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This Week in Health Care Reform: January 11th, 2019

New collaborations offer up hope in the ongoing battle to combat rising drug costs – which continue to threaten to overwhelm our health care system; the US leads in health care spending, but gets less; and, value-based care redefines traditional care delivery relationships.

Week in Review

Rx Collaborations: Not to be lost amidst the clamor surrounding out-of-control drug prices is the fact that these medicines can often be life-saving.  Take for instance last summer’s approval of a new biotech drug from manufacturer Alnylam, targeting a rare peripheral nerve disease.  As the only FDA-sanctioned therapy for the condition, the drug was quickly met with praise from physicians, patient groups, and analysts.  Physicians and patients obviously pointed to the quality-of-life improvement potential of the drug; whereas, analysts were eager to capitalize on the pipeline possibilities offered by this new class of medicines.  What distinguishes the approval of this drug from other, more routine regulatory approvals, is Alnylam’s concurrent announcement that it would be pursuing value-based contracts with commercial insurance plans in an attempt to help payers and consumers better manage the treatment’s not insignificant annual list price of $450,000.  The move represents something of an important transition for such agreements, which, historically, have been reserved for a limited number of disease states and less expensive medicines.  This trend towards outcomes-based contracting for drugs is poised to expand, experts predict, driven, primarily, by the skyrocketing costs associated with new treatments.

Rx Prices: That all having been said, it’s still impractical to talk about drugs and their purported benefits without first addressing the exigent threat posed by rising costs.  While the pharmaceutical industry continues to point to rising prices as the cost of innovation, a new report published earlier this week in Health Affairs tells a different story.  In essence, researchers found that the skyrocketing costs of many prescription drugs in the US was primarily the result of manufacturers simply raising their prices on older, already established, brand-name drugs, and not, as the industry claims, due to new therapies or improvements in existing medicines.  The analysis only serves to reinforce the deleterious impact that drug pricing has had systemically, as illustrated in a newly released report linking rising health insurance premiums to specialty drug costs in California.

Health Care Spending: As covered last week, new data from the Organization for Economic Co-operation and Development (OECD) continues to show that health care spending in the US remains significantly higher than for other developed countries.  In fact, per person spending in this country in 2016 ($9,892) was about 25 percent more than it was for the next country on the list (Switzerland at $7,919).  In evaluating the drivers behind this spending trend, researchers concluded that the US spends the most because the US is also the most expensive, in terms of the prices we pay for health services.  In addition to higher drug prices, higher salaries for doctors and nurses, higher hospital administration costs, and higher prices for medical services were all cited.  But, perhaps most compelling, researchers found that, despite those higher costs, Americans have less access to many health care services available to patient-consumers in other countries – meaning, we pay more, but somehow manage to get less

Value-Based Care:
Earlier, we highlighted the growing prevalence of value-based contracting between drug companies and commercial insurers.  This approach has also found traction between payers and providers, with as much as 47 percent of payer-provider relationships at the end of 2017 being tied to value-based care, at least according to data from the Health Care Transformation Task Force.  While this is nothing new to some stakeholders, there’s mounting evidence that the efficacy of these arrangements is translating into real-world, outcomes-based meaningful improvements in health care delivery and access – specifically, that value-based care leads to reductions in visits to emergency rooms and readmissions.  Taking it a step further, the collaborative nature of these payer-provider partnerships, by definition, requires a tacit level of trust and transparency, coupled with the implicit acknowledgment of a shared responsibility and common purpose to transform our health care delivery model to better meet the needs of consumers and fuel the future of affordable care.

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