Percentile 75%

Mean 53%

Median 53%

25th Percentile 26%

Min 0%

Located with Brand or BU:

Max 30%

75th Percentile 0%

Mean 2%

Median 0%

25th Percentile 0%

Min 0%

Max 50%

75th Percentile 0%

Mean 6%

Median 0%

25th Percentile 0%

Min 0%

Fractionally Dedicated:

Located in Washington, DC:

Max 100%

75th Percentile 58%

Mean 40%

Median 38%

25th Percentile 21%

Min 0%

Located at Headquarters: Total Benchmark Class:

(n=18)

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based on the simple yet profound principle that organizations can chart a

course to superior economic performance by studying the best business

practices, operating tactics and winning strategies of world-class

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Managing Healthcare Reform: Winning Strategies for Engaging the Government Ecosystem That Shapes...

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