President Trump and U.S. Department of Health and Human Services Secretary Alex Azar outlined their efforts to reduce prescription medicine costs in the United States, including lowering out-of-pocket costs for consumers, utilizing value-based contracting and restricting the use of rebates, among other measures.
As a health care policy research organization, the National Pharmaceutical Council has led studies examining several areas under consideration by the administration. Our studies—many of them published in peer-reviewed journals—offer a research-first approach to help us consider how to tackle cost and spending issues in the United States. Below, we examine some of the topics raised by the administration through the lens of our research.
Addressing Out-of-Pocket Costs
With a greater number of insurers offering high-deductible health plans, out-of-pocket costs have been increasing for consumers in recent years. Studies have found that those costs fall particularly hard on low-income consumers, causing them to skip treatments or postpone care.
In response, some insurers and government programs, such as Medicare, have been testing value-based insurance design (V-BID), which is designed to give patients an incentive (or in some cases eliminate a built-in disincentive) to use high-value medical services. The National Pharmaceutical Council, working with the University of Michigan Center for Value-Based Insurance Design, has studied how a move to V-BID could change medicine for the better, but only if it is grounded in a strong evidence base, with enough flexibility to ensure that no patient is left behind.
There are other approaches that we could take, too. One consideration is to lower or reduce out-of-pocket costs for patients who need higher-cost treatments based on their biology or genetics, a concept examined in our peer-reviewed study. This approach recognizes that patients shouldn’t be penalized for “bad luck” and aligns costs with the benefits of a treatment. Another approach is to provide pre-deductible coverage for medicines used to treat common chronic conditions, which could lower out-of-pocket costs and increase medication adherence for patients. If current laws were changed to allow this pre-deductible coverage, our study with VBID Health shows that this approach would increase utilization and shift some costs to health care plans, but the overall impact would be modest, requiring a premium increase of less than 2 percent.
Reducing the Impact of Rebates
There is a disconnect between the important role employers believe their pharmacy benefit managers (PBMs) play in helping to manage prescription drug benefits and employers’ perceptions of the overall value they are getting from their PBMs, according to a study conducted by Benfield, a division of Gallagher Benefit Services, on behalf of the National Pharmaceutical Council. Findings indicate that this disconnect is rooted in employer concerns about transparency, contract complexity, rebates and focus on value. By addressing these concerns, employers could realize better value for their health care spending.
There also are efforts underway to ensure that patients capture the value of rebates. The Centers for Medicare and Medicaid Services has proposed point-of-sale rebates for those in Medicare Part D programs, and UnitedHealthcare said it will begin passing on rebates that PBMs negotiate with pharmaceutical companies to some customers when they buy prescription drugs next year.
Encouraging Value-Based Contracting
Paying for prescription medicines based on their value to patients is seen as a promising way to combat rising medication costs. In the United States to date, value-based contracting activity has been limited. But interest in these agreements among both payers and biopharmaceutical manufacturers is strong, and a changing health care environment may generate more activity in this arena in the future. There are benefits for both parties: manufacturers can use value-based contracts to differentiate and demonstrate the effectiveness of their product versus their competitors, which can assist payers in making formulary decisions. Payers can utilize value-based contracts to gain experience with a product, reducing uncertainty regarding clinical value, performance and financial impact.
Yet there are four regulatory and legal barriers that are standing in the way of advancing value-based contracts in health care, according to a National Pharmaceutical Council study. These barriers include restrictions on the information that manufacturers and payers can use in developing a contract, existing Medicare and Medicaid reimbursement mechanisms, and laws governing how organizations can partner with each other.
For the administration to promote further use of these types of contracts, they will need to consider how to address these challenges.
Going Below the Surface on Health Care Spending
A study by IQVIA indicated that although the use of medicine increased in 2017, “spending on medicines grew by 0.6% in 2017 after off-invoice discounts and rebates,” suggesting that there are additional factors related to growth in health care spending. The cost of medication to the patient certainly is a legitimate topic of discussion, and is frequently compounded by hospital markups and the byzantine system of rebates and fees accrued within the drug supply chain. Focusing solely on this one slice of health care spending not only misses the point, it misses the opportunity to fundamentally make the system more efficient without sacrificing improved outcomes.
Asking why drug spending is so high assumes that spending more money on drugs is a bad thing, confusing drug spending with overall health care spending. Our pressing question should not be, “Why is drug spending so high?” but rather, “How can we best spend our health care dollars to benefit patients?”
To consider these and other challenging questions, the National Pharmaceutical Council launched the Going Below the Surface initiative to broaden and improve the conversation around how we use health care resources in the United States. The initiative is aimed at better understanding the roots of the nation’s health investments by promoting a discussion that is firmly based in health policy and systems research.
The goal is to provide clarity on how best to optimize health care spending so that patients receive the right care while simultaneously providing the right incentives to sustain next-generation innovation to improve patient well-being and health system efficiencies.
Thinking About Value
There are many aspects to the U.S. health care system, as well as many different stakeholder viewpoints on how to address current challenges as our system shifts from one driven by the volume of health care services to one focused on the value of health care that is provided. As we consider how to define value, we need to keep in mind what treatments and care have the most value for patients and improving their health outcomes, as well as how we can steer them toward the use of this higher-value care. Reducing wasteful and unnecessary spending is a key part of this approach.
Learn more about the National Pharmaceutical Council’s research-first approach to health care policy by visiting our websites, www.npcnow.org and www.goingbelowthesurface.org and by following us on Twitter @npcnow.