What Are Key Considerations for Health Reform?

The American Journal of Pharmacy Benefits, January/February 2017, Volume 9, Issue 1

Having the right evidence, using high-value care, and developing strong incentives to improve payment and delivery systems are among the ways we can improve healthcare.

By most accounts, healthcare reform will be driving headlines throughout the first half of 2017. Although it is fairly certain that the Affordable Care Act will be repealed, what is less certain is how a final replacement bill might be structured. Many policy makers in Washington have made statements about the need for marketplace competition, a system that is patient-driven with less federal government intervention and a flexible set-up via block grants to states, among other priorities.

Regardless of political party or preferences, healthcare stakeholders first need to work together to develop and implement provisions that achieve the important goals of improving health outcomes, improving the healthcare system, and lowering costs. Over the long run, if our health system ensures that patients have access to the right treatments and services at the right time, then we should realize improved health outcomes and lower costs.

To meet these shared goals, it is critical that we examine several key areas of healthcare, such as ensuring we have the right evidence to make key decisions, fostering the use of high-value care, and developing strong incentives to improve payment and delivery systems. In particular, we should focus on the following 10 areas:

1. Collaborating on Data

In large part due to technological innovation, we are now starting to see the benefits of a revolution in healthcare data and, with it, the potential to make healthcare payment and delivery even more effective and cost-efficient. Through electronic health records, claims data, and even wearable devices, we are able to gather insightful real-world evidence (RWE) about how healthcare is being delivered, the quality of that care, and how biopharmaceutical treatments are performing in patients in everyday settings. This is even an area in which segments of the biopharmaceutical and insurance sectors have been able to collaborate to conduct real-world studies1 designed to determine how to most effectively and economically treat disease, thereby bringing value to our healthcare system. How payers will utilize this evidence in making coverage decisions is still a work in progress, however, as new methods are being developed2 to ensure the quality of the data, how a research study is conducted, and how the evidence is evaluated.3 RWE is likely to grow in importance thanks to the 21st Century Cures Act, which specifically addresses its application and calls on the FDA to develop a program to consider how this information could be used and evaluated.

Going forward, it is important to have the infrastructure and processes in place to determine whether these and other changes are moving us closer to or further from the Triple Aim. RWE based on comparing patients who experience changes versus previous care and/or comparing them with patients who are not experiencing changes could help provide the evidence needed to inform future innovation.

Additionally, broader access to research-quality data found in taxpayer-funded databases could help researchers tackle a host of healthcare questions that cannot be addressed through other information sources. Although CMS has allowed4 biopharmaceutical companies to access certain federal databases, access to state all-payer claims databases remains limited. Above all, by having ongoing assessments of how patients are experiencing care, we can make adjustments to ensure that positive outcomes remain front and center.

2. Enabling More Open Conversations Between Payers and the Biopharmaceutical Industry

A broad-based reform conversation must cover the need for biopharmaceutical companies and payers to exchange relevant healthcare economic information. Although Section 114 of the Food and Drug Administration Modernization Act of 1997 established a special mechanism for how such information might be shared, research funded by the National Pharmaceutical Council (NPC) found that “the language of Section 114 is sufficiently vague[…] leaving legal, regulatory, health economics, and other teams within drug companies to interpret the statute and gauge the company’s risk tolerance. The seemingly limited use of Section 114 to date may reflect companies’ uncertainty about its scope[…]. In practice, it is hard to know exactly what the law allows given the imprecision of the statute and the lack of guidance about its scope.”5

The FDA hosted a hearing on the topic in November 2016 and in January 2017 issued a draft guidance document that could allow for the “off-label” exchange of healthcare information under specific circumstances.6 However, any meaningful information that can make a difference for healthcare decision making should be broadly communicated by all stakeholders.

3. Moving From “How Much” to “How Well” We Spend

Recognizing what is a "high-value" treatment or service—in that it is beneficial to patients and offers the best use of our health dollars—should be a paramount concern in health reform. Even more important, the health benefit should be patient-centered, with reduced or no barriers to high-value care.

One approach toward reducing health costs—currently being tested in the Medicare program, in the Department of Defense, and by some employers—is value-based insurance design (VBID). VBID shifts the focus from “how much” to “how well” we spend healthcare dollars and is driven by the concept of clinical nuance, which recognizes that medical services differ in the benefit they provide and in the benefit each individual patient experiences from a particular service. By incentivizing consumers to utilize the treatments that are most beneficial to them, this could shift spending to higher-value care.7

4. Recognizing Individual Patient Differences via Co-Pays

Another approach related to VBID that also could shift consumers to higher-value care is dynamic cost sharing. For policy makers and healthcare leaders who speak about the need to keep the patient at the center at all times, it is important to keep in mind that a biopharmaceutical listed on the first tier of a formulary may not work well for everyone. The individual who does not respond well to that first biopharmaceutical might need to try 1 or more treatment options until finding one that works best, which might be on a higher, or more expensive, tier of the formulary. Should that person be required to pay more for a medicine—whether it is brand or generic—simply because his or her biological response is different? The results of a recent study led by NPC suggest that dynamic cost sharing could be an appropriate approach for patients with the same condition but who are in need of specialized treatments.8

5. Considering Value-Based Contracting

As the system increasingly embraces a value-based mindset, we need to creatively design and implement new incentives. One way to do so is through value-based contracting, under which healthcare payers and biopharmaceutical manufacturers agree to link coverage and reimbursement levels to a drug’s effectiveness and/or how frequently it is utilized. According to one study,9 there are benefits to these arrangements. Biopharmaceutical manufacturers can use value-based contracting to differentiate and demonstrate the effectiveness of their product versus that of their competitors, which can assist payers in making formulary decisions. Payers can utilize value-based contracting to gain experience with a product, reducing uncertainty regarding clinical value, performance, and financial impact. Yet, existing barriers, such as the effort and expense involved in patient monitoring, make it difficult to design and implement value-based contracting in the current US healthcare environment.

6. Identifying and Addressing the Gaps in Quality Measurement

Quality measures play a critical role in the implementation of accountable care organizations, as physician payments will be based on how they measure up against quality metrics. It is important to understand how these delivery and payment structures save money, in addition to whether they result in improved patient health.

A first step is to examine where gaps exist in quality measurements10 for prevalent and costly health conditions and to evaluate whether we are incenting the most appropriate and effective treatments for patients with these illnesses. We need to continue strengthening our understanding of how new payment models may be impacting individual patient care and health outcomes, as well as how biopharmaceuticals fit into these models.

7. Carefully Designing Bundled Payment Programs

CMS is piloting programs to reimburse healthcare providers—generally hospitals and physicians—with bundled payments as a way to maintain healthcare quality while reducing costs and increasing efficiency. In a bundled payment, healthcare providers are reimbursed based on the expected costs for specific episodes of patient care. Yet, we need to be careful in how we design bundled payments11 so that we can emphasize those positive aspects and minimize the risk of unintended consequences. We do not want to inadvertently create incentives for underutilization of needed, but costly, services, or avoid caring for the sickest patients. Utilizing evidence-based treatment variability when designing bundled payments and holding the care up to quality metrics with adequate financial consequences can help with this balance.

8. Advancing Value Frameworks to Consider the Full “Value” of a Treatment

Despite nearly every constituency in healthcare focusing on the topic, there is no one “value assessment framework” that can accurately determine all aspects of the value of a treatment for all stakeholders. Although existing frameworks have their strengths and limitations, the field of value assessment is still evolving and there is much room for improvement. It will be critical to follow guiding practices,12 such as those outlined by NPC, to make sure that frameworks are effective tools for advancing patient care and achieving better clinical, economic, and humanistic outcomes rather than well-intentioned, but flawed, tools that impede such progress.

9. Lowering Barriers to High-Value Care

Today, we are seeing a shift toward high-deductible health plans, particularly in benefits packages offered by employers. Premiums are generally lower than in traditional plans because enrollees must meet the higher deductibles before traditional medical and pharmacy coverage begins. For consumers who are in a low-income bracket or who have high healthcare needs, however, these types of plans can impose the bigger burden of out-of-pocket costs,13 potentially causing them to reduce their compliance with necessary treatments or avoid care altogether. These types of plans can present a significant barrier to patients who need access to care the most.

10. Reducing Low-Value Care

Finally, not all care is high-value. We can do a better job identifying and ultimately eliminating "low-value" care,14 which resulted in $765 billion in wasteful spending in 2013 alone. Reducing medical errors, having appropriate pricing information, and recognizing that there can be specific circumstances under which patients might require a low-value service are important ways to lower unnecessary healthcare costs.

Conclusions

Improving our healthcare system will always be a challenging and daunting task. Whether we repeal, replace, or simply reform the Affordable Care Act, the effort will take the support and input of a wide range of stakeholders. Working together and considering some of the opportunities and challenges at hand, we can arrive at a solution that promotes innovation, incentivizes high-value care, and ultimately improves health outcomes. These will be indicators of the extent to which reform efforts achieve their full potential.

Author Affiliations: National Pharmaceutical Council, Washington, DC.

Funding Source: National Pharmaceutical Council.

Author Disclosures: Mr Leonard is an employee of the National Pharmaceutical Council, an industry-funded health policy research group that is not involved in lobbying or advocacy.

Authorship Information: Concept and design (DL); drafting of the manuscript (DL); critical revision of the manuscript for important intellectual content (DL); administrative, technical, or logistic support (DL); and supervision (DL).

Send Correspondence to: Dan Leonard, MA, President, National Pharmaceutical Council, 1717 Pennsylvania Ave, NW, Washington, DC 20006. E-mail: dleonard@npcnow.org.

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