The Emerging Pharma-Patient Compact

By Jeff Elton, PhD, Vice Chairman, ConcertAI 

This year, life science companies have few stable operating assumptions in the face of the AI revolution, changes in FDA emphasis and infrastructure, unpredictable trade policies, unclear assumptions on the levels of economic growth or inflation, and other integral government initiatives such as BIOSECURE. So, while AI policies are being released, new FDA committees being formed, and duties on European goods finalized (seems the 15% may be good news), there has been limited coverage of the next phase of Medicare changes within the Inflation Reduction Act (IRA) for 2025. This year marks the capping of patient out-of-pocket drug costs at $2,000 and a $10 billion shift of liability to pharma manufacturers (20% mandatory rebate)¹ with an accompanying major shift in costs to payers.

This year brings the next phase of changes initiated in 2024, when the 5% coinsurance responsibility of patients in the catastrophic phase of coverage went to $0. With the base patient responsible portion of the plan and the elimination of payment responsibilities in the catastrophic phase, the maximum payment outlay was $3,300 per year. In case there is any doubt about the responsiveness of healthcare consumption to economics, this change saw an immediate increase in all specialty categories, and in oncology a 50% increase in Medicare Part D total scripts filled comparing 2024 over 2023 levels.² By the end of 2024, it was estimated that the proportion of total medical claims for which patients had a $0 cost was approaching or exceeding 80%. Stated differently, there was a 10- to 20-fold increase in the number of patients who had a $0 copay over the course of the year.

Why did patient volumes between 2023 and 2024 increase at such an extraordinary rate? Analyses are still underway, but most explanations point to patients not seen in traditional payer data and receiving support from manufacturer patient assistance programs, reductions in other forms of assistance, greater incentive to use therapeutic add-ons, and patient “pull-ins” that were previously disincentivized to receive treatment because of an inability to pay.

In 2025, the cap on patient payments under Medicare is being reduced to $2,000 over all program scenarios with increasing levels of responsibility for pharma manufacturers and healthcare payers. This means that just as volumes of patients and patient prescriptions increase, so too does the level of pharma mandatory discounts. The net effect varies tremendously by company based on their portfolios, but for those with rare and oncology drugs the additional payments will likely be in the billions of dollars annually.

With these new pressures and barriers, our view is that the interests of pharma manufacturers, providers, and patients will emerge as ever-more aligned. It is expected that payers will be putting a stronger emphasis on utilization management (e.g., more difficult and complex prior authorization), tiering, and significant pressure on rebates. So, while the changes to Medicare under the IRA should enable better and more immediate access to the latest oncology medicines, the truth is that new barriers may emerge as payers seek to better control their higher costs and new risks.

Pharma companies need to develop new tools and infrastructure for this environment, including:

1. Data. New data sources and linked data solutions (e.g., medical claims and molecular testing information) assure that the complete patient journey is understood and programs are aligned to specific requirements of therapy transitions.
2. AI & advanced analytics. Prior trends and patterns are a poor basis for predicting future utilization and growth in total prescriptions across many different cancers. Since most pharma use historical data with adjustments for changed guidelines, new diagnostics, and new products, these are not going to be accurate given the large one-time correction in 2024 and ongoing changes that will continue well into 2025. Having data diversity and completeness within an AI-savvy environment will allow for the use of predictive tools and threshold alerts to better manage trends from 2024 running into 2025 as well as new factors emerging in 2025.
3. Patient programs. Prior programs, such as Patient Assistance (PAP), are likely no longer appropriate given the limited financial responsibilities that Medicare-eligible patients will have. New vehicles, such as Foundations of the manufacturers or provider Foundations that are manufacturer-agnostic, may have more beneficial impact than legacy approaches.
4. New payer/payment initiatives. The terms “risk contracting” and “outcomes-based contracts” have been used for more than two decades, but they have had limited use — however, that may be about to change. Just as payers will look to assure access that controls their higher-cost burden, it is likely that certain manufacturers will look for disintermediating approaches that align the higher costs they are assuming and provide some avenues for margin relief. Here too, the traditional tools of optimizing for preferred or non-preferred formulary positions won’t function or deliver assured results as they did in past years. Similarly, healthcare providers will need to have far more advanced and sophisticated solutions that address the issue of prior authorization and other administrative processes encumbering their clinical decision making and impairing some of the patients’ choice.

ConcertAI has been committed to assuring advances in, and access to, oncology care in close partnership with the country’s leading healthcare providers and manufacturers for the better part of a decade. We believe that the national scale of our data (49 states and growing) and the latest generation of our AI Precision Suite™ solutions are foundational elements for the biopharma enterprise. They enable a deep and active understanding of the entire patient journey. The low latency and high recency of our data and AI solutions allow predictive and event-triggered responses in an environment where new patterns are just starting to emerge. We are moving ever closer to the point where financial criteria do not have to overwhelm clinical considerations in making treatment decisions. The definition of a "compact" is a contract between parties that establishes a set of mutual rights and obligations with the highest level of commitment. With biopharma’s greater financial responsibility for funding patient access to medicines, it is increasingly in a position to be close working partners with the country’s leading oncology care providers and patients in assurance of access and outcomes. Positively, we see this emerging with a new level of commitment and obligation that it may become a Pharma-Patient Compact.

Jeff Elton, PhD is the former founding CEO and Vice Chairman of ConcertAI and the co-author of the widely cited study on global healthcare systems, Healthcare Disrupted -- Next Generation Business Models and Strategies (Wiley, 2016), an early exploration into how AI, Advanced Analytics, and Digital Solutions could enable new value-centric models for healthcare.

[1] See: https://prescriptionanalytics.com/blog/overview-of-the-2025-medicare-part-d-program-redesign-a-paradigm-shift-for-pharma-manufacturers/, and https://www.zs.com/insights/ira-medicare-part-d-changes-mppp-how-pharma-can-prepare.

[2] IQVIA LAAD 3.0 Dataset, IQVIA analysis