Health Care Current: April 5, 2016
Paying for innovation in medical technology
This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Paying for innovation in medical technology
By Harry Greenspun, MD, Director, Deloitte Center for Health Solutions, Deloitte LLP
Inspired by my wife Kerry, our 14-year-old son, Luca, has become a serious cyclist. Last May, we bought him a new road bike, complete with clipless pedals and shoes. After riding for a few months, he joined a local team and put hundreds of miles on it each month over the summer. In the fall, road season ended and cyclocross season began. So, we had to buy him a new cyclocross bike, along with shoes and pedals. Last month, with road season upon us, we discovered that he had outgrown his road bike. We had to buy him yet another new road bike and, of course, larger shoes. Having proven he is a strong and committed rider, he has moved to a more intensive training program, which required installing a power meter to assess his effort and progress. That required installing a new crank and bottom bracket, as well as purchasing a new bike computer to record his measurements.
By the end of all of this, we were in a spinning vortex of new needs requiring new devices, those devices creating new needs. While this resulted in better performance, it also led to rapidly escalating costs.
This image was not lost on me as I spoke on a panel at a recent summit of CEOs from medical device manufacturers. Innovative devices are transforming prevention, care, and chronic disease management. Each brings new capabilities and the potential to improve outcomes. Of course, each development also comes at a cost.
The US medical device industry is expected to grow at 7.1 percent annually from 2014 through 2019, reaching $52.9 billion annually.1 Traditional medical device companies and new technology entrants are capitalizing on new technologies, devices, and analytical tools to develop new or improved devices. From artificial pancreases to watch-like biosensors it’s clear the industry is showing no signs of slowing down.2 Though the Affordable Care Act (ACA) included a 2.3 percent medical device excise tax in an effort to put pressure on device prices, Congress suspended the tax for two years, giving device makers a reprieve…for now.
But what do we get with those growing costs?
Many medical device and technology (medtech) companies are working with providers and health plans under new value-based care (VBC) arrangements that increase standards for evidence to support product adoption. These new models mean that companies are no longer modifying features of a device and promoting to clinicians or competing on price alone. Rather than working to provide a cheaper but comparable product, companies are seeking to show better return on investment through improved results, reduced readmissions, and more efficient care.
Companies like Medtronic, Johnson & Johnson, and St. Jude Medical, Inc. have set up shared risk arrangements. For example, Medtronic guarantees that infection rates will be lower for hospitals that use its Tyrx product, which covers cardiac implants with antibiotics. If infection rates are not lower, Medtronic agrees to pay for the cost of treating patients’ infections. Similarly, Johnson & Johnson gives hospitals a discount on its Biosense Webster devices, which are used to treat arterial fibrillation, if patients need a repeat procedure within a year. St. Jude Medical offers rebates on its Quadra heart failure device if patients need a surgical lead revision as a result of certain clinical outcomes associated with the device within a year.3
In general, these alternative arrangements have huge potential for a new type of innovation in the medtech industry. But, innovation does not come without challenges. For one, the quality measures have not completely caught up. Bundled payments, where providers accept a lump sum payment for each patient per episode, have increased in popularity. The US Centers for Medicare and Medicaid Services (CMS) has been testing this model for several years through the Bundled Payments for Care Improvement program. More recently, it announced that organizations in 67 geographies across the country would be required to accept bundled payments for joint replacement surgeries. But, many worry that these programs lack the quality measures necessary to ensure patients are receiving the highest value medical devices (see Deloitte’s recent paper, “Delivering medical innovation in a value-based world”). Quality measures that look at improvements in functional status, pain level, quality of life, and others may do more to assess the value that these products can bring to patients’ lives. CMS is awarding grants of $1 million to $30 million to test new payment models that might be scaled up if they are successful. This may be one avenue for testing new ways to pay for medical devices, but the projects CMS is funding are small scale and may take years to implement and show results.4
Though the motive behind increased transparency to improve outcomes is admirable, measuring and tracking performance of implantable devices within an appropriate time frame often proves to be a challenge. First, data that the outcome expected is likely to be achieved have to exist. Second, the value attained must be realized by those involved, which often requires that being under a managed- or accountable-care contract or operating within an integrated delivery network.
Finally, taking on risk involves investment by at least one of the parties, which is where it often gets very tricky. When payment is attached to outcomes, distinguishing between the responsibility of the provider and product is important. While a payer, provider, or patient may realize some incremental value as the result of adopting a new device, the manufacturer stands to profit greatly from successfully demonstrating the product can add value. Consequently, the onus may be on them to bear the bulk of the risk. For some innovators, particularly startups, the capital requirements for this may be prohibitive.
These issues will have to be addressed in order to bring more value-generating innovations to patients. Historical examples can serve as cautionary tales about what we risk if we’re not able to align all of the stakeholders. When pacemakers were initially developed, they were not compatible with MRI machines. As a result, health plans would not reimburse for MRIs on patients who had pacemakers. Seeing this as a unique opportunity, manufacturers stepped in and developed a pacemaker that was compatible with MRIs. They worked with health plans to secure reimbursement and providers to get buy-in. However, today, these pacemakers are still not commonplace and radiologists have been slow to break with the existing standard of care.5
In Luca’s case, tracking his outcomes has been enlightening. Thankfully, every new device has been accompanied by better performance and accelerated improvement. While the cost has been considerable, the pride Kerry and I feel is priceless. Of course, that’s not stopping us from seeking greater value, so if you’re on the admissions committee of a college that provides cycling scholarships, please let us know.
Study: Mail-order pharmacies may help with medication adherence
Stroke patients are more likely to adhere to their prescribed drug regimens if medication is delivered to their home according to a recent study by Kaiser Permanente. The data show that patients with chronic conditions can increase savings, convenience, and adherence by having their prescriptions mailed directly to their homes.
Analysis: The growth of home delivery services for medications indicates that consumers are seeking options that are more convenient. These services can reduce costs for consumers and increase the probability that patients will take their medication consistently. As a result, mail-service pharmacies can improve health outcomes, reduce non-drug medical costs, and reduce hospitalizations. Deloitte’s recent report, Improving medication adherence: Tailored approaches may boost potential for success, found that medication adherence is related to consumers’ attitudes about the health care system, wellness, and engagement with digital tools. Specifically, people who are more positive about incentives are more likely to report greater adherence. Higher concerns about cost are, as expected, also associated with lower rates of adherence.
Implementation & Adoption
Most exchange plans exclude primary care visits and generic drugs from deductible requirements
Findings from a recent Commonwealth Fund analysis show that deductible exclusions – services covered prior to when an individual meets their deductible – vary significantly from plan to plan. The ACA requires all health plans to cover certain preventive screenings at no cost to the patient even before he or she meets the deductible.
Plans can choose to exclude other services, ranging from drugs to clinician visits, from the deductible requirement. The Commonwealth Fund analyzed HealthCare.gov data from silver-tier plans in 37 of the 38 states using the federal health insurance exchange platform. The researchers found that 30 out of 37 silver-level plans exclude primary care visits and generic drugs from the deductible. In 24 of these plans, specialist visits and prescriptions for preferred brand-name drugs are also excluded. No plans exclude skilled nursing services or bariatric surgery from their deductible requirements, although these were two of the 22 services analyzed.
(Source: The Commonwealth Fund, “How Deductible Exclusions in Marketplace Plans Improve Access to Many Health Care Services,” March 17, 2016)
IMS Health: Eight biosimilars may save $110B in US and five European markets by 2020
Biosimilars are expected to save the US and largest European health systems as much as $110 billion through 2020, according to an IMS Health report. Biosimilars are a type of biological product that have highly similar properties to an already-approved biological product and have been shown to have no clinically meaningful differences from the original product. IMS estimates biosimilars will bring substantial savings as physicians and consumers accept them for a variety of therapeutic areas. There are currently 56 new biosimilar products in clinical development. The extent to which these new products deliver savings depends heavily on policy changes, implementation approaches, and acceptance by patients and physicians.
The report shows that eight major biologic drugs may contribute a large portion of the estimated savings. The drugs are mostly treatments for auto-immune disorders and diabetes; these biologics are losing patent protections in the next five years. IMS estimates that the biosimilar competition with these drugs would reduce health system spending 30 percent per treatment day.
Analysis: Biosimilar manufacturers will need to overcome many challenges before their products become a viable revenue stream. Because biosimilars involve living tissue, they are not an exact match of the biologic. Showing that a biosimilar is interchangeable with a biologic means additional clinical trials and higher expenses for the manufacturer. Many stakeholders agree that biosimilars will not be as inexpensive for consumers, relative to branded products, as generics are in the non-biologic market. It is unclear to what extent biopharma companies will invest in the biosimilars market because of the uncertainty of the market.
(Source: IMS Institute for Healthcare Informatics, “Delivering on the Potential of Biosimilar Medicines: The Role of Functioning Competitive Markets,” March 28, 2016)
NAACOS says that CMS should consider all Medicare ACOs as eligible alternative payment models under MACRA
The National Association of Accountable Care Organizations (NAACOS) told CMS that it is pleased with the payment methodology, specifically the benchmarking methodology, in the proposed rule for the Medicare Shared Savings Program (MSSP). NAACOS’s comment letter emphasized that CMS continue to refine the model in ways that will promote further program growth. The comments centered on three areas:
On the Hill & In the Courts
CMS has granted 15,000 Medicare Advantage enrollees special enrollment periods
CMS has allowed approximately 15,000 Medicare Advantage (MA) enrollees to switch health plans outside of the annual open enrollment period because their provider networks changed, according to Kaiser Health News. Starting January 1, 2015, CMS requires health plans to let the agency know 90 days before making significant changes to provider networks. Health plans must also give beneficiaries 30-days’ notice to give them time to find a new provider or request to continue seeing that provider.
The new policy was in response to health plans’ removing hundreds of providers from their networks in 2013. Consumer advocacy groups said that beneficiaries needed to be able to switch plans if networks changed after they signed up for a plan because their provider was in its network. CMS has granted some beneficiaries special enrollment periods to switch plans. For example, in Montana, CMS let nearly 350 individuals switch plans when their health plan dropped 125 physicians and hospitals from their plan. In Puerto Rico, more than 7,800 beneficiaries had a special enrollment period after two health plans dropped a combined 268 providers.
Provider networks have become an important issue in health reform – both in MA plans and in exchanges. Consumers want access to their providers without disruption. However, health plans find that small provider networks can lower costs, lowering premiums for consumers. As enrollment in MA increases – now at more than 30 percent of the Medicare population – consumer choice and provider availability are likely to remain important topics.
(Source: Susan Jaffe, Kaiser Health News, “When Medicare Advantage Drops Doctors, Some Members Can Switch Plans,” March 29, 2016)
Massachusetts dual eligibles demonstration uses outreach workers to reach beneficiaries
Tufts Health Plan and Commonwealth Care Alliance are using a program called One Care to manage care for people in Massachusetts on both Medicare and Medicaid, people who have disabilities or little or no income. Health plans often find it difficult to track down these members and ensure they receive needed care. Of the 100,000 people eligible for One Care, fewer than 13,000 are enrolled in the program. The state assigns some people enrolled in MassHealth (the state’s Medicaid program) to the One Care program, but many opt out for a number of reasons. These include lack of understanding of the program, unwillingness to switch doctors, and lack of interest.
Plans say they are unable to track down about 30 percent of the One Care members assigned by the state to their plans. This is where outreach workers come in. Community outreach workers, employed by the plans, have been going door-to-door to find the hardest to reach members. The goal is to let people with chronic conditions know about relevant health programs offered through the One Care program.
State officials plan to extend One Care for another two years and experiment with other models. Most of the people enrolled in One Care report being satisfied with the program. Some evidence suggests the program has lowered hospital spending. Inpatient hospital stays fell 7.5 percent for members at Commonwealth Care Alliance in 2014. Additionally, for the health plan’s 10 most expensive members, costs declined by 38 percent in 2014.
Around the Country
Most states identify Medicaid beneficiaries at high-risk for opioid abuse
State Medicaid programs look at many factors to identify patients at risk for opioid abuse and enroll them in patient review and restriction (PRR) programs to reduce "doctor shopping." A new report explores which risk factors states use and how Medicaid programs select patients for PRR programs.
States have used PRR programs since the early 1970s. Of the 52 Medicaid programs, including the District of Columbia and Puerto Rico, 49 operate a PRR program for their fee-for-service (FFS) population, managed care organization (MCO) population, or both. Medicaid programs use predetermined criteria (see examples below); all of the surveyed states with FFS programs use at least two criteria, and 76 percent of programs use at least five criteria.
States use a variety of criteria, flagging patients as high-risk for:
- Obtaining or filling a minimum number of controlled substance prescriptions, or other prescriptions, over a specified time period
- Using a minimum number of pharmacies to obtain controlled substances over a specified time period
- Visiting a minimum number of prescribers to obtain controlled substances over a specified time period
- Visiting a minimum number of emergency departments over a specified time period
- Obtaining a minimum number of controlled substances in the same therapeutic class over a specified time period
Clinicians and providers may also refer or recommend that certain beneficiaries be considered high risk. Once identified, Medicaid PRR programs typically require at-risk enrollees to receive controlled substance prescriptions from either one designated pharmacy or prescriber.
In 2014, the number of beneficiaries enrolled in Medicaid PRR programs varied from as few as 19 in Oregon to more than 5,700 in New York. A state’s rate of prescription drug abuse, Medicaid program resources, and number and type of criteria used to identify at-risk patients can contribute to state variation in enrollment. For example, 20 states reported that their Medicaid FFS prescription review programs do not access their state's prescription drug monitoring program, which could help identify people at risk for addiction.
Related: President Barack Obama spoke to the National Rx Drug Abuse and Heroin Summit last week. Thousands of representatives from local, state, and federal agencies, clinicians, and patient advocates gathered to discuss ways to reduce overdose deaths and improve treatment of substance use disorders. At the event, the President announced additional overdose prevention and treatment programs. The administration will partner with the private sector to escalate the fight against prescription opioid abuse. The new programs will build on the President’s proposal for $1.1 billion to combat opioid addiction and fund treatment programs.
(Source: Cynthia Reilly, “Analysis: How Medicaid programs tackle prescription drug abuse,” The Pew Charitable Trusts, March 2016)
The future of emergency response may involve wearables and sensors
Researchers from the US Centers for Disease Control and Prevention (CDC) aim to create the next generation response to emergencies by studying the potential benefit to wearables and remote monitoring. Currently in the research phase, the Center for Direct Reading and Sensor Technology at the National Institute for Occupational Safety and Health within CDC is conducting focus groups and scheduling workshops to publish a technical report on the evolving state of sensors in health care next year. The team is interested in exploring how sensors can provide more information in emergency care and potentially enhance first responder preparation and deployment.
One preliminary idea includes putting more sensors in health care facilities to help first responders set priorities. Others areas of government have begun such efforts, and the CDC is hoping to learn from these current activities. The Federal Emergency Management Agency (FEMA) began integrating automated patient tracking capability into first responder training in 2014. The mobile device compatible software uses barcode scanning on triage patient tags to track and identify patients throughout the emergency medical process. The goal is to enable response teams to manage resources more efficiently during large disaster response situations and help ensure patients are provided the correct medication and treatment.
The CDC team anticipates that future networks of sensors will tell first responders what kind of disaster to expect right away: If there is radiation, fire, smoke, a chemical release, or something else. The team wants to learn if sensors could be worn in backpacks and around the waist and where else sensors could be located to help measure what is in the environment.
Analysis: The Office of the Assistant Secretary of Preparedness and Response’s (ASPR) latest strategic plan sets out to modernize responses and tap into emerging trends in technology and communication to help communities become better at planning for disasters. Sensors and wearables have potential to play a major role in disaster response and technology start-ups are taking notice.
One company is partnering with Google Glass to develop an app that allows emergency workers to collect data and images from an area while they are performing more urgent tasks. This allows a command center away from the disaster to assess data real-time. Other companies are looking to use crowdsourcing techniques to quickly provide real-time images, video, and intelligence back to decision-makers who can determine resource deployment. Federal and local governments are already using crowdsourcing to improve response time. For example, during Hurricane Sandy, real-time updates from several organizations and individuals helped to create an interactive crisis map to connect individuals in need with evacuation centers, emergency shelters, and other resources.