What does a split congress mean for healthcare reform?

What can we conclude from the election of Democrats to the House while Republican’s increased their majority in the Senate? The simple answer is that nothing will get done in the next two year. I’ve long held that a congressional fix for healthcare is an unlikely outcome; however, I now believe that there are some interesting things that can happen. The focus should be on the (progessive/trifecta blue) states.

#1) Create durable protections under law for pre-existing conditions

IF the Democrats are clever…The Democrats should take Republican claims of support for pre-existing conditions seriously. Even Ted Cruz supported pre-existing conditions down the stretch. Democrats should put pressure on Reps by passing legislation in the House carving out and creating a long-term, legal protection for pre-existing conditions. Even though this is technically unnecessary, given the prominence of pre-existing conditions in ACA, it’s possible that the Republicans may suddenly ‘forget’ their support for this policy. It is unlikely to pass in the Senate – but that’s not the point. Election stump talk is cheap, legislation is more expensive.

Allowing Republicans to u-turn on pre-existing conditions and not holding their feet to the fire would be a mistake. (but count on Democrats to miss a good opportunity whenever they can)

 

#2) Stop focusing on prescription drugs – start focusing on the medical benefit

Last night Nancy Pelosi gave a truly cringeworthy speech that touched on the need to reduce the cost of prescription drugs as a primary way to make healthcare affordable. As I’ve written many times, we could eliminate our spending on drugs, crippling both the branded and generic drug manufacturers at the expense of thousands of jobs, and ONLY reduce healthcare spending by >10%.

In politics cutting healthcare spending means ‘cutting drug spending’ because drug out-of-pocket costs are highly visible to consumers. But until politicians see the forest (medical benefits) for the trees (drug spending) we aren’t going to see healthcare costs come down. Having a single payer system isn’t going to solve this problem, despite what progressives wish to be true.

 

#3) The cauldron of innovation is now the States

One lightly reported change is the democratic pickup of 5 ‘trifectas’. With the slow/no rate of healthcare change at the National level, these states are the most likely to try something creative. Rumors abound that California will resurface it’s $400B single payer legislation that went nowhere in 2017. Without the balance of a meaningful opposition party, Democrats in these 13 states will want to demonstrate to their constituents that they can deliver on healthcare. IF they take a serious look at BOTH pharmacy and medical benefits (see #2!) it will be interesting to follow the outcome. Reducing spend by eliminating overbilling, unnecessary care, prioritizing less expensive treatments, etc. sounds much easier than it is. However, I will applaud their efforts and we should all watch with open-minded interest. After all, almost every other advanced economy has managed to provide (good/better) healthcare at lower costs.

WH Proposed Rule on Birth Control – Instant Take = ‘meh’

bc_chart

Just saw this Vox News article – https://www.vox.com/policy-and-politics/2017/10/6/16435382/trump-birth-control-mandate

And while this is a real bummer, it’s unlikely to dramatically move the market – here’s why.

On the one hand, REQUIRING employers to cover birth control allowed WAC and net price increases for these products. This was because many payers and employers were fearful of implementing ‘too much’ control in one of women’s eight preventive health benefit markets. This pretty clearly distorted the market, if one is solely focused on pricing dynamics.

On the other hand, insurers, payers, employers, and most importantly WOMEN really like this benefit. And, looked at from any perspective, birth control is a very cost effective way to manage BOTH health and non-healthcare resources. (yeah, I’m going with the Nixon reference here, just to point out how far we’ve come, baby!)

In fact, women who have the ability to delay their families make more money. There are too many cultural dynamics to detail here, and I don’t want to digress too much.

But, fortunately or unfortunately, like many of this White House’s initiatives, this is unlikely to do much at all. As noted in the article, it’s possible that large, religious universities MAY take this as an opportunity to stop covering birth control. But remember that women in those institutions are largely of age to revert to their parent’s coverage – until that portion of the ACA is repealed or replaced – and the coverage until 26 facet is HUGELY popular (85% support).

So, while companies MAY restrict coverage of birth control, how many actually WILL change their policies? Over time, I could see a slow change as payers and employers feel more confident about taking action here. But that may end up with even stronger Gx step edits and more limited coverage of brands (if they cover brands at all). Not wholesale failure to cover ANYTHING.

As payers and employers know, TAKING AWAY coverage is much harder than adding it. Women have come to LOVE this benefit. And, politics aside, women will be angry with their insurance providers if they see their coverage change and become more restrictive. Unfortunately, we aren’t rational actors when it comes to aligning our anger with the ultimate decision maker, especially in complex and obscure processes like this. Simple economics would state that they’d seek out plans providing coverage in subsequent years, even if those plans cost slightly more.

This will be interesting to watch develop. I want to voice my opinion that this will be greeted with a giant yawn. Let’s see!

 

 

The Future of Pharmaceutical Pricing…(it’s not what you’re being told)

Novartis’ launch of Kymriah has opened up a number of discussions about pharmaceutical pricing. Perhaps surprising to many, I’m going to completely sidestep that discussion. But a lot of the talk of Kymriah returns to ‘value-based’ pricing. So today I want to go back and reinforce the points I’ve been making about the potential that the future will look more like it does today. While it’s tempting to see a future, where indication-based pricing dominates, I think this marks complexity for complexity’s sake. What other industry can we think of where the WAY a product is used determines its value. What we need to successfully differentiate pricing is differentiation – think Avastin and Lucentis, for starters.

Clarity_(4906196813)

Photo credit Zach Dischner

Yes, stock quotations vary depending upon the time duration of their delay. “Live” quotes are most costly, slight delays moderately priced, and 15-minute delay cheapest (often included for free).

You’d walk out of your luxury car dealership if the price that you paid depended upon HOW you were going to use the car. So why the tendency to think that this is the future of pharma? “Well health care is different” you hear the proponents saying.

How so? Healthcare buyers have every right to use the products as they see fit. Worst still, doctors in the U.S. have the explicit ability to use FDA approved drugs for any use they see fit – further complicating payers’ decisions as to how to cover products, and what to cover. So, the current conversation goes, the way to decrease drug prices, while balancing Pharma profits is indication-based pricing. But this simply provides doctors and insurers the incentive to document the use of the product for the lowest cost indication. Unless, of course, the manufacturer pays for the testing required to document the actual indication – and this introduces all sorts of privacy concerns…

And what about complexity? Healthcare is complex. To demonstrate the various and complex value of pharmaceuticals, the industry has hired numerous highly educated and brilliant health economists & pharmacoeconomic experts. I argue that during this period we’ve seen a HUGE increase in prices and an ever-decreasing value of these medications to the GENERAL population. Certainly, we can’t BLAME the PHDs. for this. They are a symptom, not the disease. But who’s stepping back from this insanity and asking whether this is the kind of system we want to have. I don’t want to be the only dissenting voice here.

Now that the industry has all these ‘value justifying professionals’ there’s a huge need to justify value.

My suggestion is, and will always be, to simplify pricing. To stick to simple, intuitive pricing schemes with some sometimes-I-win-sometimes-you-win outcomes. As I’ve argued, there’s more areas of complexity in value-based contracting than there are rays of light – at least now.  

Not today! Q&A on ‘Value-based Contracts’ in the U.S.A.

wait

I recently took issue with a well written, but incomplete article called Value-based Contracting: New, Necessary, but Not Easy from Simi Mathew in the online version of Managed Care Magazine.

Please stop and think of these questions, every time you see one of these articles – as the authors often don’t have the inside view from a pharma company or major payer.

  • Are the contracts tied, precisely and exactly, to the clinical trials that were performed by the manufacturer?
  • If they aren’t straight out of the label, do they rely on FDAMA 114 data including HEOR Studies?
  • Do they include, or must they include to make the financials make sense, product for zero dollars or a nominal value?
  • Would the payer be better off if the contract included another product that’s co-administered with the product in question, but manufactured by another company?

In they article Ms. (in fairness soon-to-be Dr.) Mathew correctly states:

Value-based contracting also creates a whole new set of logistical problems. Developing the infrastructure for an auditing method introduces a new upfront cost. To track outcomes, all parties require access to data that are typically siloed in individual health systems. Regulatory pitfalls must be anticipated. Discounts could trigger Medicaid best-price rules, 340B ceiling prices, or anti-kickback laws.

But merely pointing out that something doesn’t or can’t work isn’t enough. I’ll address the points one-by-one, and demonstrate how non-trivial these problems are.

  1. Developing infrastructure

What this point says is, ‘we’ve now entered into potentially adversarial relationships between payers and pharma, we need systems to handle this’. Some might argue that Pharma/Payer contracts have ALWAYS agreements between frenemies. ‘Value-based’ contracts take the adversarial relationship to a new level. The payers have all the data – and like any pharmacoeconomic study, success or failure will boil down to how small or large one defines the population – so it’s in their best interest to ONLY provide the data that tells the best story for them. And contracting in advance to get exactly the data you’ll need at the end of a multi-year study isn’t easy.

  1. Tracking outcomes

Here’s one that I don’t think anyone has thought of properly, outside the rooms where these deals are being discussed – and to give credit to folks I’ve seen on the Pharma side in Managed Markets teams.

Let’s contrast clinical trials with the real world. In clinical trials patients meet with their doctors, often weekly, and have HUGE incentives to stay on therapy. In the real world…unfortunately this isn’t the case. Here’s the problem, manufacturers are being held to task for something that’s the Doctor’s, Patient’s, and Plans’ responsibility, namely keeping the patient on therapy. Medical Possession ratio is a nice metric, but what if the medication doesn’t work because it’s sitting in a bottle on the medicine cabinet? Why should Pharma discount the drug there?

  1. Discounts and Federal Programs

No ‘money back guarantee’ under the current system, especially not for drugs with any Medicaid business. Simply put, until these programs are excluded from best price calculations pharma pricers will not have enough flexibility to make them meaningful. Not to mention the concomitant use of drugs from multiple manufacturers, often in high dollar therapies like oncology, make the most attractive discount scheme (discounting somebody else’s medication and not yours) the most attractive. Who’s going to do that to enable a competitor’s profits?

I’m not a regulatory or compliance expert so I’m not going to address the nightmare that is arguing that you’re not ‘promoting’ the use of these products through these contracts…I’ll leave that for others to outline.

So what can we do about it?

  1. Let’s stop pretending that Value-Based contracts are the future
  2. …Until we see meaningful regulatory changes at the FEDERAL level it will be difficult for payers and manufacturers to craft these agreements in ways that will enable their broad acceptance
    1. Change best price to exclude these kinds of contracts
    2. Loosen promotional activities directly related to FDAMA 114 and provide clear direction that HEOR teams can and should sit, not with medical but with Managed Care (silo them if that makes sense)
    3. Provide mechanisms for various companies to come together to provide appropriate discounts on bundles of products including MULTIPLE manufactures (weighted average value approach)
  3. Assume that highly publicized ‘Value-based’ contracts look and feel a lot like every day managed care contracts (because you don’t and can’t know what they say unless they’re made public)
  4. Invest in a trusted, objective third party systems to collect ALL the data and publicly report the results (I support a For Profit technology-based approach)

Until we see ALL these points addressed we won’t see the dawn of the age of the Value-Based contract. Another time I’ll write about how such adoption might continue to DRIVE UP the WAC prices for products in the United States…