Digging Deeper Into Health Spending | November 2021

In this e-newsletter, NPC will dig deeper into health care spending and highlight the importance of relying on good research to create good policy.

As Congress continues to debate which health care policies should be included in the Biden administration’s domestic spending package, policymakers are looking for data and research to bolster their positions. In this revamped e-newsletter, NPC will dig deeper into health care spending and highlight the importance of relying on good research to create good policy. Although our Going Below The Surface initiative has sunset, NPC remains committed to engaging in provocative conversations about health spending research and policies. We hope you enjoy this first issue, share it with colleagues, and encourage others to subscribe.

health care spending

Digger Deeper Into Health Spending Research

Health care policies should be based on sound evidence, because when patients’ health is at risk, we can’t afford to make ill-informed decisions. Health care decision-makers must be diligent in their efforts to separate good data from bad data, and health care researchers must design studies that are transparent about their methodology and realistic in their assumptions. Otherwise, bad data could lead to policies with harmful unintended results.

Take two recent studies, for example. One study concluded that government price regulation of medicines wouldn’t impact the number of new drugs coming to market. But this faulty conclusion is based on analysis of the relationship between annual changes in revenue and changes in R&D investment for large pharmaceutical companies. Why is this problematic? It ignores historical data showing that annual changes in company revenue are relatively small, at roughly less than 10%, while the annual revenue hit from government price controls could be 20%.

Another study found domestic reference pricing — tying prices for new drugs to inflation-adjusted prices of clinically similar therapies — could bring significant savings for Medicare. Taking a deeper dive into the data, however, it is clear the study significantly overstated the estimated savings. For instance, much of the expected savings comes from a class of drugs that includes insulins, where the actual amounts paid for the drugs are well below list price.

Using data from flawed studies to craft or support health policies could result in unexpected adverse consequences. No matter the study or who conducts it, we should hold research to the highest possible standards.


Questions to ask when evaluating the credibility of research:

Would the conclusions change significantly if the assumptions changed? If so, why?

Is the study consistent with other studies? Why or why not?

Do the results of the study fundamentally support its conclusions and recommendations?

Do the authors acknowledge the potential risks and consequences for their recommendations?

Is Drug Spending an Anomaly in Health Spending?

A new study published in the Journal of Managed Care & Specialty Pharmacy by researchers from NPC and the IQVIA Institute for Human Data Science showed that spending on prescription drugs follows similar patterns as spending on other health care services, with a small subset of the sickest consumers responsible for the majority of spending.

The findings have two main policy implications. First, spending on prescription drugs is not an anomaly — it mirrors spending on other health care services. As such, policy proposals that focus narrowly on constraining spending on prescription drugs, particularly specialty drugs, are disregarding other drivers of health care spending.

Second, a significant portion of health care spending is concentrated in a small population. Therefore, managing rising health spending requires a deeper examination of the value of the care being delivered to this subset of high-intensity patients to ensure better care delivery and more efficacious interventions. Read the full study on JMCP and highlights on NPC’s blog.

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Is Price Transparency the Answer to Our Health Spending Questions?

During a recent AcademyHealth-NPC webinar, a panel of experts pondered this question and considered what advancements are necessary to provide consumers with accurate, useful information to make informed decisions about the cost and quality of care. Take a deeper dive on the topic via AcademyHealth’s blog.

Read more.

Additional Good Reads

Lenahan KL, Nichols DE, Gertler RM, Chambers JD. "Variation In Use And Content Of Prescription Drug Step Therapy Protocols, Within And Across Health Plans," Health Affairs, November 2021

This close examination of health plans’ step therapy protocols found that they are “more stringent than FDA label indications” and “inconsistent with leading clinical organizations’ recommended treatment pathways.” These protocols make it difficult for patients to get the care they need and can worsen health outcomes, the researchers explained. Read more.

Mark Your Calendar

We aren’t the only ones interested in a having a friendly debate on health care spending topics. Check out these upcoming events for some good conversations. Heard of an event that we should share in this space? Drop us a line and let us know!

Council for Affordable Health Coverage Price of Good Health Summit
November 17, 2021

Virtual ISPOR Europe 2021
November 30- December 3, 2021