Is Significant Change on the Horizon for Payers, Pricing, and Pharma?

Thanks to the 2020 presidential election, pharma companies can expect plenty of talk from both sides of the aisle on the need to lower drug prices. In fact, last year we saw proposals pass in the Democratic House and Republican Senate.

In September 2019, the Senate passed S. 2543, the “Prescription Drug Pricing Reduction Act (PDPRA),” which would in part cap annual out-of-pocket (OOP) spending in Medicare Part D at $3,100. And in December 2019, the House passed H.R. 3, the “Elijah Cummings Lower Drug Costs Now Act,” which also proposed the reform of the Medicare Part D benefit structure and would grant authority to the HHS Secretary to negotiate drug prices for both Medicare and the private market. While it seems unlikely that either bill will become law before the election, that doesn’t mean we won’t see some kind of reform before then.

“If Congress or the Trump administration are able to enact any type of drug pricing reform during 2020, it’s likely to be a redesign of Medicare Part D,” says Partha S. Anbil, Chief Data & Analytics Officer, Integrated Accounts, IBM Healthcare & Life Sciences Practice. “Both bills would implement OOP spending caps for Part D beneficiaries and considerably change how costs are divided up in the catastrophic phase of coverage. Those [Part D] designs look very similar to one another, so I’m somewhat optimistic for a Part D redesign, which could be part of the healthcare extenders package that expires in May.”

Mike Motto, SVP of Market Access, Intouch Solutions says that it is also important to keep an eye on the several other issues that come up during the ongoing discussions over drug pricing including price transparency, patient OOP burden, single-source/high-priced generics, price predictability, rare disease therapy pricing, and value constructs/assessments.

“Regardless of final legislation, biopharma would be well served to embrace price transparency going beyond whatever government may mandate to provide more clarity for patients and HCPs,” Motto adds. “But price transparency alone will not address drug pricing practices. And it’s noteworthy that assessments from groups such as ICER and NICE will continue to define value and set pricing benchmarks that will drive more rationalized pricing.”

Which Payer Has the Power?

Regardless of any drug pricing legislation, pharma companies will still be dealing with an increasingly complicated payer landscape in 2020.

“Beyond the well-known mergers between PBMs and health plans, there are constantly evolving relationships between benefits administrators and care delivery providers,” explains Ami Gopalan, PharmD, MBA, FAMCP, VP, Clinical and Strategic Services, Precision for Value. “For example, a health plan may use one PBM as a claims administrator, while using another PBM for rebate management. That health plan may also have an exclusive arrangement with a specialty pharmacy who may be affiliated with a larger entity. Pharma companies may have a difficult time keeping straight who the actual customer is and the type of influence they may have. In light of this, pharma companies should continue to look for opportunities to demonstrate the value their product offers across a variety of healthcare stakeholders.”

And speaking of PBMs, their power is only increasing.

“Today, downstream providers, like pharmacies, that rely on PBM reimbursement are forced to fight for every dollar,” says Mia Yousefzadeh, RN, Content Strategist, Valuate Health Consultancy. “These non-clinical stressors cause immense administrative burden that keep costs high, even for pharmaceutical manufacturers. If legislation around price transparency passes, a number of products will likely be excluded or not covered for many patients—collateral damage that stems from the power of the PBM and inhibits cost reduction opportunities.”

And according to Debbie Warner, Vice President, Kantar, pharma companies can expect “more of the same” tactics from payers that will continue to cause them headaches this year. That includes rising OOP costs (which may be even broader and deeper this year), more formularies split into preferred and non-preferred specialty tiers (with significant differences in co-insurance percentages between the two), and an increase in high-deductible health plans with deductible amounts also rising significantly.

“Meanwhile, copay accumulators and blocking of copay assistance by some health plans is making it more difficult for pharma companies to buy down OOP costs to neutralize the impact of being placed on a non-preferred tier,” Warner adds. “More payers are also excluding biologics when biosimilars are available. Finally, ‘performance’ type formularies that exclude certain branded options in competitive, high-cost categories, offered by PBMs such as CVS Caremark, Express Scripts, and OptumRx, are growing in size and popularity as employers attempt to hold costs in check.”

Changing the Value Equation

Payers are also now applying more management controls in therapeutic classes, such as oncology and rare diseases, that were once deemed protected. Elisa Remoundos, SVP, Group Creative Director, Copy, Entrée Health, says more health plans are restricting access through the same utilization management controls (e.g., prior authorizations and step edits) often used to manage access to treatment for patients with diabetes and heart disease and that this will require a different approach to a once traditional communication algorithm for payers.

“The definition of value is wholly different when it comes to certain cancers and rare conditions: Rather than cost-effectiveness, the emphasis should be on predictability and progression-free survival,” Remoundos adds. “Manufacturers will need to proactively control and define the value narrative for payers before they begin to define it for themselves, and start to limit access altogether (e.g., PARP inhibitor class). The tools are in place (21st Century Cures Act and FDAMA 114) to support early and bold conversations, which will help the manufacturer keep prescribers in the drivers’ seat of their patients’ care.”

Pharma companies will now also have to compete with new organizations that are working to provide better value to patients on their own. For example, Skin Medicinals, a conglomerate of about 3,000 dermatologists throughout the U.S., have come together to agree to prescribe compound solutions created using the same topical medications as brands, but at a fraction of the cost.

“Pharmaceutical companies have trillions of dollars on hand to always find a way to come out on top,” says Founder Dhaval Bhanusali, MD, FAAD. “The only way the pharmaceutical industry will change is by being threatened by companies such as Skin Medicinals who offer $25-$45 prescription-strength drugs. If every dermatologist did this you would see the pharma industry forced to drop their prices in order to compete. This would then lower the cost to insurance companies which would then ultimately lower all Americans’ yearly premiums. That is what the medical field needs to understand in order to affect real change in the near and distant future.”

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