The announcement later explains, "Our PBM Agreement contemplates that, in the event of this type of change to the relevant AWP calculation, there will be a modification of the AWP discounts in the PBM Agreement so the parties are returned to their comparable economic position prior to the change by FDB in its calculation of AWP." The essence is that the government changed the definition of the benchmark Average Wholesale Price (AWP) and, hence, reduced the value of it. So, ESI is reducing the value of its "discounts" to maintain the same net sales price to the buyer. First of all, my hat is off to ESI for publicly admitting this change. Secondly, I'm not sensing a real PBM value-add here. Have they really provided the marketplace with a discount? Or are its contracts set-up to allow manufacturers to just inflate their pricing to offset the negotiated “discounts” (and the plan sponsors are now also paying big middlemen PBMs like ESI to help distribute the drugs to plan members)? Last year, we observed 14% to 15% price increases on average for brand drugs (before discounts). Furthermore, there is an article in the Wall Street Journal today that highlights some dramatic first quarter 2009 price increases by the drug manufacturers: Viagra +20.7%, Sprycel +32.7%, Strattera +15.6%, and others.
Give me back the shoe-box effect of major medical plans. I think the PBMs and their promises of "discounted" drug cards have taken us for a ride.
The second proposed change to COBRA coverage allows any involuntarily terminated employee who is 55 years or older, or who has 10 years of service, to elect COBRA coverage until Medicare eligibility. Under this proposal, and employee could theoretically be terminated at the age of 35 after 10 years of service, and elect to purchase COBRA all the way until Medicare eligibility. This is a scary proposition for employers. However, this portion of COBRA reform is less likely to become law. It was included in the House portion of the stimulus package, but absent from the Senate package.
Do you find this kind of COBRA change "stimulating"? Or does it feel more like another unfunded burden for employers to administer? Speak now or complain later.
Is this possible? Is this really the view of NAM's membership? Or is it the view of pharmaceutical manufacturers?
We view clinical effectiveness research to hold great promise and to be an important "public interest" function for the government. It is certainly superior to the FDA's almost unbelievable use of a "lesser harm" standard in drug approval. This standard allows less effective drugs to be approved for market use as long as they aren't too much lesser. Does that sound like the kind of drugs you want to buy? Well, combine it with slick advertising, and that is what people do every day.
We can't expect the average consumer to follow clinical effectiveness research. They need the help of coverage sponsors to influence their purchase decisions through plan design and provider payment schedules. The better, more independent data we have to do so, the better off we will all be.
]]>Why is it that providers are regularly willing to accept half or less of their billed charge amounts as payment in full for their services? In our experience, negotiated discounts are sometimes as much as 85% off of billed charges. Do PPO networks really have so much negotiating clout that physicians are willing to provide their services at half price or less? Or, is it that physicians have inflated their billed charge levels so much since the advent of PPOs that now there is no realistic relationship between billed and negotiated charge levels? Isn't this really just a billing war between providers, PPO networks and health plan sponsors - and the plan members who go out of network are subject to collateral damage? Providers get to say "we gave in to negotiations and deeply discounted our fees." Networks get to say, "We are great negotiators and are delivering discount value to our customers." Employers are able to say, "We are smart buyers and are saving our company and employees lots of money off of provider charges." In the meantime, employees who venture out-of-network (intentionally or un-intentionally) are often left with big bills to pay.
Unfortunately, unless we want governmental price controls, there isn't a lot we can do about this. Employers can change the payment level for out-of-network services to a percent of Medicare's fee level (i.e. 120% of Medicare). This avoids the whole debate about what is usual and customary. However, this will still leave employees exposed to large balance due amounts for billed charges less the Medicare-pegged allowable amounts. As always, and easier said than done, consumers need to first ask providers if they will accept the plans eligible charge amount as payment in full.
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I wish I could afford AstraZeneca’s public relations firm. They had the media hook, line and sinker last week with the release of its Crestor study results. Even the Wall Street Journal gave AstraZeneca top billing on page B1 with what appeared to be a replay of AstraZeneca’s press release. “Crestor sharply lowered risk of heart attacks among apparently healthy patients in a major study that challenges long-standing heart-disease prevention strategies," the WSJ reported in its first paragraph. It wasn’t until the end of the article (on page B4) that the WSJ revealed that AstraZenece was the sponsor of the study and that Crestor users demonstrated a 25% increase in the incidence of diabetes.
Yes, much has been reported on the Crestor group experiencing 54% fewer heart attacks than the placebo subjects, as well as 48% fewer strokes, and 20% fewer deaths. But what do all these percentages really mean? There were 83 cardiac events of all types in the Crestor group, an 0.9% actual risk, compared with 157, or 1.8%, in the placebo group. The study actually showed that physicians would have to treat 180 people for two years to prevent one death.
Is this big news? Will this study “reshape cholesterol-treatment guidelines used for more than a decade to fight cardiovascular disease, the world’s leading killer”? (from the second paragraph of the same WSJ article) I hope not. This study calls to mind the cautions of Dr. Norton Hadler of the University of North Carolina. Dr. Hadler has proposed that Medicare and other plan sponsors consider adopting a simple “number needed to treat” rule (NNT) in determining the eligibility of new medicines and procedures. For a hard outcome (death, heart attack, stroke, etc.), the NNT should be no larger than twenty (20), meaning for every twenty patients treated, at least one would avoid the event. For a soft outcome (feel better, function better, etc.), the NNT should be no larger than five (5). These seem like reasonable thresholds – and ones that AstraZeneca’s Crestor study results would easily fail.
You can see Dr. Hadler’s own reaction to the Crestor study at ABCnews.com:
http://abcnews.go.com/Health/HeartDiseaseNews/story?id=6207285&page=1
By the way, Dr. Hadler’s thresholds would be measured by independent studies, not those funded by the manufacturers. As pointed out in a New York Times editorial today, the lead investigator in the study also stands to benefit from a patent involving the use of C-reactive protein (or CRP) to evaluate the risk of cardiovascular disease.
So, let’s take a pass on more medication and focus our attention on better diets and more physical activity.
What is up with this? Is it possible that the recent turmoil in our financial market has trickled down to Main Street in such a way that maintenance drug spend is being affected? Does it mean that prescription drug copays are now at a level that is impacting plan member decisions regarding the value of their medications? Are plan members switching to generic drugs? Have they responded to health promotion programs and changed their diet and exercise routines - no longer needing cholesterol lowering drugs? Regarding declining Lipitor sales, Pfizer reported, “The drug’s sales have been under pressure from the availability of cheaper, generic options for cholesterol treatment.” (WSJ October 22, 2008)
This sounds like a good trend to me. Usually when economic times get tough, plan members load up on discretionary treatment before they lose coverage. Now that cost sharing levels in most PPO and CDH plans are significant, plan members may be foregoing care altogether. Is this good? Are we avoiding unnecessary plan costs? Or, are we simply deferring appropriate preventive treatments? Only time will tell.
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In the meantime, the the financial markets have been in a real crisis and major commercial banks and investment banking firms are on the skids. Some pundits are forecasting the crisis to impact the auto industry even harder than the housing sector.
How about the insurance industry? We know AIG took a tumble. Is that all?
No, employers need to brace themselves for a broad impact on mainline insurance companies like MetLife, Aetna and Cigna just to name a few. Insurance companies hold financial assets as reserves to offset their long term liabilities. Unfortunately, these assets are the same ones that have dramatically fallen in value just like our 401k accounts.
In years gone buy, this would not have been such a big thing. Most of these insurance companies were mutuals. However, their stock is now publicly traded and this means they have investors looking at their quarterly financial results. This short term pressure will lead them to raise product pricing as a way to make up for investment losses. So, hold on to your check book during renewal negotiations. The market may get a little tighter.
]]>One pharmaceutical analyst was quoted as saying, “The whole industry is finding it difficult to get through the FDA with line extensions because the FDA is understaffed and focusing on things they think are more innovative and important.” We can only hope this is true.
An FDA spokesperson said, “The law does not allow the FDA to discriminate against any new drug application based on what else is already on the market.” Well, here is to hoping the FDA manages its resources well without running afoul of the law, and drug manufacturers respond with real innovations instead of line extensions.
]]>Health clinics, fitness centers, wellness programs, preventive screenings, food service, and health plan design changes are being reshaped (no pun intended) to encourage healthy employees, great productivity and lower health plan costs. Some employers are adopting aggressive measures to impact employee health. Most are more gradually encouraging health risk appraisals and screenings, adding preventive benefits to their plans and hosting wellness fairs, lunch and learns, etc.
So, how do our efforts compare to others across the globe? The New York Times reported last week on one country that is taking a particularly aggressive stance – Japan. With nationalized healthcare, the Japanese government is on the hook instead of employers, and it has decided to get aggressive. A new Japanese law took effect two months ago that requires employers and local governments to measure the waistlines of people between the ages of 40 and 74 as part of their annual checkups. Those who fail to meet the applicable standard, are required to participate in education and behavior change programs.
“To reach its goals of shrinking the overweight population by 10 percent over the next four years and 25 percent over the next seven years, the government will impose financial penalties on companies and local governments that fail to meet specific targets.” http://www.nytimes.com/2008/06/13/world/asia/13fat.html?pagewanted=1&ei=5070&en=7ba4c425e5d62707&ex=1214020800&emc=eta1
The Japanese have even renamed “overweight” as “metabo” which is short for metabolic syndrome, the condition of heightened risk of developing vascular disease and diabetes (abdominal obesity, high blood pressure, and high levels of blood glucose and cholesterol).
Do we need government to take aggressive action to improve the health of our workforce? Would our government and society ever be willing to take such action? Why is a country not known for its overweight people willing to undertake such action and be out front on this issue?
]]>My question is “who is going to protect people from unnecessary treatment once a genetic test shows any level of predisposition?” The healthcare delivery system has demonstrated a great ability to not only treat medical conditions, but also to treat the potential for medical conditions. Americans have also shown a predisposition to try to reduce risks through diagnostic testing and medication. Hopefully, some day they will also have a predisposition to improve their diets and exercise levels to reduce these same risks.
So, will genetic testing lead to a growth in treatment of potential conditions? And, what “prophylactic treatments” will benefit plans be responsible for? I expect genetic testing will lead to more medical treatment – including a rise in the use of bioengineered drugs. This will undoubtedly be good for some, but bad for many others. I expect it will go too far, because our culture (and third-party payment model) generally looks at “more” as “better.”
In the meantime, there is one tool available for employers to use – A Purchaser's Guide to Clinical Preventive Services: Moving Science into Coverage which is currently available through the National Business Group on Health at this site: http://www.businessgrouphealth.org/benefitstopics/topics/purchasers/index.cfm. This guide was developed in conjunction with the Centers for Disease Control and Prevention (CDC) and it leverages the work of the U.S. Preventive Services Task Force.
]]>As Ross DeVol of the Milken Institute points out in the Dispatch article, “The good news is that with moderate improvements in prevention and early intervention such as reducing the rate of obesity, the savings to the economy would be enormous.” Can we do this? Can we reduce the rate of obesity among our employees? I believe the answer is definitely “yes.” We have already seen progress through some particularly creative programs. Is this a sensitive issue to touch? Again, I believe the answer is definitely “yes.” Is it too sensitive to address? “No” and it isn’t in anyone’s best interest to skirt this issue. Employers have the resources and the “position power” to make weight management a bigger issue and to help employees succeed. It is hard work, but well worth it in many ways.
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It is with this backdrop that we launch our first blog. We are in the business of protecting the financial health of employers and the physical health of their employees. We are consultants and we are students of the business. We don’t just observe what’s going on around us. We study it and work with our clients to manage it more effectively than others in the marketplace.
Through this blog, we are inviting you into our daily discussions. We are sharing items that strike us as significant in a manner similar to the doorway conversations we share with our colleagues. “Hey, did you notice…” Please join in our virtual doorway discussions. Read what we are noticing and thinking. Join in and share your own observations and thoughts. Think-Build-Act. Let’s get started together.
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