By Robin Gelburd and John Wright
As the ACA continues to drive rapid transformation throughout the healthcare industry, new decision risks are emerging for all of the stakeholders in this complex market. As industry players struggle to quantify the effects of current reforms on their business models, it is becoming evident that high-quality, unbiased claims data are a critical tool. Specifically, pharmaceutical companies rely heavily on trend forecasting to ensure they are prepared for shifting market forces that ultimately affect their sales, production and profit. External, private healthcare claims data can shed light on the underlying reasons for changing product demand, allowing companies to take a more proactive approach and retain their competitive advantage.
Understanding the impact of provider and health system integration
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The recent trend toward provider integration has dramatically affected the way care is delivered. As the industry responds to ACA mandates and the broader movement to reduce healthcare costs, large hospital systems are acquiring smaller hospitals in their regions, creating horizontal integration. We are also seeing significant vertical integration as hospitals purchase long-term care facilities, home health agencies and physician practices. Both models are influencing regional service volumes and patterns of service delivery. Changes intended to reduce duplication of services, streamline care delivery, and change care settings are affecting not only providers, health systems and patients, but also pharmaceutical companies.
Without a precedent or relevant internal data, pharmaceutical companies may be left without the tools they need to understand how integration is affecting the demand for their products. To stay ahead of the curve, companies need to know exactly how and when specific drugs are prescribed at a local level. These details will allow them to anticipate changes and make targeted adjustments to their sales strategies, maintaining pricing power and ensuring an efficient and profitable response.
Improving forecasting techniques
In light of current industry changes, pharmaceutical companies must adopt better forecasting techniques to succeed. While most companies use their own script data to understand utilization trends, many may be missing a broader understanding of the market by not incorporating other datasets that provide a larger market view.
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For example, a pharmaceutical company’s proprietary script data can quickly and easily show that specific drug claims are increasing or decreasing over time. It is more difficult—and more critical—to understand the cause of that change. Are more providers using a competitor’s product? Are physicians prescribing less frequently? Is overall utilization of a certain set of health services decreasing in a specific region?
These are the questions that unbiased, robust healthcare claims data can help to address. By teasing out the various drivers of pharmaceutical sales and usage, companies can explain the relevant markets, customers and call points behind sales numbers, and then evaluate what these numbers really mean.
Specific benefits of putting healthcare claims data into action
Healthcare claims data may be the key to cracking the forecasting code at many levels. This information can accomplish many things, including these three.
Identify trends
With so many industry reforms occurring simultaneously, it can be difficult to determine whether prescription and utilization trends are related to system-wide changes, or simply the market performance of a drug. Analyzing healthcare claims data for certain procedures alongside internal data on a given product can explain how often the drug is used in a specific geographic or service location (outpatient, skilled nursing, etc.), and how often related procedures are being performed. Overlaying this claims data with a company’s internal information can highlight whether procedures and prescriptions are in alignment, or if other factors are at play.
Suppose prescription claims for a cardiovascular drug have recently decreased. Analyzing the claims patterns of a related cardiovascular procedure might show that this standard procedure is increasingly being performed in a long-term care facility. Because these patients are more closely monitored, the facility is issuing fewer prescriptions – a clear effect of vertical integration.
Monitor the competition
Taking this analysis a step further, healthcare claims data can help to gauge a company’s performance against competitors. When companies rely solely on internal data, they can’t assess whether market competition is behind a decrease in utilization of a particular product. Benchmarking internal prescription numbers against the actual healthcare claims for a related medical procedure in a specific region can highlight instances where a competitor is taking on a larger market share.
What if, in the cardiovascular example, the number and location of cardiovascular procedures had stayed consistent, but prescriptions were down? This could suggest providers are switching to a different product.
“Now”-cast
Good business isn’t just about predicting future trends. Claims data allow companies to understand what’s currently happening in the industry, which can be especially useful in the face of rapid change. For instance, if a product has a short shelf life, the last three months of relevant claims can demonstrate whether demand is shifting. Short-term trend analyses may look very different than a year-end review.
We are already experiencing the far-reaching effects of healthcare reform and the industry’s overall efforts to reduce costs. With more changes to come, effective trend forecasting will become even more critical for pharmaceutical companies. By leveraging claims data, companies can ensure they are reducing operating costs, managing supply, staying aware of their competition and meeting the needs of today’s larger, more streamlined health systems.
Robin Gelburd is President of FAIR Health, Inc., a national independent, not-for-profit corporation whose mission is to bring transparency to healthcare costs and health insurance information through comprehensive data products, consumer resources and research tools, all powered by the nation’s largest collection of medical and dental claims data.
John Wright is President of Covaria, a consulting firm that provides marketing strategy, analytics, and optimal resource allocation services to a wide range of healthcare industry stakeholders. He was previously a consultant for McKinsey & Company, and has had academic appointments at the University of Florida. John received his AB, MBA and PhD from the University of Chicago.
