Three Things More â€œPresidentialâ€ Than Simply Hammering Drug Manufacturers on Price
Value and outcomes are key considerations when seeking to reduce health care costs.
A CASE COULD BE MADE that, overall, health care has not been a focal point of the respective political parties’ presidential nominee debates or campaigns. The discussion has been much, much more specific.
In mid-October, both Hillary Clinton and Bernie Sanders blithely placed biopharmaceutical manufacturers in their crosshairs, counting them among their “proudest enemies.” This is politically convenient, if not wise, in light of Turing Pharmaceutical’s debacle over its 5000% price hike on Daraprim.
Additional credence to this position comes from the October 2015 Kaiser Health Tracking Poll showing that the cost of prescription drugs has risen to the top of the list of health care issues the public believes the president and Congress should prioritize.
The report specifically states, “Making sure that high-cost drugs for chronic conditions, such as HIV, hepatitis, mental illness, and cancer, are affordable to those who need them is viewed as a top priority by 77% of the public and more than 7 in 10 across party lines, and at least half of Democrats, Republicans, and Independents say government action to lower prescription drug prices should be a top priority.”1
The report goes on to show that 62% of Americans believe there is not as much regulation limiting the price of prescription medications as there should be. Not surprisingly, Democrats on the House Committee on Government Oversight and Reform formed the Affordable Drug Pricing Task Force in early November with the goal of enacting “meaningful action to combat the skyrocketing costs of pharmaceuticals.”
On November 7, Specialty Pharmacy Times reported online that the Senate Special Committee on Aging had scheduled an initial hearing for an investigation into prescription drug pricing for December 9, 2015. The Biotechnology Industry Organization (BIO) and the Pharmaceutical Research and Manufacturers Association both responded reasonably, essentially calling for a balanced approach between pricing reduction and the need for medical innovation that demands massive investments in research and development to create new and, in many cases, curative therapies.
Both organizations squarely rebuked Turing, with BIO essentially revoking the company’s membership. Pfizer also jumped into the fray when it announced on November 5 that it was making 44 additional medications free for both uninsured and underinsured patients earning up to 4 times the federal poverty level, double the limit previously covered by the program.
In the midst of this hubbub, the shift to value-based health care has generated some useful tools and industry-wide recognition that drug pricing, when viewed on its own, is highly myopic. Value is the true metric when “value” is defined by the equation outcomes divided by costs.
Although value-based formulae for new oncology drugs or proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitors are difficult to create absent desperately needed real-world data, the value of a $94,500 course of Harvoni that cures hepatitis C compared with a $577,000 liver transplant is easy to understand.
The following 3 options are more presidential than simply pounding manufacturers on price:
1. Make value-equals-outcomes-divided-by-costs the national measure of value-based health care.
Value can be illustrated by using the simple equation of value-equals-outcomes-divided-by-costs. For decades, the US health care system has attempted to increase value by cutting the denominator in this equation: costs. We believe we have reached a point where further cost reductions create a risk of declining outcomes.
No value is realized when the outcomes numerator decreases in parallel with a decrease in the costs denominator. The repeal of Medicare’s sustainable growth rate and the enactment of the Medicare Access and CHIP Reauthorization Act of 2015 are a step in the right direction because they reward Medicare providers based on outcomes, not volume. They do not, however, include a clear enough definition of “value.”
Establishing a clear, objective definition of health care value should be a priority. Defining incentives for health care stakeholders who implement programs that drive value should be a priority. Prioritizing these 2 activities would demonstrate leadership.
For example, greater reimbursement should be considered for preventive services like medication management that drive higher levels of adherence and, thus, value for costly prescription medications. Medicare providers who demonstrate measurably improved outcomes and cost reductions should be highly compensated in future payment models.
2. Insist that the Centers for Medicare & Medicaid Services (CMS) focus on intent and commit to measuring outcomes.
CMS needs to be more forceful with its own rules and regulations. Issuing a simple “black and white” rule and then failing to enforce it when the industry finds a way around it needs to change. CMS leadership should focus on intent and not get lost in over-analysis of the rules’ wording.
Two Medicare initiatives that deserve support are:
a. CMS’ proposed rule intended to improve discharge processes is patient- and care-team focused, and this approach should be encouraged and streamlined where possible. The rule states, “Although the current hospital discharge planning process meets the needs of many inpatients released from the acute care setting, some discharges result in less-than-optimal outcomes for patients including complications and adverse events that lead to hospital readmissions.” Furthermore, it states that, “Reducing avoidable hospital readmissions and patient complications presents an opportunity for improving the quality and safety of patient care while lowering health care costs.”2
b. Beginning January 1, 2015, CMS began paying physicians for “non-face-to-face care coordination services furnished to Medicare beneficiaries with multiple chronic conditions,” and includes “medication reconciliation with review of adherence and potential interactions” and “oversight of patient self-management of medications” among covered services.3
This program, although a step in the right direction, does not include clinical pharmacists among the eligible practitioners. Given pharmacists’ expertise in pharmacology and greater accessibility to patients, this would be an effective, practical change to a new rule that would not only take a bite out of the massive waste due to medication nonadherence, but improve patient outcomes simultaneously.
3. Lean hard on the longest lever available to reduce wasteful health care spending.
Any discussion of prescription drug prices should include a reference to the massive waste due to medication nonadherence. Research from the IMS Institute of Healthcare Informatics indicates total avoidable costs in US health care amount to $213.2 billion. Nearly half of those avoidable costs, $105.4 billion, are attributed to medication nonadherence.4
Fixing the problem of nonadherence will require significant effort, but it is entirely possible to take a massive bite out of $105 billion in avoidable costs for the benefit of all concerned. Every Medicare hospital readmission avoided saves approximately $10,000 to $13,000 and enables patients to enjoy higher quality of life.
Based on a study conducted by Curant Health and Amedisys of Medicare home care patients with multiple chronic conditions, effective medication management protocols have the ability to snuff out $2.7 billion per year in Medicare spending.
CMS currently defines medication therapy management (MTM) as a program that:
- Ensures optimum therapeutic outcomes for targeted beneficiaries through improved medication use
- Reduces the risk of adverse events
- Is developed in cooperation with licensed and practicing pharmacists and physicians
- Describes the resources and time required to implement the program, if using outside personnel, and establishes the fees for pharmacists or others
- May be furnished by pharmacists or other qualified providers
- May distinguish between services in ambulatory and institutional settings
- Is coordinated with any care management plan established for a targeted individual under a chronic care improvement program.
This MTM program is far too limited to be effective, but at a minimum, it includes the pharmacists. This capability should be added to the new chronic care management program.
A Few Words About Alignment
Manufacturers are going to be forced to accept lower payments or no payment at all if high-cost medications are not shown to improve outcomes in real-world applications.
According to several reports, Harvard Pilgrim will recoup additional rebates from Amgen if patients in their health plan on the PCSK9 inhibitor Repatha do not achieve specific cholesterol targets for various patient groups. Nevertheless, there remains a desperate need for improving alignment among manufacturers, prescribers, payers, pharmacists, and patients.
Where prescription drug prices are concerned, however, bashing the manufacturers exclusively is shortsighted and not very presidential. Instead, a winning position on pharmaceuticals would involve creating a roadmap to industry alignment by effectively accelerating the shift to value-based care by clearly defining value, committing to outcomes measurement, and improving adherence rates through effective medication management among the nation’s chronically ill patients.
As the nation’s largest payer and arguably the nation’s largest driver of health care innovation, CMS should lead the charge and our next president should ensure they do so effectively. SPT
- DiJulio B, Firth J, Brodie M. Kaiser health tracking poll: October 2015. The Henry J. Kaiser Family Foundation website. http://kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-october-2015/. Published October 28, 2015.
- Office of the Federal Register. Proposed Rule: Medicare and Medicaid programs; revisions to requirements for discharge planning for hospitals, critical access hospitals, and home health agencies. www.federalregister.gov/articles/2015/11/03/2015-27840/medicare-and-medicaid-programs-revisions-to-requirements-for-discharge-planning-for-hospitals. Published November 3, 2015.
- Department of Health and Human Services. Chronic care management services. www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/ChronicCareManagement.pdf
- IMS Institute for Healthcare Informatics. Avoidable Costs in US Healthcare. Parsippany, NJ: IMS Institute for Healthcare Informatics; June 2013.
About the Author
MARC O’CONNOR is chief operating officer for Curant Health. Curant Health treats patients nationwide through its medication management protocols, including medication reconciliation and establishment of personalized medication regimens, and supports its provider partners and care coordination with its award-winning electronic health record, MedPlan. Curant’s health care professionals provide individualized care proven to improve the lives and reduce the overall health care costs of chronically ill patients.