Learn about reference pricing as a purchaser in response to the high and rising pharmaceutical sales and innovative strategies for managing specialty drugs.
2. Agenda
• Reference Pricing as a Purchaser Response to High and Rising Pharmaceutical Prices – Jamie (20 mins)
• Innovative Employer Strategies for Managing Specialty Drugs – Linda (20 mins)
• Q&A (20 mins)
Linda Davis, Consultant
Minnesota Health Action Group
James C. Robinson
Leonard D. Schaeffer Professor of Health Economics
Director, Berkeley Center for Health Technology
University of California
3. Logistics
• All lines are muted.
• Questions will be monitored in the chat box throughout the presentation.
• Email kklaas@pbgh.org for a copy of the slides.
4. Reference Pricing as a Purchaser Response to High
and Rising Pharmaceutical Prices
James C. Robinson
Leonard D. Schaeffer Professor of Health Economics
Director, Berkeley Center for Health Technology
University of California
5. Reference Pricing as a Purchaser
Response to High and Rising
Pharmaceutical Prices
James C. Robinson
Leonard D. Schaeffer Professor of Health Economics
Director, Berkeley Center for Health Technology
University of California
7. In most sectors, variation in price is due to variation in
quality, convenience, performance
In health care, variation in price is due to factors on
the supply side:
Drug manufacturers: patents and exclusivity
Care providers: market consolidation
Price Variation in Health Care
The variation in price is permitted by
factors on the demand side
Consumers lack incentive to
shop, as someone else is
paying (insurer, employer)
Consumers lack information on
prices and quality at the time of
making choice
• Unmanaged variation in price permits increases in price
8. 8
Dominant Employer Response to High Costs:
Shift to High-Deductible Plans
Percentage of Covered Workers Enrolled in a Plan with a Deductible of $1,000 or More
for Single Coverage
Source: Kaiser Family Foundation/HRET 2015 Employer Survey
10. 10
The Limitations of High Deductible Plans
HDHP reduce costs by
reducing use, not by more
shopping for lower price
Some reduce use of
appropriate care
Most consumers do not
use transparency tools
Consumers need a simple
way to identify low-priced
drugs, tests, facilities
11. Sponsor (employer, insurer) establishes a maximum
contribution (reference price) it will make towards
paying for a particular service or product
This limit is set at some point along the
observed price range (e.g., minimum, median)
Patient must pay the full difference between
this limit and the actual price charged
Patient may reduce cost sharing by switching to
low-priced product or provider
Patient chooses his/her cost sharing by choosing
his/her product or provider
Patient has good coverage for low priced
options but full responsibility for choice
What is Reference Pricing?
15. RETA Trust implemented reference pricing July 2013
Drug claims from July 2010 to December 2014 were
obtained from RETA Trust (N=573,456) and from
comparison labor union trust (N=549,285)
Compare change in drug choice and price paid for
RETA, before and after implementation, with changes
(if any) over same period for comparison group
Probability that the patient selects the low-price drug
within its therapeutic class
Average price paid per 30-day prescription
Average consumer cost sharing per prescription
JC Robinson, CM Whaley, TT Brown. Association of
Reference Pricing with Drug Selection and Spending.
New England Journal of Medicine 2017;377:658-75
Data and Methods
16. Impact of Reference Pricing: Increased
Share for Low-Price Drug with Each Class
17. Impact of Reference Pricing: Reduced Prices
Paid and Increased Consumer Cost Sharing
18. Much of the price increases and variability have
been for specialty drugs, which are more complex
and expensive than traditional medications
There is great potential for price competition among
specialty drugs: innovation is producing large
numbers of therapeutic equivalents
Follow-on brands, generics, and biosimilars
Examples: Rheumatoid arthritis, growth hormone,
multiple sclerosis
To be effective, reference pricing will need to
incorporate comparative effectiveness analysis (as
done in DE and FR)
This is the next frontier for reference pricing, and for
all forms of value-based drug purchasing
Can Reference Pricing Be Applied to
Specialty Drugs?
19. 19
Reference Pricing in Context: Impacts for
Surgical Procedures and Diagnostic Tests
Percentage point
increase in use of low-
price facilities
Percent reduction
in price paid per
procedure or test
Total spending by
commercially insured
individuals in the US
($Billion)
Potential spending
reduction from
reference pricing
($Billion)
Joint replacement 14.2 19.8 17.09 3.38
Arthroscopy of the
knee
14.3 17.6 5.70 1.00
Arthroscopy of the
shoulder
9.9 17.0 3.80 0.65
Cataract removal 8.6 17.9 1.90 0.34
Colonoscopy 17.6 21.0 11.39 2.39
Laboratory tests 18.6 32.0 23.73 7.59
Imaging: CT scans 9.0 12.5 17.09 2.14
Imaging: MRI
procedures
16.0 10.5 19.93 2.09
Total NA NA 100.62 19.59
20. 20
The American Question
Reference pricing seems to offer substantial
benefits to purchasers. Why has it not be
adopted more broadly?
Perhaps purchasers (employers, insurers) are
preoccupied with HDHP and narrow networks,
and will consider reference pricing as the
limitations of those strategies become evident
Perhaps purchasers simply have not heard about
reference pricing
Perhaps reference pricing has limitations…
21. 21
Challenge: Breadth of Applicability
Reference pricing is only applicable to ‘shoppable’ tests and
treatments, where consumers have the time and the
information to compare price with performance
But these acute, non-emergency drugs and services
account for a very large share of health spending
Comparison information on price and quality is improving,
supplemented with decision supports
Provider organizations (e.g., ACO) paid on per-capita basis
need consumer cost sharing incentives to help them steer
their patients to low-price and cooperative referral
specialists, facilities, and drugs
22. 22
Challenge: Administrative Burden
Reference pricing requires that a payment limit be identified
for each drug class and for each procedure
But a consumer-driven health system must help the
consumer make intelligent choices. Sponsors (insurers,
employers, advocates) cannot avoid the task of identifying
opportunities for saving money by moving to cheaper but
high-quality options
Reference creates the incentive for consumers to consider
price, but needs to be supplemented by information on
options and the creation of new options
23. 23
Challenge: Insufficient Competition
Reference pricing requires there be multiple drugs in each
therapeutic class and multiple providers in each market
But some drugs have no alternatives (orphans) and
many geographic markets are consolidated
But the pipeline of innovation is making many specialty drug
classes increasingly competitive (e.g., rheumatoid arthritis,
multiple sclerosis)
Reference pricing may offer the best response to
consolidation, driving patient volume from hospital-based for
free-standing ASCs, from ASC to physician offices, from
physician offices to the home
47. Contact Us:
Bill Kramer, Executive Director, PBGH
wkramer@pbgh.org
Kelly Klaas, Purchaser Value Manager, PBGH
kklaas@pbgh.org
47
Hinweis der Redaktion
Health plans off
3 year journey so far….2 years of learning, 1 year of action
17 employers throughout
Added industry players in 2017
Developing scorecards and criteria for comparing performance, accountability
Communication piece for Community Dialogue, Guiding Coalition, all stakeholders, key informants
Consistent messaging to all stakeholders by all employers
Short hand version of goals
Prioritized 10 for this year, 10 remaining next year
Will talk more about NDCs, transparency and fiduciary
Deliverable: Scorecards
CRITERIA EXAMPLE IN APPENDICES
Asked employers their impressions today; some employers with same vendors didn’t have same perception
Either not aware of treating different employers differently
Need to ask vendors for information to verify impressions
No red line = 0
Separated functions and goals for specialty pharmacies
Continues to be confusion about the different functions and accountabilities; conflict of interest with PBM
Two vendors = no complete picture of patient’s treatment or outcomes, costs, options
-Disconnected data sources; not integrated by condition, patient, provider for analysis
-DIFFERENT benefit plans and vendors
-DIFFERENT strenghts and weaknesses
-Different key relationships
PBMs and pharmacies
Health plans and providers
-Conflicts of interest
PBMs-mail, retail, specialty pharmacies
Providers-buy and bill
Made progress in last 3 years! Still not there but getting close
WHY WE NEED NDCs = HUGE SPEND UNDER MEDICAL BENEFIT
HOW TO UNDERSTAND VALUE AND MANAGE SPEND WITH NO INFORMATION ABOUT COSTS?
PRIORITIES IN APPENDICES
Multiple opaque relationships and conflicts of interest
DRIVING WITH A OPAQUE WINDSHIELD?