After facing resistance and numerous litigations, President Joe Biden signed the Inflation Reduction Act (IRA) into law on August 15, 2022. The decision impacted the medical industry, highlighting the need for specialty healthcare outsourcing services.
The act was sponsored by Senators Chuck Schumer (D-NY) and Joe Manchin (D-WV and is part of the broader Build Back Better legislative framework. It includes healthcare-related provisions that would significantly lower the costs of certain prescription drugs and curb the federal government’s drug spending, including:
- Limiting out-of-pocket expenses of Medicare patients to $4,000 or less in 2024 and no more than $2,000 a year starting in 2025.
- Extending premium subsidies of people who purchase individual health insurance to three more years.
- Enabling the federal government to negotiate the prices of up to 100 drugs over the next 10 years.
While the passing of the IRA will bring tremendous benefits to consumers and pave the way for a significant transformation of healthcare service delivery, pharmaceutical companies could suffer substantial losses and face other downsides.
How the Inflation Reduction Act Impacts Drug Companies
One of the most controversial provisions of the Inflation Reduction Act is that it allows the federal government to negotiate prices for specific brand medicines (without generic counterparts) that account for the most significant Medicare spending. Additionally, if drug manufacturers increase costs faster than inflation, they must pay Medicare a rebate.
Beginning in 2026, the health secretary will choose 10 drugs eligible for negotiations. This number will increase to 15 in 2027 and 2028, 20 in 2029, and 20 each year after.
These provisions will practically force pharmaceutical companies to put a price cap on the affected products, significantly impacting their cash flow, bottom line, and overall medical billing. An analysis from Avalere found that the law could lead to a revenue cycle of over $460 billion loss by 2032.
Since the Inflation Reduction Act was first proposed, it has met strong resistance from pharmaceutical industry members, asserting that the law could hamper innovation and drug development.
However, a study by America’s Health Insurance Plans (AHIP) found that of 10 top pharma companies examined, seven allocated $36 billion more funds to advertising than drug research and development. Consumers practically shoulder the costs of expensive ads more than what can bring them cure.
This issue could once again put the drug manufacturing sector under public scrutiny. Even before the study, the pharmaceutical sector’s reputation has been on a downward trend. A Harris Poll report showed that from a high of 62% in February 2021, only 47% of U.S. consumers held a positive view of pharma companies in February 2022.
Physicians’ Hesitance To Advocate Certain Pharma Brands
Physician advocacy plays a crucial role in advancing the potential of pharmaceutical products. However, most pharma representatives need to know more about what drives physicians to advocate for prescription drugs.
According to a study by Bain & Company, 40% of physician advocacy is linked directly to customer experience and loyalty. Meanwhile, pharma reps focus on identifying new patient opportunities. The former values delivering a patient-centric experience; the latter focuses on product demand generation.
With the controversial result of the AHIP study exacerbating the volatile reputation of specific pharma brands, physicians, out of fear of public backlash, may hesitate to advocate certain brands of drugs.
Negative Credit Ratings
According to Fitch Ratings, the Inflation Reduction Act has potential rating implications, particularly for pharmaceutical companies that derive cash flow from negotiation-eligible drugs. Issuers could cushion the impact on the ratings if they were willing to reduce dividends and shareholder-oriented capital allocation.
Mitigate the Impacts of Inflation Reduction Act 2022 With These 5 Specialty Healthcare Outsourcing Services
Now that the Inflation Reduction Act has been approved, pharmaceutical companies must adopt measures and strategies to ensure long-term sustainability. Consider the following specialty healthcare outsourcing services:
Declining return on investments has challenged the pharmaceutical sector for quite some time. And with the passing of the IRA and increased pressure from the public and the government to invest heavily in R&D, pharmaceutical manufacturers should tighten their belts and ensure efficiency across the value chain.
One way to achieve this is by hiring back-office logistics specialists from Business Process Outsourcing (BPO) providers. Through economies of scale, outsourcing helps companies to save on resource costs, infrastructure costs, and other overhead expenses by at least 15%. It also enables pharma companies to eliminate frictional losses that often occur when people work on tasks outside their core competencies.
Even companies specializing in logistics solutions (3PLs) found significant benefits in delegating noncore functions, such as accounting, data entry, and customer support, to outsourcing partners. Drug manufacturers can focus more time, effort, and resources on R&D and other core functions by leaving supply chain management to the experts.
Supply Chain Management
Although cost reduction remains the primary reason why pharma manufacturers outsource several functions, the motivations of many have shifted monumentally over the past years. The pharmaceutical supply chain has become global and vulnerable to disruptions and risks.
Driven by increasing competition with generic manufacturers from other countries and global disruptions, major pharma companies in the U.S. outsource supply chain management and other business functions to improve product quality, gain global presence, and reduce time-to-market.
Complex and constantly evolving regulations also make ensuring compliance challenging for pharmaceutical companies that want to break into the international market. Keeping pace with new rules in the U.S. alone takes tremendous time and resources; what more if one sells to over 100 countries?
Outsourcing supply chain management helps companies minimize the costly risks of compliance oversight. It allows companies access to professionals with comprehensive knowledge of relevant international regulations and guidelines.
Technology-Enabled Customer Support
Since COVID-19, physicians’ demand for a more client-centric approach has grown for better patient care. However, most pharmaceutical companies operate on a traditional volume-based sales approach. Responding to the call of the physician groups would require pharma companies to overhaul their “overly commercialized” business model.
Healthcare providers care about services that lighten their loads and assist them in meeting patients’ needs. Aside from aligning their mindsets with physicians, pharma companies must equip themselves with the digital tools and skill sets required for a customer-centric approach.
Outsourcing customer support will equip pharma companies with the technology, process, and people needed to deliver a seamless, omnichannel patient experience. In turn, this enables pharma companies to help physicians better serve patients and meet their needs, helping close the gap between the priorities of pharma reps and physicians.
When patients enjoy a client-centric experience, physicians will likely advocate for your pharma brand among peers and patients. And you (the pharma company or rep) will benefit from increased demand and market share.
Healthcare Data Analytics
Access to rich data and meaningful insights is imperative to realizing a customer-centric digital transformation in the pharmaceutical sector. Doctors also see the most value in reps who provide valuable trend data on client satisfaction, industry standards, and financial health. But for an industry that has long been operating compartmentally, adopting a data-driven, fully digital workflow is an uphill battle.
Data analytics is a long and complex process. One has to have enough time, technical, and cognitive capabilities to sift through a large volume of unstructured data and find valuable insights to inspire a personalized customer journey across multiple platforms.
Doing these tasks in-house will remove pharmaceutical companies’ crucial resources and focus on their equally complex and time-consuming core functions. Recruiting data analysts alone, especially in the current labor climate, can take weeks (even months).
By outsourcing data analytics, drug manufacturers can fully implement data analytics in a more productive and cost-efficient manner. It allows you to leverage readily available expertise and infrastructure to fast-track your digital transformation efforts.
Content Writing Services
To improve patient experience, physicians and other healthcare professionals look for digital resources that offer data, information, and expertise to help elevate the patient experience. They are not after promotional or marketing pitches but high-level content with a scientific basis and backed by credible sources.
Outsourcing content writing services enable the healthcare sector to build authority by producing relevant, well-researched, and informative content that offers value to readers. Digital content experts also know how to incorporate technical requirements to optimize engagement. Amid the digital landscape, they can help position your content to attract your market’s attention.
A Specialty Healthcare Outsourcing Services Partner With an In-Depth Knowledge of the Healthcare Industry
Pharmaceutical manufacturing and development is a complex and inherently risky industry. And recent and ongoing disruptions, coupled with evolving regulations and consumer expectations, make things increasingly challenging for companies. To cope, you need a strategic partner with an in-depth familiarity with the ins and outs of healthcare facilities.
You can start by outsourcing medical billing and other specialty healthcare outsourcing services to a BPO provider operating under the guidance of a major U.S. healthcare company. From there, you’d outline a transparent business plan for your organization and prioritize cost savings in medical billing. Ensure they’re also experts in medical coding and transcription while committing to safeguarding patient data.
Finally, they need to understand the unique needs of those in the pharmaceutical sector and the unique landscape they operate in. Once that trust is built, you can allow them to help you navigate the pressing challenges the pharmaceutical industry faces.