Tag Archives: hepatitis c

How to Disrupt Drug Prices

These days, we’re not surprised to open the paper and see another headline about the latest Epi-pen, Martin Shkreli or yet another new drug with an exorbitant price tag that has no basis in reality. Since Sovaldi, a pill to treat Hepatitis C, hit the market at a price point of $1,000 (never mind that you could purchase it for $4 per pill in India), it has become acceptable for mass-market therapies to suddenly become very expensive — often to the tune of $100,000 per therapy per patient per year.

So it might blow your mind to open up a newspaper (or your web browser) and learn that a new, more effective drug is significantly cheaper and better, especially if it is a cure for Hepatitis C.

Mavyret, manufactured by AbbVie, is the first example of a new, brand name Hepatitis C drug that is actually better for patients and costs far less. Eighty percent of patients with Hep C can do an eight-week course, versus the alternative, manufactured by companies including Gilead and Merck, which requires a 12-week course.

Mavyret is the only drug that works for genotypes 1-6, and it has a list price that is less than half of what the competitors charge, even when you factor in the bizarre middleman shenanigans. It ends up costing about $26,000 to cure a patient of Hep C. If that sounds high, just consider the fact that all the specialty meds for chronic conditions such as psoriasis are now $50,000-100,000 or more per year! Mavyret sounds too good to be true, right?

In the world of specialty pharmaceuticals — an intentional labyrinth of perverse financial incentives, with zero transparency for the payer or patient — it is actually not too good to be true. But clients and their employees probably still won’t reap the benefits. Unfortunately, our current system probably locks them into paying more for a drug for employees that is less effective, even though a cheaper alternative exists.

See also: Stop Overpaying for Pharmaceuticals  

Most of our efforts to manage pharmacy costs rely on working with a pharmacy benefit manager or PBM, which uses strategies like formulary management, prior authorization and step therapy. PBMs are, as Bloomberg News explains, “the middlemen with murky incentives behind their decisions about which drugs to cover, where they’re sold and for how much.”

For starters, your PBM may have contracted to have the more expensive drug on their formulary because that manufacturer offers them better rebates. This decision, of course, is not based on what is most effective for the patient, or cheaper for the payer. It is based on the formulary and written into the contract, so you are stuck with it. And with the bizarre economics of rebates for manufacturers, Gilead and other makers of Hep C drugs can argue that their post-rebate prices are only 50% to 60% of their list price, so they really aren’t committing too much highway robbery.

The New York Times recently reported that, contrary to conventional wisdom, an increasing number of patients are being steered away from lower-cost generic drugs toward brand name alternatives because this is a better financial arrangement for the PBM, thanks to steep rebates from manufacturers trying to “squeeze the last profits from products that are facing cheaper generic competition.”

We feel the financial pain of this broken system every day. Only a few years ago, specialty drugs composed a reasonable-sounding 10% of our overall drug spending. Last year, specialty dug spending bloated to 38% — and by 2018, it will be an astounding 50%, which is an increase of $70 million a day!

The system is opaque and perverse — and it’s the only system we know. But it doesn’t have to be this way. Almost two decades ago, the internet revolution made the travel agency obsolete. Uber and Lyft have done the same thing to parts of the transportation industry, and Amazon continues to do this to many industries. What have all of these disruptive innovations taught us? They have taught us that we might, in fact, be able to make better decisions ourselves, without a middleman.

It is time for this type of disruptive innovation to hit the pharmacy benefit world. Today we have a system that focuses on controlling suppliers: PBMs that use profitability levers like formulary management, prior authorization and step therapy that, in reality, just limit our choices and prevent the functioning of a real market.

See also: Open Letter to Bezos, Buffett and Dimon

What if instead of focusing on supply, we focus on value? What if we begin by asking “is this drug really working for this patient? How well? And how does it compare with the alternatives?” This scenario represents an incredible opportunity for better health outcomes and savings compared with the status quo. What makes sense and saves cents at the same time isn’t being locked into a formulary choice, but the brave new world of opportunity for employees to get well sooner and pay less for a therapy like Mavyret.

As a benefits professional, breaking out of the status quo isn’t easy. After all, 10 years ago, it wouldn’t have worked to turn to your travel agent, taxi cab driver or storefront manager and tell them, “I need a new model for your industry, and I don’t need you anymore.”

Organizations that have a bit of flexibility to experiment can, should and will be the early adopters of better ways. Some already exist. Don’t settle for the status quo. Keep asking vendors, “What have you done for my clients and their employees today?”

Why We Must Stop ‘Bucketing’ Healthcare

Health insurance plans should be designed to spur the use of the highest-value pharmaceuticals as well as the highest-value care delivery services.

In some cases, plans do seek to ensure access to the highest-value care regardless of how it is delivered. Think for a moment about implantable devices, from drug-eluting coronary stents to replacement joints. Patients don’t have to pay for the stent outside of their insurance; it’s included in the total cost of their care because it’s less expensive to cure an individual’s heart or hip than it is to pay for the multiple episodes of care required by a lack of effective treatment.

Yet many plans are set up with “buckets” of money that don’t make sense and destroy value. For example, bucketing means there are plans that discourage the use of high-value blood pressure medications because the broader adoption of this therapy caused the plan to exceed its budget for medications – even though the therapy saved dramatically on the cost of hospital and disability care and the reduced incidence of heart attacks and strokes. (As a side note, these savings materialize much more quickly than many typically expect. Better use of blood control medications can reduce the incidence of strokes and heart attacks in as little as six months.)

There are also many specialty medications that are exceedingly expensive and tremendously effective. Their use can reduce the overall costs of care, but bucketing means the payment system often isn’t sure how to incorporate them. Examples include new medications for curing hepatitis C as well as “orphan drugs” for rare diseases, including unusual expressions of hemophilia, cystic fibrosis and Gaucher’s disease.

So what’s stopping providers from inciting the use of high-value medications? First, too few of the medications (or treatments of any sort) have good outcome data that shows results and costs over the full cycle of care. Second, few providers are set up to provide comprehensive, full-cycle care.

The way to get these high-value medications included in care is to eliminate the use of bucketing and instead look at the total cost of care for a patient’s medical circumstances. In the case of an infection like hepatitis C, that cycle of care would be from the time of diagnosis until the patient is cured. For conditions perceived as non-curable or lasting for an extended duration, it would typically be for a period of time or through a particular episode (e.g., an acute flare-up of Crohn’s).

This has been done for Gaucher’s disease, particularly in countries with nationalized healthcare, because the new drugs dramatically reduce the total cost of care. Untreated, the condition requires multiple, expensive and painful surgeries. For plans to encourage value-based care, they must similarly minimize fragmentation and instead consider the holistic needs of each medical condition. Only then can the industry truly improve health outcomes and reduce overall spending.

Progress Report on ACA After 9 Months

Nine months into it and getting ready for the next go-round, I thought it might be beneficial to take a look back and see what progress has been made on the Affordable Care Act.  There are many perspectives from which to evaluate the situation, and many will vary in their assessment. This article attempts to take an unbiased view and make an accurate assessment.

First of all, the implementation was a near disaster. Frustrated customers, frustrated carriers, frustrated providers. . . Obamacare couldn’t have generated more frustration if that had been the primary objective. Now that most of the dust has settled, the exchanges are enrolling individuals, and customers are paying their premiums and obtaining coverage with their selected health plan and carrier. I am not aware of any major glitch in this process. It appears that this part of the marketplace is functioning well, even if with implementation bruises.

The rate update process for 2015 also appears to be working well. Most health plans are now more comfortable with the system. The oversight of the various insurance commissioners seems to be working better this year. Rates are being approved. And most things seem to be ready for the coming implementation in the fall.

For all practical purposes, the ability to offer a benefit program, publicize the rate in the marketplace, purchase it, enroll and make use of the benefits as needed seems to be working well. This is not a major improvement, just a catching up to what had been done before, outside this new marketplace. Yes, the plans are standardized (the metallic levels), and the rates are consistently made (through a combination of oversight and standard ACA age factors), which improve the marketplace and minimize some adverse selection. But for the most part this is just doing business a new way.

So, have there be any improvements? Are more people covered? Have inflationary trends gone down? Has coverage become more affordable?

The results so far are preliminary, hard to measure and somewhat variable from one market to another. However, based on my experience with carriers and health plans across the country, I have the following observations:

  • 2015 rate increases will likely be less than in prior years is many markets;  this is less the result of reductions in underlying healthcare trends and more the result of the lack of any major change in the underlying marketplace.  Moving from a situation of being able to underwrite new members to one where no medical information can be used resulted in many carriers being conservative in their pricing for 2014. Because 2015 is merely an update from the prior year, the actual changes were less. One of the exceptions will be carriers who are phasing in the impact of ending the ACA catastrophic reinsurance program in 2017. I expect that most rate increases in most markets will be less than 10%.
  • Pharmacy costs are increasing much more rapidly than previously anticipated. The introduction of Sovaldi for Hep-C patients has significantly affected those programs covering Hep-C patients. Although Sovaldi essentially provides a cure for Hep-C, the treatment cost for patients is about $90,000 over three months and is expected to increase to at least $120,000 as the updated combo drug is introduced later this year. This highly effective, yet costly, drug is one of many hitting the market that are driving up costs. This drug has nothing to do with ACA implementation but will be included in the assessment of ACA effectiveness because it was introduced post-ACA.
  • The rolling of some Medicaid beneficiaries into the exchanges and the expansion of Medicaid in many states is having a significant impact for carriers operating in those markets. In one particular market, these changes are leading to severe financial challenges for carriers assuming the financial risk of these members in the exchange and in the managed care Medicaid program offered side by side to the ACA exchange.  Apparent underfunding by the state and much higher-than-expected utilization and costs are leading to serious financial issues. These issues appear to be replicated in many markets nationally.
  • The 3Rs (i.e., risk adjustor, risk corridor and reinsurance mechanisms) have yet to be included in financial results of health plans and carriers. Health plans are having to incorporate adjustments into this year’s financial results yet do not really know what the final adjustments will be. Some will have to establish premium deficiency reserves, others accruals for subsidies from ACA or payouts to ACA, adding much uncertainty to their operations. Boards are going to be less aware of financial results than in the past. Audits are going to be harder to complete and audit adjustments more common.
  • Underlying inflationary trends do not appear to be lowering as a result of ACA. Unit cost increases appear to be as fast as before, and in some markets more rapid. There is increasing pressure from providers as health plans attempt to negotiate controlled or reduced rates. Health plans are pursuing narrower networks to get the deals they desire, with public pressure to continue to keep maximum choice. The conflict of health plan objectives of controlling costs and consumer pressure to maintain no restrictions is leading to increased costs. Logically, one would assume that there is a point where the consumer might be willing to utilize a more restrictive network at a lower price, but the general reaction is that we aren’t yet at that point. Even though we are experiencing the highest costs on the planet, the average consumer still desires unlimited choice.  These same consumers complain about cost but are not willing to make personal changes to help reduce those costs.
  • The numbers of individuals without health plan coverage has reduced slightly but has not yet approached targeted levels. We have not yet achieved coverage for all. In fact, we are not yet on a path to accomplish this.

The bottom line:

  • We have made some progress to bring healthcare to the table for discussion.
  • We have re-arranged many of the insurance and health plan chairs on the Titanic-like health care system. We have avoided some icebergs this year, but it is not yet clear that we have clear sailing.
  • The system is still subject to significant cost factors that are hard to control (such as Sovaldi), anticipate and plan for. These “icebergs” will continue in the future.
  • The environment that our health plans are operating in is financially risky for them and will require high levels of cooperation with government oversight bodies (i.e., Medicaid departments, CMS and insurance departments).
  • Although rate increases may be tempered somewhat this coming year, there is little evidence of any long-term tempering or reduction in underlying health carecosts or bending of the trend. Many attempts by the carriers (e.g., narrow networks) are not receiving adequate acceptance by the public and regulators.

ACA is a work in progress. It has introduced some hope but has yet to produce the results hoped for.