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High Drug Prices in US: R&D Investments Cause or Cover?

Posted By Louise Probst, Wednesday, June 7, 2017
It's well understood that pharmaceutical companies charge more for their medications in the U.S. than in other countries. This fact helps fuel charges of predatory pricing on the part of the pharmaceutical industry. Explanations for high drug prices are many and varied, yet, drug makers commonly rely on a seemingly compelling argument: Hefty prices are necessary to fund research for the next generation of innovative treatments.
 
But can the claim that research and development drives high U.S. drug prices be put to an empirical test? A recent study published in Health Affairs did just that.
 
Using data on prices and sales volume in the U.S. and abroad, researchers analyzed the 15 drug companies that manufactured the 20 top-selling drugs globally in 2015. List prices in the UK, Canada, Ireland, and Denmark averaged 41% of U.S. net drug prices for the 15 companies studied.
 
The researchers then calculated the amount of "excess" revenue companies earned by charging higher prices in the U.S. compared to Europe and Canada. Note the "excess" refers to the revenues created by the price paid in the U.S., above the amount Canadian or European customers paid for the drugs. Excess revenue for these 20 drugs was $116 billion.
 
The results: In total, companies spent just 66% percent of the excess revenue on global R&D. As the table demonstrates, excess revenues as compared to R&D spending varied by company, with Bristol-Myers Squibb's R&D costs claiming about three quarters of its excess revenue, and Biogen's excess revenue from U.S. customers equaling nearly 2.5 times its R&D spending.  
 
According to the researchers, if the excess prices charged to U.S. customers were reduced to cover only 100% of the industry R&D expenditures, the U.S. would have paid $40 billion less in 2015. That's a good chunk of change in a year when CMS reports that Americans spent a total of $325 billion on drugs.

Warm regards,

Louise Probst

BHC Executive Director

 

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St. Louis: A High Value Health Care Community? Prices for Medical Services Below National Averages

Posted By Louise Probst, Thursday, May 4, 2017
report from the Health Care Cost Institute (HCCI) illuminates commercially-insured price differences for three categories of health care services across 61 regions between 2012 and 2014. Communities can now understand how prices for physician, inpatient, and outpatient services compare over time and to other regions. Marked variation in price levels exist among the three categories and across regions when indexed. For instance, when the national average is set to one, the spread across high and low price regions can vary more than 70 points. This variation is important to understand since research shows that higher prices do not correlate with better health outcomes or care quality. 

Prices in St. Louis, as in many Midwestern communities, were below the national average in all three categories in each year. This speaks positively about the value of health care in the Midwest since we know that, on average, quality scores in St. Louis mirror national averages. What we don't know is how these price differences compare when adjusted for wage and other cost of living factors. Also important to note: price comparisons are not the same as total cost of care comparisons (PMPM cost), since they exclude service utilization. Differences in illness burden, patient expectations, and provider practice patterns drive important differences in total cost. Midwest Health Initiative data suggests St. Louis has higher utilization patterns than many communities, even after adjusting for illness burden. A final observation is that St. Louis' price-competitive edge has eroded somewhat during this time. While its prices are still below the national average, they have moved closer to it, suggesting higher price increases over the last three years than other communities. 

Employers can use this information to compare their own experience in St. Louis and other communities where they have a significant workforce presence (mapping tool available here). If you have data on spending for your population in physician, inpatient, and outpatient categories, the BHC would like to help you look at your data as compared to HCCI findings. Please call Patti Wahl for assistance. HCCI is committed to creating insights that are meaningful to employers. The BHC appreciates the opportunity it has to bring an employer perspective to HCCI's work. 

Warm regards,

Louise Probst
BHC Executive Director

 

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St. Louis ReCAST: Addressing Youth Engagement, Mental Health in Trauma-Impacted Communities

Posted By Louise Probst, Thursday, April 6, 2017
More Americans are dying prematurely, notably among our younger generations. So says the 2017 County Health Rankings & Roadmaps, just released by the Robert Wood Johnson Foundation and the University of Wisconsin Population Health Institute. Unsurprisingly, the opioid epidemic was a leading cause of premature death among people ages 15-44 in 2015. But for young people ages 15-24, the picture is somewhat different. This cohort lost more lives to other types of injury death, most commonly motor vehicle crashes and firearms. Suicides and homicides are on the uptick.
 
The report points to fostering youth engagement in communities as an antidote for this malady. To assist, the BHC is pleased to join the coalition of stakeholders supporting St. Louis ReCAST, a project launched to promote well-being and resiliency among high-risk youth and families in a federally designated "Promise Zone" encompassing North City and much of North County. Led by the St. Louis County Department of Public Health, St. Louis City Department of Health, and St. Louis Mental Health Board, ReCAST is leveraging a $4.7 million 5-year grant from the Substance Abuse and Mental Health Services Administration (SAMHSA). Project goals include improving access to trauma-informed behavioral health services and peer-to-peer youth support and violence prevention programs. Residents in the target communities, including youth, will serve as delegates in a participatory budgeting process that gives them a major say in how and where funds get spent.
 
Want to get involved in ReCAST? There are a variety of ways that BHC members and other partners can help out in the coming months, from donating raffle items for a Participatory Budgeting Kick-Off on April 22nd to serving as subject matter experts during the request for proposal process. If you would like more information, please contact Michelle C. Mitchell, Community Engagement Coordinator, at mmitchell2@stlouisco.com.

Warm regards,
Louise Probst
BHC Executive Director
  

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Health Care Reform 2.0: What is Past May be Prologue?

Posted By Louise Probst, Wednesday, March 8, 2017
This week we saw the health care reform debate heat up, with House Republicans releasing their plan, the American Health Care Act  on Monday. At this point it is not clear that the proposed legislation will overcome the ACA's greatest shortcoming: making care more affordable.
 
Tax credits for purchasing insurance on the individual market and measures to incentivize Health Savings Accounts seem to form the twin pillars of this proposal, which keeps much of the ACA in place. Three ACA provisions that will remain intact are: (1) eliminate the use of pre-existing conditions in underwriting, (2) allow children to stay on a parent's policy until age 26, and (3) ban the use of lifetime maximum coverage caps. The ACA value-based purchasing programs also appear to be left in place.
 
Taking steps away from the ACA, the Republican plan removes the mandate for individuals or employers to purchase health insurance and the penalties set forth in the ACA for non-coverage. In order to protect insurers from the adverse selection that can accompany guaranteed access to insurance, those with gaps in coverage would be subject to 30% premium surcharges. Rate bands which differentiate the price between younger and older subscribers have been expanded. The "Cadillac" tax, which would impose taxes on employers who offer rich plans, has been delayed until 2025; however, its future seems uncertain.
 
Medicaid expansion will be able to remain in place through 2020, after which federal funds for new Medicaid enrollees will stop. States will be given flexibility in structuring their Medicaid programs and the current spending match will be replaced with a per capita allotment, without adjustments for high spending communities. High risk pools will return.
 
If the early response is any indication, consensus will not come easily. What do you think? We look forward to learning your opinions.

 

Warm regards,

Louise Probst

BHC Executive Director

 

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Question of the Hour: Getting to Affordability?

Posted By Louise Probst, Thursday, February 16, 2017
In 2015 federal spending on health care programs exceeded spending on Social Security for the first time. It's no wonder then, that as Congress considers replacing the ACA, affordability is top of mind.

Information in the BHC's recently released 2017 St. Louis Health Care Industry Overview: Volume I suggests that managed care plans shifting to value-based provider contracts seem to be making gains toward more affordable care. Most striking is the report's findings on Medicare Advantage (MA) plan performance.

New research shows MA plans out-performed fee-for-service (FFS) Medicare on quality, and may have contributed to a drop in FFS Medicare costs through a spillover effect. Poor and minority counties with the largest increases in MA enrollment saw the largest drop in FFS Medicare costs.

Increasingly, MA outperforms commercial plans - both nationally and locally. In Missouri, local MA plans outperformed commercial insurance plans on controlling blood sugar in diabetics, managing hypertension, and reducing hospital admissions.
The gaps across these products were wide.

Consider the cost implications for diabetes, with a national price tag of $322 Billion. St. Louis commercial plans saw a steep decline in the number of patients with their blood sugar in control during 2015, while MA plans reported notable improvements. Nationally, commercially-insured people with diabetes cost 3.7 times more than do people without the disease. The ROI could be considerable.

How to explain these performance disparities? The Centers for Medicare and Medicaid Services (CMS) Star Ratings program incentivizes plans to focus on prevention and positive health outcomes. In turn, MA health plans include payments that reward clinicians for better quality results. These levers compel provider attention to care management.

The BHC's recent survey of local health plans found many adopting value-based incentives. Join BHC's February 9th Member Meeting discussion of how employers can use value-based models to reduce costs while improving care quality.   

Warm regards,
Louise Probst
BHC Executive Director

 

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The Opioid Epidemic: Reason for Optimism

Posted By Louise Probst, Thursday, February 16, 2017
Recently, I participated in the BHC Pharmacy Management Initiative's fascinating forum on the Opioid Epidemic. We all know opioid misuse weighs heavily on American society, as the statistics in the text box to the left demonstrate.
 
But there is good news. Each speaker offered new and meaningful solutions. Here are some highlights: 

1) The Centers for Medicare and Medicaid Services (CMS) has evaluated and tested interventions to reduce the hazards of opioid use among Medicare enrollees. They now mandate a maximum opioid dose per month. The use of a standard calculation which converts all opioids prescribed to a Morphine Equivalent Dose (MED) has made this possible. In any given month, when a prescription exceeds this amount, the patient encounters a "hard stop" at the pharmacy. Alerts are also provided. Of course, hospice care and certain diagnoses exempt a patient from this safeguard. Medicare's early results warrant your consideration - so ask your health plan or PBM about a prior authorization for the MED.

2) Congratulations to the St. Louis County Department of Public Health for getting St. Louis County's Prescription Drug Monitoring Program (PDMP) organized so quickly and thoughtfully. It will go live in April and was developed to easily enable other municipalities to participate. Seven are already working together. At the outset, the program will cover a large portion of Missouri. The County appreciates the wide business and public support it has received and welcomes your help in spreading physician awareness of this coming resource. 

3) Dr. Michael Bottros of Washington University's Pain Management Center underscored that overprescribing and misuse of prescribed opioid medications are major sources of this problem. You might think that as a pain management physician specialist, opioid use would be higher in his patient population. I did, and I was wrong. A fairly small portion of his patients use these medicines. I also learned that for 1 out of every 5 patients undergoing a knee replacement, their joint pain continues after surgery. The good news is that there are many effective alternatives and more coming. New neurological interventions to control pain can help patients manage back, joint, and other pain. 

Meeting slides can be found here and more details are available from local expert and BHC Product Manager, Dave Heaton

Warm regards,

Louise Probst
BHC Executive Director


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Patient Choice of Surgeon or Hospital: Does it Really Matter?

Posted By Louise Probst, Thursday, February 16, 2017
The BHC's member meeting conversation last December focused on information from two national organizations that had boldly and publicly reported performance ratings for surgeons: Propublica and Consumers' Checkbook. Their analyses were based on millions of Medicare claims and both showed large differences in patient outcomes across individual surgeons.  
 
As a reminder, for total hip and knee replacements, where death is a rare occurrence, Consumers' Checkbook reported the best surgeons had overall bad-outcome rates (deaths, complications, and readmissions) of less than 8 percent, while the worst-performing one-tenth had overall bad-outcome rates of more than 21 percent.
 
Recently, researchers from the Harvard T.H. Chan School of Public Health asked: Do patients who receive care at a high quality hospital spend less? Using Medicare claims data to assess 90-day episode cost for five major surgical procedures, which included hip replacement, their answer was "yes". Superior surgical quality translates into lower mortality, higher patient satisfaction, fewer readmissions, and lower Medicare spending on post-acute care. 
 
Two common measures of surgical quality were assessed: 30-day surgical mortality rates and the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey.
 
Patients who had surgery, which included hip replacement, at high-quality hospitals cost Medicare less than those who had surgery at low-quality hospitals. Adjusted spending differences of nearly $2,700 in the first 30 days of care were found to be largely driven by the cost of care in the weeks following surgery. 
 
Interested in helping your employees use information to find better value care? The BHC can help - just give Patti or Louise a call at 314-721-7800.  
 
Warm regards,
Louise Probst
BHC Executive Director

 

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Rides to Wellness: Connecting Public Transit Users to Needed Health Care

Posted By Louise Probst, Thursday, February 16, 2017
The BHC congratulates two member companies on their successful new partnership. Bi-State Development Research Institute and the St. Louis County Department of Public Health recently received recognition and funds to help North County Metro riders assess and manage their health risks.
 
The Federal Transit Administration (FTA) has awarded $940,000 to Bi-State Development Research Institute to fund innovative mobile wellness units. Working in partnership with St. Louis County Department of Public Health, the program will improve access to vital sign monitoring and basic health screenings for residents dependent on public transit and living near several MetroLink Stations in North St. Louis County. Participating transit users will have the opportunity to receive onsite counseling based on screening results, in addition to being connected to health department clinics for follow up appointments. The mobile wellness units will be available at the North Hanley MetroLink Station, the Rock Road MetroLink Station, and the Wellston MetroLink Station.
 
The federal grant is part of the FTA's Rides to Wellness initiative, which emphasizes public transportation as a strategy for people to access non-emergency health care, resulting in better health, fewer hospital visits, and lower costs. The initiative focuses on improving the health of those with chronic conditions and ensuring that at-risk populations can get to wellnes appointments and obtain health screenings (such as blood pressure and cholesterol tests) and community services.
 
Demand for the U.S. Department of Transportation's FTA Rides to Wellness grants exceeded available funds, as 78 applications totaling $28 million from 34 states were received. The FTA awarded 19 projects in 16 states and only one in Missouri.
 
Let's wish them great success!

Warm regards,
Louise Probst

BHC Executive Director

 

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