New Rules, New Playbook: How Pharma Must Adapt to Shrinking Government Funding

by Roger Longman and Ellen Licking

On Thursday May 22, the House passed a sweeping bill that, among other things, cuts funding for healthcare, especially Medicaid. Assuming something like it passes the Senate and gets signed into law, we don’t think it will make America healthier–quite the opposite.

But whatever our point of view on the bill’s merits, the industry will likely need to deal with this new reality. So, what should the biopharma industry be preparing to do in a world of shrinking government healthcare funding and fewer insured people?

1. Patient support is even more essential: With new work requirements and eligibility redeterminations looming, access to #Medicaid and #ACA plans is likely to narrow. Commercial insurers, meanwhile, may compensate for reduced funding by increasing cost-sharing for beneficiaries or increasing formulary management or both. That means companies must develop compliant patient support tools that help patients find foundation assistance and navigate care delivery without overstepping guardrails.

2. Physician time is scarce - Help them use it well: Cuts to provider reimbursement will stretch physicians further. Care management tools and digital health services, including prescription digital therapeutics, that improve therapeutic efficacy, reduce follow-ups, and help patients stay on their meds can now offer real, measurable value—not just to patients but also to providers and payers.

3. Getting real about real world evidence: In this budget-tight environment, expect Medicaid plans to scrutinize formularies for value. All payers, including state Medicaid plans, generally consider manufacturers’ HEOR data suspect at best. To get payer buy-in, companies will have to figure out how to co-create it with payers, ensuring the evidence is relevant in terms of the local population being treated, the costs, and the outcomes. Remember, credibility is earned in collaboration.

4. Budget certainty Is the new gold: When money’s tight, predictability rules. Tools that offer budget impact guarantees, whether through volume-based discounts or oft-discussed but rarely implemented subscription models could soon be critical to unlocking access in government plans.

5. Find products that save money in the near term: Our payment system focuses on short-term results even though savings from most products only become apparent in the longer term. However, some products do reduce costs within the narrow time frames payers, and especially Medicaid, work within. Examples include: products that reduce pre-term birth, which directly save Medicaid money by reducing NICU days, among other benefits; or therapies that reduce surgical complications and therefore ICU stays (e.g., acute kidney injuries following cardiovascular surgery). Companies should be looking for these kinds of products -- or at least mechanisms to demonstrate cost savings in the one- to two-year time frames payers care about.

The future of access is being rewritten right now. For life sciences companies, that means rethinking old playbooks and proactively building new partnerships especially with forward-thinking state Medicaid plans.

It may be that the House bill will be utterly transformed in the Senate and reconciled into something far more generous. And that business life can go on as it has. But we don’t think it’s smart to bank on miracles.