Peeking Behind the ‘Managed Care Curtain’

When optimizing the promotion mix, most pharma marketers will diligently develop models that empirically determine the best allocation of details, samples, digital promotion and offline promotion across both physicians and consumers. What’s conspicuously absent from the promotion mix analysis is managed care, or more accurately, the amount of money allocated to providing managed care discounts to secure favorable formulary access.  The reason for this is that managed care contracting is handled by ‘another group’ typically out of sight to the marketing team. 

How does that make any sense?  Especially when we consider the following:

  • For a number of brands, the largest part of the promotion budget is the amount of money provided for managed care discounts. 
  • Marketing teams will scrutinize the ROIs for a single direct mail piece, but will have no idea what the ROI is from a discount provided via a managed care contract, even though the dollars invested in the managed care contract dwarf the dollars invested in the direct mail piece.

It’s time marketers got behind the ‘managed care curtain.’  We recommend two analyses that will help marketers ensure that dollars spent on managed care discounts are optimized:

  1. Contract Valuation Analysis.  Prior to managed care contracts being signed, a full financial analysis using physician and patient-level data is used to estimate the ROI from providing varying discounts. This analysis can then be incorporated into a full promotion mix analysis, which enables the marketing team to determine where best to invest promotional dollars – in managed care discounts or other promotion channels.
  2. Contract Pull Through Analysis.  Once the contract is in place, it is important to measure the actual return generated from the contract. Using physician and patient-level data, statistical models can be used to quantify the actual ROI from the contract. These contracting ROIs can then be compared to ROIs from other promotion channels to determine the optimal promotion mix.

Too much money has been invested in managed care contracts with little to no visibility on the impact.  It’s time to change that.

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