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This Week in Health Care Reform: February 22nd, 2019

Hospitals reap profit windfalls from drug markups; elsewhere, price hikes for branded drugs outpace higher utilization of generic drugs; improved population health tied to value-based care; and, a quick policy analysis of this year’s proposed changes to Medicare Advantage.

Week in Review

Hospital Rx Profits: A new study brings to light a worsening trend that’s become all-too-familiar to patients – namely, that hospitals are charging significant premiums on some of the most-used prescription drugs.  According to the analysis, these health systems are reaping huge windfalls by marking up these drugs 3-7 times more than Medicare’s average sales price.  These practices are both enabled and exacerbated by the other trend reshaping the health care delivery landscape – hospital consolidation – and only serve to drive up health care costs for consumers.  As hospitals have acquired doctors’ clinics at an increasingly alarming rate these past few years, they’ve been able to convert these facilities into outpatient departments, which, in turn, allows them to set higher prices for their services as they head into negotiations with payers.  For their part, hospitals have pushed back against the study’s findings, pointing fingers at other stakeholders in the care delivery model – specifically, the pharmaceutical industry, who, they remind everyone, occupy the central role in drug pricing.

Brand-name v. Generics: With so much attention being paid to the outsized impact that rising drug prices have had on the overall health care cost curve, analysis has turned to how specific segments of the pharmaceutical industry have affected that trajectory.  While generic drug utilization has gone up, any potential cost-savings have been obliterated by the price hikes seen for branded drugs.  For example, in 2017, brand-name drugs represented only 17 percent of total prescriptions filled.  However, they accounted for a wildly disproportionate 79 percent of total pharmaceutical spending.  Additionally, between 2008 and 2016, generic drug prices went down, while the price for branded drugs nearly doubled.

SDoH & Value: The growing recognition that social determinants of health (SDoH) have a positive influence on health outcomes continues to reshape our health care delivery model.  This movement towards better integrating SDoH into how people interact with the health care system has only been amplified by the parallel transition towards rewarding value in care delivery.  Put another way, experts believe that this emphasis on value-based care design will only foster the growth of population health management programs.  Conversely, there’s growing belief that the attention paid to social factors in producing better health outcomes will, by necessity, create pathways for value – through data analytics – where before there were few

Medicare Advantage:
As the campaign rhetoric surrounding ways to impose systemic changes to our health care system heats up, it’s worth noting that enrollment in Medicare Advantage continues to soar.  Stakeholders point to the benefits offered through the popular program as evidence of what can be achieved when you bring private sector discipline to public sector administration.  And, with the Centers for Medicare & Medicaid Services’ (CMS) planned expansion of supplemental benefits in the program on the not-too-distant horizon, it’s not hard to imagine that more beneficiaries will be signing up.  Recently, CMS released its annual proposed changes to the underlying structure of Medicare Advantage, affecting how the program is, both, funded and administered.  These changes have the potential to disrupt how the millions of American seniors and persons with disabilities enrolled in the program access the coordinated, comprehensive care offered through Medicare Advantage plans.  Learn more about what those proposed changes could mean to the program.      

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