Strategies for the future - pharmaceutical companies emphasizing disease management, risk sharing - special edition: The State of Health Care in America 1995

Business & Health, Annual, 1995 by Alicia Ault Barnett

While politics will be an interesting sideshow this year, pharmaceutical companies will focus attention on two relatively new strategies: disease management and risk sharing.

Employers spend large portions of their health care dollars for the long-term treatment and management of chronic illness, such as hypertension, asthma, and diabetes. Disease management programs being developed by managed care providers and drug companies aim not only to get patients more involved in controlling their chronic conditions, but to keep physicians involved in monitoring the quality of their patients' care. The goal is to reduce the incidence of costly complications of these illnesses while treating the disease in its entirety. For drug companies, disease management is a strategy to make their products an integral part of patient care and to bring value to the buyer. "If all you're doing is pushing products, you can't win. You end up with razor-thin margins," says J.D. Kleinke, principal with Health Care Investment Analysts, a health data analysis and research company in Baltimore.

Drug makers can provide purchasers with expertise on various chronic diseases that has been acquired during the R&D process or through claims data collected from company-owned PBMs. They design clinical protocols, provide their partners with sophisticated computer systems, and offer educational brochures and videos for patients, pharmacists, and physicians. And, with huge in-house staffs of economists and scientists, drug companies can help managed care organization (MCO) partners conduct clinical and patient outcomes trials on their membership.

Several drug companies, including Zeneca Pharmaceuticals, in Wilmington, Del., and Eli Lilly & Co. in Indianapolis, have established disease management units to sell clinical protocols to MCOs. Others, such as Pfizer, of New York, and Merck & Co. Inc., of Whitehouse Station, N.J., are developing protocols in tandem with MCOs. Some drug companies are structuring contracts with MCOs that put both partners equally at risk for the successful outcome - or treatment failure - of products. For instance, Merck has a risk-sharing program for its drug Proscar (finasteride), which it says helps alleviate symptoms associated with enlarged prostates. The drug has not been well-accepted in the marketplace due to doubts about its effectiveness. So, Merck has offered to pay for an assessment of the patient's condition prior to treatment and a follow-up assessment post-therapy; if the symptoms get worse, Merck refunds the cost of the drug to the MCO.

Kleinke says that long term, the program should boost Proscar's acceptance, as Merck puts its money where its mouth is. Eventually, Merck could gain market share at the expense of more costly surgery, while gaining outcomes information through the program.

Risk-sharing arrangements are still few in number, however, says William Rosenberg, director in the human resource advisory group of Coopers & Lybrand, New York. He worked on a "handful" of risk-sharing deals in 1994, and sees doing "two or three handfuls" in 1995. There are also legal and regulatory issues that could kill some of the partnerships. For instance, if drug companies begin taking on risk for care, they might have to satisfy state insurance laws that require certain cash reserves to cover claims. That's a whole new way of doing business for a drug manufacturer.