Archive | February, 2021

Press Mentions

February 13, 2021 by George Van Antwerp 0 Comments

Just capturing a few things:

  1. Rule Eliminating Rebates Leaves Plenty of Uncertainty (article in Pharmacy Times about presentation I gave at Asembia in 2019) and also in the American Journal of Pharmacy Benefits (July 2019)
  2. Care at the Counter: Technology and Policy are Empowering Pharmacists (Forbes.com)
  3. The Data Antidote by Kate Smith in September 2018
  4. Can We Fight Opioid Use Disorder by Filling Data and Policy Gaps by Allison Inserro in AJMC on May 31, 2018
  5. MMIT Spotlight on Market Access (May 18, 2020)
Books / Articles, Press

The Specialty Pharmacy Elephant (2016)

February 13, 2021 by George Van Antwerp 0 Comments

I originally wrote this for the Deloitte Center for Health Solution blog. It was then republished in the HealthCare Consumerism Outlook 2016 publication.

PBM / Pharmacy

The Jetson’s drugstore: Welcome to the digitization of the pharmacy sector

February 13, 2021 by George Van Antwerp 0 Comments

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]
Originally Posted by George Van Antwerp on September 28, 2017

A flying car that conveniently folds into a briefcase never materialized, but the digital revolution now underway in pharmacy could lead to a reality not far from the futuristic world envisioned by The Jetsons cartoon series of the 1970s.

As an industry, health care is often seeking ways to pay for and reward value rather than volume. While pharmacy often lags behind medical in this area, discussions are starting to focus more on consumer engagement, patient satisfaction, clinical outcomes, and collaboration across the ecosystem (i.e., retail, mail, and specialty pharmacies, distributors, manufacturers, and pharmacy benefit managers (PBMs)). Rather than creating value through scale to drive price negotiations, three primary forces will likely push companies across the pharmacy ecosystem to transform their business models:

  • Advancing technologies from the Internet of Things (IOT) to Artificial Intelligence (AI).
  • Growing expectations from consumers as other industries embrace them and make them the focus of their outside-in redesign of processes and technology.
  • Increasing data availability and technology that leads to new insights and predictive models that allow companies to personalize and engage with consumers (and their care teams) in new ways.

If we look to the future, will pharmacy companies be the delivery channel, the aggregator, the clinical care management company, the technology vendor or something very different? As pharmacy leaders ask themselves where they want to play and how they will win, defining the role of pharmacy within the health care ecosystem will likely be critical.

Technology: Imagine the following future scenario (all of which is in development).

As you start your day, your smart toilet detects abnormal sugar levels in your urine and alerts your physician. After a telehealth visit (from your couch) with an avatar of your physician, your physician gives you a prescription for a new medication. You fill your own prescription using a 3D printer. The generic drug is embedded with a smart chip that transmits clinical data back to the physician before dissolving in your stomach. The physician sends information about common side effects to your home monitoring system, which tracks your health and compliance. After a few days, your smart home recognizes you as you walk into the kitchen and asks how you are feeling. Your response about a rash correlates with a common side effect, and the monitoring system offers to schedule an appointment with your physician to determine if an alternative medication might be better.

While none of these technologies will see broad adoption any time soon, the pharmacy industry should consider investments now in preparation for the future. Such investments will likely help traditional players compete with start-ups and health-focused technology companies that will probably try to carve out the most profitable sectors (as we see in retail).

Pharmacy companies should be asking:

  • How should we work with smart devices and use that data to help manage conditions such as diabetes?
  • How can we more effectively share data and clinical insights with physicians?
  • How should we collaborate with pharmaceutical manufacturers to think about drug delivery and real-world evidence?
  • How can we use artificial intelligence and predictive models to enhance the customer experience?
  • How can we help consumers save time and money?
  • How can we simplify health care to improve engagement, adherence, compliance, and outcomes?

Consumerism: Today’s hypercompetitive marketplace often requires constant innovation and digitization. It commonly requires companies to look at their products and solutions through the eyes of the consumer, particularly as adoption of high-deductible health plans (HDHPs) continues to expand. One way to think about this is to follow the consumer journey. Here are four moments when consumers are often open to engagement:

Open EnrollmentWhat is the best health plan for me given my conditions and prior medication use? How can I save money? What is the likely progression of my condition?
DiagnosisWhat is wrong with me? What are my treatment options? How have other patients responded to this medication? What are the side effects? Is there a lower-cost medication?
Pharmacy Selection & Pick-upWhich pharmacy will save me the most money? Which pharmacy is most convenient? Where will I get the best service? What do I need to know about the drug and my condition? Will it interact with any food I eat, vitamins I take, or other medication? What is this prior authorization and why did I not know about it until I went to pick up my medication?
Ongoing Support & ManagementWhat should I be doing to manage my condition? Why was my copayment so high? How can I see the status of my order in real-time through an app? How do I know if the medication is working? Am I better or do I have to keep taking the medication?

Data: For many companies, it is still a challenge to integrate pharmacy and medical data. When you begin to look at lab data and unstructured data (e.g., patient reported outcomes, physician notes), the challenge can increase. At the same time, many technologies are creating new opportunities to leverage data and analytics to shift from reactive to proactive.

Data and analytics might help the pharmacy industry to:

  • Predict who will be adherent to a medication, and match that patient to an intervention.
  • Create a risk score around abuse that identifies at-risk patients and triggers an earlier intervention.
  • Develop a churn model that determines which patients are likely to switch pharmacies, and offer insight into how to retain them.
  • Create a one-to-one marketing approach to determine the right message in the right channel to the right person at the right time going beyond segmentation and personas.
  • Identify and route an inbound caller to the most appropriate agent using a predictive reason code.
  • Identify patients at risk for depression so that their treatment can be managed effectively.

Three drivers of change – technology, consumer, and data – will likely manifest themselves in different ways at different companies. As leaders think about business-model innovation and new product solutions using frameworks such as the Ten Types of Innovation or the Ambition Matrix, we will likely continue to see greater differentiation across the pharmacy market. I am excited about what this means for pharmaceutical manufacturers, wholesalers, PBMs, retail pharmacies, specialty pharmacies, and provider owned pharmacies.

This blog was first published in A view from the Center: Deloitte’s Life Sciences & Health Care Blog

Healthcare, Innovation, PBM / Pharmacy, Technology

Drug rebates will remain… but so will pressure to reduce drug prices and demonstrate value

February 13, 2021 by George Van Antwerp 0 Comments

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : July 29, 2019
Author: Deloitte
Categories : Biopharma, Drug rebates, Health policy, Life sciences

On July 10, the White House abandoned efforts to eliminate safe-harbor protections for drug rebates in Medicare Part D and Medicaid managed care due to concerns that the change would lead to higher premiums for beneficiaries. (For background on this issue, see our previous blogs.) While the rebate issue is now off the table, pressure to reduce prescription drug costs is not. But rather than waiting for the next round of regulations, we believe the pharmaceutical industry should consider developing its own business models that address drug prices and demonstrate value.

Recall in January, the US Department of Health and Human Services (HHS) proposed eliminating safe-harbor protections for rebates beginning on January 1, 2020. The Congressional Budget Office (CBO) estimated the proposal would have increased Medicare spending by $170 billion and Medicaid spending by $7 billion over the next decade (see the May 7, 2019 Health Care Current). It also would have increased the premiums that Medicare beneficiaries would pay under Part D.

Who’s to blame for rising drug costs?

The Pharmaceutical Research and Manufacturers of America (PhRMA) said the decision not to eliminate safe-harbor protections for rebates was “a blow to seniors who could have paid less” for prescription drugs. America’s Health Insurance Plans (AHIP), however, said that drug manufacturers are solely responsible for setting drug prices and determining price increases, and could decide to reduce prices. In February, a group of biopharmaceutical executives told a Senate committee that eliminating safe-harbor protections—and shifting toward a value-based drug-pricing system—might be the key to reducing drug costs (see the March 5, 2019 Health Care Current). However, at a subsequent hearing, executives from five large PBMs suggested that increased competition among drug manufacturers could help to reduce drug costs.

At the heart of the debate is whether drug prices are artificially high because of the rebate system, or whether this system helps to bring drug prices down. In 2017, rebates and discounts offered by brand-name drug manufacturers reduced list prices by an average of 44 percent.1 Several PBMs have said they keep 5 percent or less of the rebates,2 which means the vast majority of rebate dollars are transferred to health plans, self-insured employers, and Part D plans to help reduce premiums. While some PBMs say they send 100 percent of rebate revenue to clients, they usually charge administrative fees to plan sponsors.

Four strategies for helping ensure market access

The average older American takes 4.5 prescription drugs, often to treat a chronic illness.3 Between 2012 and 2017, the average annual cost of four widely used prescription drugs increased about 58 percent, according to AARP. Even with the rebate proposal off the table, pressure to rein in price increases is likely to increase, which could push pharmaceutical companies to compete more directly on value. This might require a shift in strategy toward more robust evidence generation, the continued use and expansion of support services, and greater competition in value-based contracts. As we have suggested in previous posts, here are a few ideas pharmaceutical companies might consider:

  • Use real-world evidence (RWE) to highlight clinical and economic outcomes: Pharmaceutical companies might want to evaluate clinical outcomes to demonstrate superiority in class, improvements in standard of care, or efficacy within specific patient sub-populations. As value-based contracts become more common, manufacturers should demonstrate the value of new products or product classes. Such contracts might also help to mitigate the clinical uncertainty of a high-cost treatment.
  • Differentiate products based on patient preference. Patient convenience, or strategies that help boost adherence, might help pharmaceutical companies make their products more appealing.
  • Expand patient-support services: Most (if not all) pharmaceutical companies offer some type of patient support. But they should consider making information available directly to patients to help them understand their illnesses, manage their medications, and navigate prior-authorization requirements (particularly in specialty areas).
  • Consider using targeted therapeutics: Manufacturers might try to reduce the impact on health plans and other payers by identifying target populations that are likely to receive the maximum benefit from a therapy.

Regulatory changes could accelerate use of value-based contracts

Over the past few years, we have seen an uptick in value-based contracts in several therapeutic categories. However, some barriers appear to be holding back widespread adoption. Some contracts have been abandoned before completion due to the amount of work required to operationalize them. While these contracts haven’t fully yet taken root, we expect the evolving regulatory environment could change that. The Deloitte Center for Health Solutions recently analyzed branded portfolios of the 19 largest biopharma companies (by revenue). From that list, we found 16 drugs that are (or were) included in a VBC.

While the rebate idea has been shelved, prescription drug costs will remain a top issue for the administration, Congress, and regulators as they advance policies outlined in the Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (see the January 8, 2019 My Take). Moreover, value-based contracting will continue to alter existing business models. The status quo is unlikely to remain and pharmaceutical companies and PBMs should prepare for change now rather than waiting for change to be mandated.
1 Adam J. Fein, Ph.D., Drug Channels Institute, April 24, 2018 (https://www.drugchannels.net/2018/04/the-gross-to-net-rebate-bubble-topped.html)
2 As a PBM and an Employer, We Know Rebates and Innovation Lower Drug Costs, Morning Consult, October 3, 2018 (https://morningconsult.com/opinions/as-a-pbm-and-an-employer-we-know-rebates-and-innovation-lower-drug-costs/)
3 Press release, April 4 2019, AARP (https://press.aarp.org/2019-4-4-Rx-Price-Watch-Report-Generic-Prescription-Drugs

PBM / Pharmacy, Politics

With drug rebates on the chopping block, stakeholders should prepare for change

February 13, 2021 by George Van Antwerp 0 Comments

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : April 17, 2019
Author: Deloitte
Categories : Drug rebates, Health care providers, Health IT, Life sciences

Early this year, the US Department of Health and Human Services (HHS) proposed eliminating safe-harbor protections for the rebates drug manufacturers pay to pharmacy benefit managers (PBMs), Medicare Part D plans, and Medicaid managed care organizations. At the same time, HHS proposed two new safe-harbor protections for some point-of-sale (POS) price reductions on prescription drugs and certain PBM service fees.

The proposed rules, which are slated to go into effect on January 1, 2020, would not affect commercial health plans…at least not yet. On February 1, HHS Secretary Alex Azar urged Congress to pass its proposal “immediately” and to draft legislation that would extend it to the commercial drug market. In March, Sen. Mike Braun (R-Ind.) introduced the Drug Price Transparency Act (S. 657), which would extend the rebate prohibition to the commercial market.

With the rule prohibiting rebates in Part D still under review, and more than 25,000 comments submitted, Part D plans have to create their bids for CY2020, which are due in June. On April 4th, the US Centers for Medicare and Medicaid Services (CMS) announced it would let Part D plans test a new payment model that would reduce the risk of large gains or losses through risk corridors under a two-year demonstration. Additionally, CMS provided clarity that Part D plans should submit bids “in a form and manner that is consistent with the Anti-Kickback Statute law and regulations in effect as of the bid submission deadline, including, for the purposes of bid development, the treatment of manufacturer rebates per our existing rules and guidance related to Direct and Indirect Remuneration.” At the same time, during an April 9 hearing before the Senate Finance Committee, executives representing six large PBMs warned that eliminating rebates could lead to higher drug prices for seniors and argued that changing the business model by January 1, 2020, was not realistic.

While we have been tracking this issue closely over the past several months, it continues to evolve. In my October blog, The future of drug rebates: Are they to be or not to be?, I explained how pharmaceutical manufacturers use rebates when establishing list prices for their products. In November, my colleague Joe Coppola outlined some of the alternative models that could emerge if safe-harbor protections are eliminated. This third installment of our drug-rebate blog series examines how the proposed changes could affect various stakeholders.

At the heart of the debate is whether drug prices are artificially high because of the rebate system, or whether this system helps to bring drug prices down. Critics argue that rebates are to blame for high drug prices, while PBMs and health plans contend that rebates are an important tool in keeping rising drug costs in check. Others note that the rebate system existed and worked when plan designs were based on flat-dollar copayments. However, now that health plans often tie patient out-of-pocket costs (e.g., deductibles, coinsurance) to list prices for drugs, this might no longer be a practical solution.

Here’s what we know…

Regardless of how rebate reform rolls out, most stakeholders will be affected. At this point, there are many questions and few detailed answers. If HHS’s proposed rule is finalized and survives any legal challenges that arise, we can make several reasonable assumptions:

  • Changes to the rebate model will begin with Medicare Part D and Medicaid managed care. Legislation, if enacted, could extend the changes to the commercial market.
  • Rebates will likely transition to upfront POS discounts for consumers that take place at the pharmacy.
  • Premiums are likely to increase for all affected lines of business.
  • Pharmaceutical manufacturers could face market pressure to reduce list prices to reflect current net prices.
  • Patients who take multiple brand and/or specialty drugs could see lower out-of-pocket costs.
  • PBMs will likely be affected but will survive.

Here’s what we don’t know…

A big question surrounding HHS’s proposal is whether it will help achieve the administration’s goal of reducing list prices for prescription drugs…and at what cost? Here are a few questions we can’t answer until we have more information:

  • How quickly will changes in Medicare and Medicaid spill over into the commercial markets?
  • Will pharmaceutical manufacturers and/or other entities have to maintain multiple price lists? If so, how will they be managed? And, how will this reimbursement be managed and paid at the POS?
  • Will changing the rebate model change the focus on value-based or outcome-based contracting around pharmaceuticals?
  • How much are premiums likely to increase?
  • Could the proposed changes really go into effect as soon as January 1, 2020 (as proposed by HHS)?
  • Will net prices be lower, and how will transparency influence future drug pricing?

Stakeholders will likely have to prepare for change in different ways.

Here is how we think various stakeholders could be affected by the elimination of the drug-rebate model:

  • Pharmaceutical manufacturers: Drug makers could face new operational challenges if they need to maintain a rebate-pricing strategy in the commercial market while developing a net-pricing strategy for Medicare and Medicaid. Pharmaceutical manufacturers will likely need to determine how much to change list pricing without rebates and/or whether to launch authorized generics. They might also have to build new connectivity with whichever third-party is responsible for paying the POS discounts (if not the PBMs). We would also expect to see an increased focus on competitive transparency and pricing analysis and greater emphasis on the value and efficacy of new therapies. This should also drive more focus on the comparative effectiveness of therapies.
  • PBMs: The transition away from rebates as a source of revenue will accelerate if the HHS proposal is finalized, and PBMs might need to redefine the services they offer. As brand prices are adjusted, PBMs will likely experience a drop in topline revenue and could see plan sponsors shift plan designs back to flat dollar copays. They will also likely need to re-contract with plan sponsors, especially around rebate guarantees, and might need to adjust the service fees they now charge pharmaceutical manufacturers.
  • Retail pharmacies: Retailers are likely to see a drop in topline revenue as brand prices are adjusted. Pharmacists might also need to spend more time explaining the new pricing model to consumers, and there could be changes to direct and indirect remuneration (DIR) from PBMs as rebates are replaced by POS discounts. Ultimately, the biggest impact will likely be the establishment of new payment mechanisms so that discounts can be received at the POS from a potentially new third-party.
  • Medicare and Medicaid plans: Retrospective rebates would likely be replaced by POS discounts. Given that copayments are already low in Medicaid, we anticipate supplemental rebates will be eliminated. By contrast, Medicare beneficiaries could see higher premiums as POS discounts show up as lower cost sharing instead of lower premiums. A more transparent model with the elimination (or reduction) of rebates and DIR fees will change PBM pricing and require new contracts especially around rebate guarantees.
  • Commercial health plans: We probably won’t see any immediate impact unless legislation is enacted to expand the rebate change to the commercial sector. However, we do expect health plans will start to use more POS rebates in anticipation of a future change. As with Medicare and Medicaid plans, commercial health plans also could see higher PBM fees and need to re-contract especially around rebate guarantees.
  • Self-funded employers: Self-funded employers won’t experience much of an impact if changes are limited to Medicare and Medicaid. However, we would expect employers to move to POS rebates so that they are prepared if Congress acts to eliminate rebates in the commercial sector. Self-funded employers could be asked to pay higher PBMs fees under a more transparent PBM model, and PBMs would need to re-contract with employers especially around rebate guarantees.
  • Consumers: People covered by Medicare Advantage and Medicare Part D are likely to see increased premiums. However, high-utilizers of heavily rebated brand or specialty prescription drugs, could wind up with lower total out-of-pocket expenses. The majority of consumers who fill generic drugs will not see any reduction in their out-of-pocket spending. With these changes, consumers are also likely to see increased transparency around drug prices.

Regardless of the shape the final rule takes, and the timing of the implementation, we are already seeing various stakeholders distancing themselves from drug rebates. In a letter to Office of Management and Budget Director Mick Mulvaney last fall, former House Energy and Commerce Committee Chairman Greg Walden (R-Ore.), and former Senate Finance Committee Chairman Orrin Hatch (R-Utah) noted that possible changes to the existing rebate model “could ripple across the health care sector, altering a major sector of the U.S. economy that Americans depend upon for their health and well-being.” Depending on where you sit, this is either worrisome, long overdue, or the natural evolution of the market.

PBM / Pharmacy, Politics

The future of drug rebates: Are they to be or not to be?

February 13, 2021 by George Van Antwerp 0 Comments

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : October 18, 2018
Author: Deloitte
Categories : Biopharma, Drug rebates, Life sciences, Regulatory

Nearly half of all Americans (49 percent) have at least one prescription drug, and 12 percent of the population has five or more, according to 2017 data from the Centers for Drug Control and Prevention (CDC). In 2016, $329 billion was spent on prescription drugs—an increase of nearly 30 percent from 2010.1

With so much money at stake, drug pricing has become a front-page issue. But the sale of pharmaceuticals is based on a complex economic model that few people fully understand. It involves employers, health plans, pharmaceutical benefit managers (PBMs), pharmaceutical manufacturers, wholesalers, pharmacies, and the government.

As the administration looks for ways to reduce prescription drug prices, prescription drug rebates is one area that has come under scrutiny. Health and Human Services (HHS) Secretary Alex Azar recently said it was within his agency’s power to eliminate rebates on prescription drugs. A proposed rule from HHS, which could end or significantly alter rebates, is being reviewed at the Office of Management and Budget. This regulation could affect commercial health coverage and Medicare Part D, but might begin with an initial focus on Medicare.

How drug rebates work

Pharmaceutical manufacturers establish a list price for their products with an understanding that discounts and rebates will be used to reduce the list price employers or government programs actually pay. A clinical drug evaluation conducted by a PBM’s Pharmacy and Therapeutics (P&T) committee identifies which drugs have to be covered and which drugs are optional. Health plans and PBMs then consider rebates as they design their formulary (i.e., the preferred drug list used by health plans). This discussion considers the breadth of the formulary (i.e., number of drugs per therapeutic category), whether the formulary is open or closed, and the number of formulary tiers. Rebates typically increase as a formulary becomes more narrow (or closed) because it increases the likelihood that certain drugs will be prescribed.

In 2017, rebates and discounts offered by brand-name drug manufacturers reduced list prices by an average of 44 percent.2 Several PBMs have said they keep 5 percent or less of the rebates, which means the vast majority of rebate dollars are transferred to health plans, self-insured employers, and Part D plans to help reduce premiums. While some PBMs say they send 100 percent of rebate revenue to clients, they do charge plan sponsors administrative fees. PBMs also collect administrative fees from pharmaceutical manufacturers for managing the rebates. What is less clear is how consumers benefit from rebates. For example, do rebates translate to lower health insurance premiums for everyone versus directly benefiting only the patients who use the medications?

The administration views rebates as one lever that could have an impact on drug prices. At the heart of this debate is whether drug prices are artificially high because of the rebate system, or whether this system helps to bring drug prices down.

Antitrust litigation prompted drug-rebate model

Drug rebates became popular among PBMs after the antitrust litigation of the 1990s challenged the ability of drug manufacturers to offer up-front discounts. The courts determined such discounts ran afoul of antitrust law by favoring managed care providers over pharmacies. In response, drug manufacturers turned to rebates, which the courts indicated would be preferable.

Under current law, rebates are permissible because the anti-kickback statue—and implementing regulations—has a discount exception (also known as the safe harbor). The administration’s “blueprint” to reduce drug prices includes the removal of this safe-harbor protection of manufacturer rebates. The intent is to decrease out-of-pocket costs for consumers and reduce overall drug spending.

Over the past five years, the amount of rebates and discounts offered by pharmaceutical manufacturers has doubled to $153 billion in 2017, according to life sciences analytics firm IQVIA. This trend aligns with a growing number of high-cost specialty drugs and more aggressive cost-management tactics—such as closed formularies—among plan sponsors. Until the administration began focusing on drug costs, the gross-to-net bubble (i.e., the difference between the list price and the actual price paid after rebates) had shown no signs of decreasing.

The IQVIA data also indicates that while list drug prices have increased, net prices have remained relatively flat over the past five years. The higher list prices can lead to higher rebates, however one recent study suggested that there is no correlation.3 These higher list prices can result in bigger out-of-pocket costs for patients who have high-deductible health plans or coinsurance-based copayments, although they do help offset premium costs for all enrollees.

This issue of alignment, and how to contain drug costs, is at the heart of the issue. The ability to design formularies and negotiate rebates is a core value proposition for many PBMs. While the rebate model has existed in a bit of a black box for many years, from a business-to-business perspective, it has become less opaque (although not yet fully transparent). Consultants and sophisticated plan sponsors have increased their use of rebate audits and have called for greater transparency.

If the rebate model goes away, what will replace it?

Many groups have said it might be time to replace the rebate model. But what would replace it? Would all list prices need to be re-aligned to match today’s net prices or will a completely new model emerge? Will we see widespread adoption of value-based (or outcome-based) contracts between health plans, pharmaceutical manufacturers, and providers? At this point, there are no clear answers.

Several potential replacement models are being discussed that could take the place of rebates. A point-of-sale (POS) rebate model might be easiest to implement and could be an interim policy step. Under this model, the plan sponsor would have its PBM implement POS rebates so that members would pay the net cost of brand-name drugs. This could mean lower out-of-pocket costs for people who have high-deductible health plans or who are responsible for coinsurance. This would likely affect only a minority of members because rebates aren’t used for generic drugs, which make up almost 90 percent of all prescriptions filled in the US. It would not affect people who have flat-dollar copayments that aren’t tied to the net price of the drug (in a point-of-sale rebate scenario).

What can stakeholders expect if drug rebates are eliminated?

How would the list prices for drugs be affected if rebates are eliminated? Would pharmaceutical manufactures drop list prices down to the net price point, or would some alternative discounting program emerge? The other key discussion point is whether eliminating rebates will change the pricing trajectory and impact the industry’s economic model. If Average Wholesale Price (AWP) inflation slows, or reverses as a result, PBMs and other stakeholders that have some of their revenue streams tied to AWPs could need a strategy to replace lost revenue.

Eliminating rebates will not be like turning off a spigot. A PBM with a three-year contracting cycle, for example, might need a year or two to open and renegotiate thousands of contracts. Government bids, based on the existing system, are priced out almost nine months in advance. Without rebates, drug manufacturers will likely have to rethink their market-access approach and reevaluate their pricing strategies.

The loss of rebate revenue could cause plan sponsors to re-evaluate their pricing models, plan designs, and underwriting process. Without a new model to represent the current net-of-rebate cost for all drugs, consumers could see higher out-of-pocket costs, or more limited benefits to keep premiums from rising.

The drug-rebate model is extraordinarily complex, and people across the health care ecosystem are closely analyzing a variety of possible scenarios that could occur if that model changes or is eliminated. There are many questions that can’t yet be answered. Will rebates go away completely? How long will it take? Will the change be limited to Medicare? Will rebates continue to exist, but get shifted to the point of sale? Maybe the biggest question is…who wins and who loses? And can re-evaluating business models and potential financial vulnerability now help to create different winners?

We will begin to try to answer these and other questions in future blogs as we continue to dig into this issue and further evaluate the potential impact on all of the stakeholders in the health care ecosystem. Stay tuned.


1 Health Affairs, January 2018, “National Health Care Spending in 2016”
2 Adam J. Fein, Ph.D., Drug Channels Institute, April 24, 2018 (April https://www.drugchannels.net/2018/04/the-gross-to-net-rebate-bubble-topped.html)
3 https://www.pcmanet.org/new-data-rebates-are-unrelated-to-drugmakers-pricing-strategies/

Healthcare, PBM / Pharmacy, Politics

The good, the bad, and the ugly of opioids: For large employers, the epidemic can stretch far beyond medical claims

February 13, 2021 by George Van Antwerp 0 Comments

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : July 26, 2018
Author: Deloitte
Categories : Analytics, Health plans, Regulatory

First the good news. While we are in the midst of an opioid epidemic, large employers have seen prescription rates fall significantly since peaking in 2009. That year, 17.3 percent of covered employees or dependents had at least one opioid prescription. People who work for large employers are now using fewer prescription opioids.1 This is likely due to an increased focus—among health plans and clinicians—on limiting opioid prescriptions among patients who might be at risk for opioid dependence. There also is growing evidence that opioids aren’t appropriate for all patients or for every type of pain.

Now the bad news: Employers are spending nearly nine times more to treat opioid addiction and overdoses (prescription and illicit drug use) than they did 12 years ago—from $300 million in 2004 to $2.6 billion in 2016, according to the Kaiser Family Foundation. The average inpatient treatment cost for an opioid addiction topped $16,000 in 2016, according data from Kaiser. More than half of this spending is for the treatment of an employee’s dependent children. After a person first seeks formal help for an addiction, it can take as long as eight or nine years to achieve sustained recovery, according to a report from the Surgeon General.

And the ugly news: Opioids, both prescription and illicit, were involved in more than 42,000 deaths in 2016, according to the Centers for Disease Control and Prevention (CDC). That number is five times higher than in 1999. Moreover, emergency department visits for opioid overdoses increased 30 percent nationally between July 2016 and September 2017, according to the CDC.

Compared to people who do not have a substance-use disorder (SUD), people with SUDs incur higher health care costs and have a greater number of disability claims, miss more work days, and are more likely to be demoted or fired, according to the National Business Group on Health (NBGH). Along with direct medical costs, opioid addiction and treatment also impacts productivity, absenteeism, and recruiting, according to a recent NBGH survey of 62 large employers. One out of four employers say it has become difficult to find qualified workers who are not dependent on opioids.

Misuse and abuse of opioids is having a devastating impact on many employers and their workers and families.

Is workers compensation the canary in the coal mine?

Pain-related conditions affect 116 million adults in the U.S., according to the Institute of Medicine. This costs employers up to $635 billion in medical costs and lost productivity.2 Workers who are injured on or off the job could wind up becoming addicted to opioids that are prescribed to help manage their pain. While employers want to prevent addiction, the crackdown on prescribing is sometimes making it difficult for people to get access to opioids that they need to manage pain. Non-opioid therapies might not be as effective and could keep people off the job longer. What is the cost for employers when workers are unable to return to work either due to an injury or because of an opioid addiction? Moreover, some employees might choose not to seek help if they are worried about their job security. Employers want their employees to have effective pain-management options and don’t want them to seek illegal sources for drugs.

Workers’ compensation programs are often seen as employee benefits programs. They provide injured employees with a percentage of their salary until they are able to return to work. Given the volume of opioids being prescribed for work-related injuries, workers’ compensation insurers were some of the first organizations to recognize the critical role that physicians played in preventing opioid addiction.

Today, many workers’ compensation insurers are beginning to utilize advanced detection tools. Thanks to their unique position in the ecosystem—where they touch health care, consumers, and governments—they can effectively leverage state and federal guidelines, physician education, and advanced analytics to help prevent dependency and addiction.

Some industries have higher addiction rates

Industries where workers have physically demanding jobs, perform repetitive motions, or spend long stretches on their feet tend to have higher rates of opioid abuse. These industries include construction, automobile manufacturing, carpentry, and trucking. About 15 percent of people who work in the construction industry have engaged in illicit drug use, according to a lead commercial insurance carrier. The automobile manufacturing plants that produce more than 70 percent of US cars are in states that have seen significant increases in drug overdose deaths, according to the US Centers for Disease Control and Prevention. Recognizing an uptick in opioid abuse among truckers, the Department of Transportation added four prescription opioids to its mandatory drug-screening beginning on January 1, 2018.

What can employers do to address opioid use and abuse?

Given the costs associated with opioid abuse and misuse, employers might want to consider strategies that help prevent their at-risk employees from becoming addicted. But employers often need alternatives to treat pain among employees. They also need quality treatment for addiction. Strategies many employers are using to address this issue include:

  • Creating drug-free workplace policies
  • Increasing communication
  • Identifying at-risk employees
  • Covering treatment therapy
  • Treating workers for addiction, rather than terminating them
  • Working with health plans and pharmacy benefit managers (PBMs) to find solutions

Employers should also consider working closely with their health plans to develop solutions to curb opioid use and misuse. The Center for Health Solutions recently conducted research to find out what health plans and pharmacy benefit managers (PBMs) are doing to help address the opioid epidemic. Many health plans and PBMs have a stake in improving care outcomes, and they have key assets—especially data—that could be used for diagnosis and treatment.

Strategies that some health plans and PBMs are already using include:

  • Pharmacy lock-in programs: These can help prevent patients from receiving multiple prescriptions and/or using multiple pharmacies to fill prescriptions for controlled substances
  • Utilization management tools: Some health plans use these to develop evidence-based approaches that provide access to necessary treatments. These tools can help encourage safe, effective care at affordable costs. Tools might include prior authorization for prescription pain medication, step-therapy, and prescription tiering.
  • Medication-assisted treatment (MAT): This is using medications with counseling and behavioral therapies to treat SUDs. The medications used in MAT could help block other narcotics or help with withdrawal symptoms. They do not cause the euphoric highs associated with opioids.

Additionally, research indicates that the focus on opioid abuse is shifting to greater use of data and analytics to identify and engage those who might be at risk.3 Given the number of patients who use prescription opioids, and the ongoing threat from illicit drugs such as fentanyl, it can be to important shift from a fraud, waste, and abuse (FWA) mentality to a fraud, waste, abuse, and care approach.

An ecosystem approach is still needed

As we noted several years ago, tackling the opioid crisis requires coordination across health plans, PBMs, pharmacies, providers, employers, and many other constituents. This is a complex problem that goes beyond what any one group can influence.

At the same time, we cannot let the drop in new opioid prescriptions lull any of us into complacency. Systemic issues should be addressed from a policy perspective, including enabling data integration opportunities. And, given the need and risk of relapse, we likely need patient engagement strategies that effectively manage their risk over time and through treatment.1 Kaiser Family Foundation, April 2018: https://www.kff.org/health-costs/press-release/analysis-cost-of-treating-opioid-addiction-rose-rapidly-for-large-employers-as-the-number-of-prescriptions-has-declined/
2 National Center for Biotechnology Information, US National Library of Medicine: https://www.ncbi.nlm.nih.gov/books/NBK92521/
3 HealthIT Analytics: https://healthitanalytics.com/features/for-opioids-and-substance-abuse-big-data-analytics-is-just-the-beginning

Care Management, Healthcare, Managed Care, PBM / Pharmacy

The emerging Hispanic health care segment: What health plans should consider

February 13, 2021 by George Van Antwerp 0 Comments

[Note: I’m republishing a few Deloitte blogs that they are no longer hosting as part of the new website.]

Published Date : September 29, 2016
Author: Deloitte
Categories : Health care providers, Health IT, Value-based care

Hispanics are a large and fast growing segment of the US population. As of 2014, there were over 55 million Hispanics in the US with the population projected to grow to 119 million by 2060. From a health care perspective, they’ve often been underrepresented and underserved. As the Hispanic population grows and ages from their current average age of 29, health plans and prescription benefit managers (PBMs) should consider learning more about their expectations, needs, and challenges.

In an effort to engage with Hispanic consumers, many health plans offer language lines or interactive voice response options in Spanish and translate printed materials. However, consumers often complain that translations are too literal and would prefer something more conversational. Though studies show that language barriers can be linked to worse health outcomes, having the same language doesn’t mean that all Hispanics share a common history, health care experience, or even the same risk of a condition like diabetes. For example, while Hispanics are nearly two times more likely than non-Hispanic whites to have diabetes, there are variances across the subpopulations with 18.3 percent of Hispanics of Mexican decent having diabetes versus 10.2 percent for Hispanics of South American decent. But since lifestyle and prevalence of conditions like diabetes varies within the Hispanic population, it’s important for health plans and providers to understand these differences and nuances in order to effectively engage them and their families.

Beyond language and economic constraints, there can also be cultural barriers for Hispanics using the US health care system. Our recent 2016 Consumer Priorities in Health Care Survey found that surveyed Hispanics valued two key interactions relative to non-Hispanic whites:

1. A health care provider who gives helpful updates on their condition or status to family during and after a procedure and
2. A doctor or health care provider who helps them and their family create a care plan or wellness plan that fits with their lifestyle.

Health plans should consider these types of cultural differences to better understand ways to engage with Hispanics around their health care.

Additionally, as we dug into the data from the Deloitte Center for Health Solutions 2016 Survey of US Health Care Consumers, we found several insights that health plans should consider in meeting the needs of their Hispanics members or attracting new members from this growing group. For example, surveyed Hispanics are more likely to use alternative care settings and providers:

• Hispanics are 40 percent more likely than non-Hispanic whites (45 percent versus 32 percent) to use a retail clinic for a non-emergency health issue if their physician was not available, and
• Hispanics are twice as likely as non-Hispanic whites (12 percent versus 6 percent) to see a pharmacist for treatment information.

Not only do Hispanics often use the system differently, they also reported trusting certain sources of information more than other groups; notably their friends and family and information found through social media.

** From the Deloitte Center for Health Solutions 2016 Survey of US Health Care Consumers

Hispanics also use available tools for navigating health care more often.Seventy one percent of Hispanics own a smartphone (compared with 61 percent of whites), and they tend to be much more likely to use technology for health care purposes.

** From the Deloitte Center for Health Solutions 2016 Survey of US Health Care Consumers

As we transition from a fee-for-service health care system to a value-based care environment, these issues of cultural differences, health literacy, information sources, and technological engagement are increasingly important. Value-based care and population health strategies sometimes revolve around self-care, wellness and better adherence, so figuring out the most effective strategies to engage different populations makes sense.

Moreover, expansion of health insurance coverage has brought many Hispanics to the private insurance market for the first time. They are still figuring out how to shop for, use, and evaluate plans. According to our survey, thirty two percent of Hispanics reported switching plans in the past 12 months (versus 21 percent of non-Hispanic whites). If health care companies don’t consider the unique needs and expectations of this population, they likely risk cutting themselves out of a real opportunity for growth over the next decade.

To get started, health plans should begin with these basics:
1. Capture ethnicity and/or language preference in your member data;
2. Understand how different segments and sub-segments (e.g., Cuban versus Mexican) typically use the health care system, respond to different channels and messaging, and have different needs;
3. Hire staff and writers that can engage Hispanics in person, on the phone, and in writing; and
4. Embrace digital solutions for providing and capturing information.

As we celebrate National Hispanic Heritage Month, consider evaluating your current market share, share of wallet, and strategies to reach this growing demographic.

Consumerism, Healthcare, Managed Care