Healthcare Insights - Summer 2010 - Volume 3, Issue 2

Healthcare Insights A triannual publication for the clients of Simon-Kucher & Partners Summer 2010 - Volume 3, Issue 2 Inside This Issue Impact of US healthcare reform: The shifting landscape of the US insurance market The latest developments in By Julie Altier global pricing and market After months of debate, President Obama finally signed the “Patient Protection and Affordable Care Act” into law on March 23rd, 2010. This comprehensive access bill will fundamentally alter the US healthcare system and is expected to have a significant impact on all facets of the market. The 2,400-page document includes: • an expansion of the Medicaid program; An overview of how to • individual mandates for health insurance; overcome the challenges • new requirements for employers; and take advantage of the • new insurance industry regulations; and, opportunities in South • the creation of an insurance exchange to increase organization and competi- tion in the health insurance market. Korea Analysts expect the reform to have two major opposing outcomes: higher overall demand for medical care and increased regulation and transparency in the insur- ance industry. It is still too early to gauge the net impact on demand for new Analysis of the pending medicines and what this will mean for manufacturers. healthcare reform in - Continued on page 16 Germany and its impact Smart profit growth through Simon-Kucher & Partners consumer pricing tactics goes “behind the curves” of By Fabian Schmidt multiple correspondence When costs of medications are funded by the healthcare system or when analysis patient co-payments are marginal, price sensitivity has virtually no impact on a patient’s decision. Yet price becomes a relevant decision criterion when patients pay a substantial amount out of pocket, in particular when the range of product alternatives is broad. Therefore, price is a relevant patient decision criterion for the following categories: • OTC medicines and devices • Rx drugs and devices which are regarded as “lifestyle” or non-reimbursable drugs • Other Rx drugs where patients have to pay a significant co-pay or the full cost of the drug or device out of pocket In these markets, consumer pricing tactics are relevant levers to influence consumer and much more... purchasing behavior. - Continued on page 18 Contents Behind the Curves Cover Stories Impact of US healthcare reform ......................... 1 Multiple correspondence analysis Smart profit growth through By Anne Fricker consumer pricing tactics..................................... 1 Simon-Kucher & Partners employs many methods to Behind the Curves: help manufacturers understand how to best position Multiple correspondence analysis ..................... 2 their products. Understanding how customers will make choices when faced with different options is an Recent Developments in Global Pricing & Market Access...................... 3 important component in the right strategy. In previous installments of Behind the Curves, which details the Features quantitative methodologies employed by SKP, we have South Korea: Overcoming discussed some of the methods that help understand the hurdles of the positive list ............................ 8 what decisions customers will make, such as Discrete The end of free pricing in Germany? ................ 12 Choice Modeling and Adaptive Choice-Based Conjoint. Faces & Places ............................................... 23 However, knowing what choices will be made is only one part of the story. Often it is also important to Simon-Kucher & Partners understand who will be making what choices (e.g. the Life Sciences Forums ..................................... 24 characteristics that describe the group most likely to purchase at a particular price point). About Simon-Kucher & Partners ................. 28 Consider the following example: a new treatment is launching for an indication in which the end consumer plays a large role in the decision-making process, such as smoking cessation, weight loss, or erectile dysfunction. Targeting the right patient population at the right price will be crucial for ensuring success of the product, particularly in markets where DTC advertising is permitted. Bonn Office Boston Office Additionally, though the most apparent customer Haydnstrasse 36 One Canal Park targeting occurs with patients, knowing the correct 53115 Bonn, Germany Cambridge, MA 02141 +49 0228 / 9843-0 617.231.4500 profile of physicians to target is also key. The willingness to prescribe a new product at different price points may Editor-in-Chief Associate Editors correlate strongly with a range of different physician Anne Fricker Maura Freedman attributes, such as whether a physician is a specialist or Pooja Shaw Executive Editor a generalist, a younger doctor or someone who finished Tory Sheppard Dr. Nathan Swilling Ravi Singh their studies several years ago, or another attribute Graphic Design altogether that may not be immediately apparent. Genevieve Solomon www.simon-kucher.com/ls Please send inquiries to: - Continued on page 21 LSCommunications@simon-kucher.com 2 Simon-Kucher & Partners Healthcare Insights Recent Developments in Global Pricing & Market Access Canada: Ontario government slashes 1. A goal to reduce the hospital drug expenditure growth rate that is linked to the national rate generic reimbursement rates In early April, 2010, the Ontario Minister of Health and 2. A goal to improve hospital drug prescription practices Long-Term Care, Deb Matthews, announced a reduction (though no specified measures for how this would to the reimbursement of generic drugs in Ontario. occur are given) As part of the province’s goal to reduce the rate of growth In case the hospital refuses to agree to the proposed in healthcare spending, the Minister announced a plan measures, the ARS can require it to pay the local to reduce the reimbursement rate of generic drugs from health insurance up to 10% of the hospital’s total drug the current rate of 50% of the branded price, in place expenditure. since 2006, down to only 25%. The proposed rate change If at the end of each of the three years of the contract is projected to bring savings of 500M CAD per year. duration, the hospital does not meet the objective of Since the first announcement, the government has been reducing the drug expenditure growth rate, and after aggressively promoting their plan to the public, including the hospital has been given the chance to present their a dedicated website (http://ontaio.ca/fairdrugprices) and comments, the ARS may require it to pay a fraction of YouTube channel.