E N D
1. The Value of HealthcareSetting the Stage: Looking to the Future Ian Morrison
3. The Emerging Value Context Rising costs
Rising cost shifting to consumers
The Fat Trapper, Bariatric Surgery and the “Swaning of America”
Infatuation with Technology based care
Evidence that Innovation makes a difference
Expect more Innovation in long term although gaps in the short run
Potential Paradigm Emerging
High cost, High efficacy, High Customization but unaffordable
The Concorde Syndrome
The Quest for Value
IOM: Balancing cost, quality, access and equity
Evidence based medicine and evidence based benefit design
Pay for Performance
Value Purchasing
4. Attitudes toward Value Strong argument that American healthcare is a poor value
The International Story
The Dartmouth Story
Americans love high technology medicine and think we as a society should spend more on it…..but, OPM (Other People’s Money)
Healthcare is a superior good, as we grow economically we will spend more, but it has to flow from……
Government
Employers
Households
Value is in the eye of the beholder …..and the payer
Value is being redefined as we move to engage the consumer as payer and decision-maker
What is value to the millions left behind?
5. Value and the Transformation of the National Debate It’s not just about cost containment
It’s not just about affordability
It’s not just about prices
It’s not just about life expectancy
It’s not just about societal level value
It’s not just about the best, no matter how much it costs
It’s not just about healthcare as the last industry to go offshore to China or India
6. Innovation Imperatives Consumers love new technology
Innovation is the pharmaceutical industry’s ace in price control debates
But if you don’t truly innovate in a way consumers appreciate and pay for…….
The new environment shifts responsibility for payment increasingly and transparency of pricing to consumers for all aspects of healthcare not just drugs
Delivering innovation to an end user consumer that has value they are willing to pay their own money for
Do not overestimate (even) Americans willingness to trade up
Are we comfortable with overt tiering?
7. How Consumers Rate Industries Attitudes toward hospitals have remained mostly stable and positive over the last few years.
Pharmaceutical companies are being demonized in public debate. Drug companies have seen a dramatic decline in good will since 1997, including a large drop in the last year.
Attitudes toward hospitals have remained mostly stable and positive over the last few years.
Pharmaceutical companies are being demonized in public debate. Drug companies have seen a dramatic decline in good will since 1997, including a large drop in the last year.
8. Health Care Tops List of Industries Public Wants to See More Regulated
9. The Value of Health Care
10. The Argument For Consumer Responsibility for Payment
Consumers have been progressively insulated from the cost of care for the last 40 years
If they only knew how much healthcare cost and had to pay they would use it less
If they were responsible for paying they would also take more responsibility to become healthy and cost the system less
Consumers should have the right to choose and to trade up to better quality with their own money
When they are make rational consumer choices the market will be working and whatever is spent will be appropriate like any other market or sector of the economy
11. The Argument Against Consumer Responsibility for Payment
The 5/50 Problem: Most consumers that are heavy users have significant co-morbidity or serious illness like cancer, they didn’t choose this health status
One day in an American hospital and they are over their maximum deductible, so……
Catastrophic coverage is a green light for excessive care by hospitals and procedure-oriented specialists
While skin in the game can clearly move people around does it save money overall?
The equity problems:
A de facto reallocation of resources from poor to rich (my access to the collective social capital of health insurance is better because I can come up with the economic down payment for physician visits and tests)
Poor people with chronic illnesses will be disproportionately affected by consumer responsibility for payment
12. Consumer Exposure to Health Care Costs is About to Increase As health insurance became more comprehensive, OOP costs declined through the 1980s and leveled off beginning in the 1990s.
As health insurance became more comprehensive, OOP costs declined through the 1980s and leveled off beginning in the 1990s.
13. The Case of Pharmaceuticals Coverage and Value
Tiering and consumer strategies
How do consumers behave?
What are the challenges?
14. Who Pays for Drugs?
15. The Five-Tier Formulary In June, Express Scripts unveiled a five-tier prescription drug benefit plan. The tiers range from $3 at the bottom to $50 at the top. This development may mean that in the future, consumers will have coverage for all drugs, regardless of their “preferred” status. However, the copay range will continue to expand.
Therefore, pharmaceutical companies will have to make important decisions regarding where in the formulary each of their drugs should be placed. There will also be battles over what qualifies as a “look good/feel good” medication. Should drugs that relieve symptoms but do not extend life (e.g., non-sedating antihistamines) be placed in the fifth tier or do they belong in tiers 3 or 4?In June, Express Scripts unveiled a five-tier prescription drug benefit plan. The tiers range from $3 at the bottom to $50 at the top. This development may mean that in the future, consumers will have coverage for all drugs, regardless of their “preferred” status. However, the copay range will continue to expand.
Therefore, pharmaceutical companies will have to make important decisions regarding where in the formulary each of their drugs should be placed. There will also be battles over what qualifies as a “look good/feel good” medication. Should drugs that relieve symptoms but do not extend life (e.g., non-sedating antihistamines) be placed in the fifth tier or do they belong in tiers 3 or 4?
16. James Brown and Fernando Lamas Effect
17. “Skin in the Game” Matters Trading down twice as often as trading up
Rapid increase in generic and therapeutic substitution
Poor, chronically ill most effected
Starting to lead to adverse health outcomes like the uninsured
Simple cost shifting without sophisticated disease management is not the right answer in the long-term
18. Big Increase in Trading Down on Drugs
19. Rx co-pay increase: More bargain-hunting since 2002. Low- and middle-income equally likely to “trade-down” What people did in response to increases in Rx cost-sharing varies considerably by income and tiered prescription drug coverage insurance.What people did in response to increases in Rx cost-sharing varies considerably by income and tiered prescription drug coverage insurance.
20. The Transformation of Pharmaceuticals Discover a unique white powder
Search for a therapeutic action
Establish safety and efficacy
Make sure it’s better than available alternatives
Promote to the profession
Get a passive payer to pay for it Design a white powder with a predictable therapeutic action
Establish safety, efficacy and cost-effectiveness
Make sure it meets a previously unmet medical need or has an effect that is detectable to human beings
Promote to all the Ps (patient, physician, PBM, payer, pharmacist, politician, press)
Get an active payer to pay for it
21. Traditional Pharmaceuticals vs. Advanced Therapeutics
22. Happy Biotechnologist Scenario We have the best stuff
Sure it’s expensive, but it works
Because it works there are savings elsewhere
This is complex – do not try this stuff at home
As generic competition makes costs go down for some technologies, there will be more gross margin left for us
Catastrophic drug coverage insulates consumers from caring about price
23. Biotechnologist’s Nightmare Scenario Public, physicians, policymakers could care less about large molecules; we don’t buy drugs by the atom
It’s complex brewing not chemistry, but how hard could it be?
Big ugly buyers and providers incensed about price of technology
High efficacy focused on small sliver of needy, desperate patients
Payers/purchasers
Medicare inpatients – the stent effect
Medicare hospital outpatient – the value case
Administering Physicians e.g. oncologists
zero-sum game on incomes
“Plop, plop” vs clinical efficacy
Consumers
Co-insurance on top tier
All drugs in CDHP
Can you pass the NICE/Kaiser Test?
24. Demonstrating “Value” What is value?
Benefit / Cost? Quality/Cost? Access/Cost?
Benefit to whom?
Patient, physician, payer, insurer, employer, government, public(?), politician?
Cost to whom?
Patient, physician, payer, insurer, government, public (taxpayer)?
Is “value” (for money) the same as cost-effectiveness?
Remember if you cut the price in half, you double the value
25. A review of scenarios first presented at the SHP Annual Luncheon in March.A review of scenarios first presented at the SHP Annual Luncheon in March.
26. Scenario 1: Tiers R’ Us The SUVing of American Healthcare
We pay more for choice and control
WIPDBS brings the market to Medicare
Chronically ill, low income beware
Catastrophic coverage for the very sick
The benefits of benefit design: save employers money
Trading down more often than trading up
A world of opportunity and risk
Private sector celebrated
27. Scenario 2: Bigger Government Major backlash against cost shifting to consumers
2008 election run on the retirement and health security issues of the middle class
Protect the baby-boom at all costs
Medicare Advantage for All or
Pay or Play or
Expanded Medicare and FICA tax or
Fill the donut holes, stick it to pharma, shore up the entitlement
Live with the consequences
Politicization of healthcare spending
Rationing and restriction
Lower Innovation
Lower profits
Equity over efficiency
Rising costs and taxes
28. Scenario 3: Market Nirvana Break the Culture of Entitlement
Consumers learn to discriminate and pay
We buy care not cars
Incentives for health and personal responsibility
Catastrophic coverage and retail medicine for all
Utilization based on ability to pay
The rise of cheapo plans and delivery systems
Reaching high end retail customers is key
Delivery reform is market-based not evidence-based
Opportunities abound for the entrepreneurial
America’s economic base as private sector healthcare
High quality, high service, low equity
29. Scenario 4: National Rational Healthcare Universality and Delivery System Redesign
Evidence-based floors and ceilings
Pay for Performance
Reference-pricing and cost-effectiveness criteria for new technology
Financial rewards for clinical redesign
Universal Mandated Coverage
Employer and individual mandates or
Expanded Medicare Advantage or
Expanded Safety Net Delivery Floor
Expanded Access and Rational Design
Delivery System Innovation rewarded
All enabled by a 21st century IT and bioscience infrastructure
30. Implications for Value No matter what, we will need better value measures and more transparency of measures
Value based purchasing will become more prevalent and have a powerful influence on providers and vendors
Consumers will become more engaged in value decisions but we cannot rely on them absolutely
The systems of healthcare need to be continuously improved to deliver greater value
31. Towards an Action Agenda The Need for Leadership
Stakeholder Dialogue
Not just IOM or NHI
Conversation for Action
Not about figure pointing
Constructive Engagement about Value Improvement in Healthcare
Redesign of the systems of healthcare
Generate Enthusiasm
Cultivate Broad Community Dialogue
Identify Quick Victories