Health Care Current: November 10 2015 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: November 10, 2015
Taking a scalpel to global drug access and affordability
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
Taking a scalpel to global drug access and affordability
While infectious disease burden is still a pressing issue around the world, many regions are also facing an explosion of the same chronic and lifestyle diseases that are impacting the developed world. Programs like the US President's Emergency Plan for AIDS Relief (PEPFAR) have enabled great strides against diseases like HIV/AIDS, for example. But sadly, little public money goes toward chronic disease in some parts of the developing world. As a result, more than half of the world’s population makes too little to afford many of the drugs they need, and four out of five chronic disease deaths are in low- or middle-income countries.1,2 These attention-grabbing statistics highlight the vast unmet needs in terms of access and affordability that exist around the globe.
Due to several recent egregious examples, the limelight in which the pharmaceutical industry basks has intensified of late, with questions raised about pricing practices. While it is easy to generalize that “the industry is the problem” based on a few data points, this is a dramatic over-simplification of the issue. We are certainly a long way from achieving nirvana – “getting the right drug, to the right patient, at the right price and time, anywhere in the world.” But, the reason we have not achieved this is not solely the fault of industry. Rather, it is a very complex, multi-faceted issue that involves all the players in the system.
Expanding market access to meet the growing demand for medicine and medical devices is clearly a critical industry goal and will be a key focus at the Financial Times & Deloitte Global Pharmaceutical and Biotechnology Conference happening later this month in London. The conference brings together leading life sciences executives and other industry stakeholders to assess the current state, discuss trends, and look for ways to improve the situation. This year, the issues of access and need is expected to generate significant discussion.
A key question one of the panels is expected to discuss is, “With a significant proportion of research and development (R&D) focused on complex drugs for orphan indications, oncology products, anti-retrovirals, and the like, how can we ensure unmet medical needs, particularly in the developing world, are met at a price point that makes these vital products affordable?”
Of course, “the world” is not one market. Pharmaceutical companies can face vastly different markets and political climates depending on the specific country in which they are operating:3
The cost of creating new and effective drugs for highly complex diseases is not expected to get any cheaper. For better or worse, drugs are largely created through a free market, capitalist system where shareholders expect a return on their investment. While some governments may argue against this approach, one can make a case that more people have access to more drugs for more diseases than they did one hundred years ago.
This still isn’t enough. But, two major issues are complicating the conversation.
For one, while drug companies can be criticized in some quarters for having a profit motive, it is a fact of life that somebody needs to accept the risk and fund the cost of discovering new drugs if we want to continue making progress in improving human health. Currently, the cost of that R&D is buried in the price the patient pays.
Another dimension is the motivation of governments and health systems themselves. Many companies face difficult export regulations and a thicket of national legislation that frequently make it difficult to get drugs to market. Many developing countries have mark-ups on pharmaceutical products that drive up costs. For example, in Tanzania, pharmaceutical manufacturers have to factor in a 2 percent pharmacy board fee, and Brazil imposes an 11.7 percent import tariff.4 In some parts of the world, intellectual property protections are often lax; drug approval processes are often unclear, cumbersome, and bureaucratic; and corruption and problems like product diversion are still issues where the need for product is acute. Government policies and approaches can be a major factor limiting access to medicine.
My goal is not to cast blame or identify a culprit. Rather, I hope to illuminate that access, pricing, and affordability around the world is a multi-faceted issue. It’s easy and convenient to demonize the industry. But that is just one view. For an issue this complex, we need a scalpel to really understand the details. After all, at the end of the day the objective should be the same: “getting the right drug, to the right patient, at the right price and time, anywhere in the world.” It’s a noble objective. But, we are still a long way from achieving it. Ultimately, I believe it’s in the collective interest of all parties involved in the system to strive to make this reality.
By Reynold W. (Pete) Mooney, Deloitte Touche Tohmatsu Limited Global Managing Director, Life Sciences and Health Care
HIX third open enrollment period begins as HHS releases public use data on HIX plans
The US Department of Health and Human Services (HHS) Secretary Sylvia Burwell said that more than 500,000 individuals had submitted applications through HealthCare.gov after the first four days of open enrollment. HHS expects applications to continue coming in throughout the open enrollment period. However, some analysts are concerned about plan availability in certain areas. Across the 38 federally facilitated exchanges, there are 10 health plans offering coverage, on average, in each state and five issuers in each county for 2016. Some areas have only one or two health plans, which could lead to higher premiums.
As the third open enrollment period for the public health insurance exchanges (HIX) began, HHS released data files that include essential health benefits, coverage limits, and rates based on plan enrollees’ age, tobacco use, and geographic location from the federally facilitated exchange. The agency released this data so that outside developers can create cost calculators and other tools to help consumers shop for health insurance. The files also include information on costs, including cost sharing, maximum out-of-pocket payments, deductibles, health savings account eligibility, and formulary ID. This year, HHS also developed comparison tools to promote competition among plans and improve the consumer experience when shopping for a plan (see the October 20, 2015 Health Care Current). As long as there continues to be a robust number of plans, the data available in the public-use files and the comparison tools created with that data could enhance competition and improve the consumer experience for individuals seeking insurance through the federally facilitated exchanges.
Implementation & Adoption
CMS proposes changes to MA risk adjustment model to account for dual eligibles
In late October, the US Centers for Medicare and Medicaid Services (CMS) sent a notice to Medicare Advantage (MA) health plans that it is proposing changes to the CMS-Hierarchical Condition Category (HCC) risk adjustment model to improve payment accuracy for dual eligible enrollees.
CMS acknowledged that many health plans are focused on exclusively serving the dual eligible population. As a result, it said that it is now appropriate to revisit the HCC risk adjustment model. More specifically, CMS looked at how well the HCC model predicts enrollees’ costs based on their dual eligible status. In its analysis, CMS found that the approach to predicting spending in the institutional duals population is accurate, but it does not predict spending for the community population as well. CMS proposes to vary payment for six segments of the community population:
The announcement comes shortly after Andy Slavitt, the acting administrator of CMS, told health plans at an America’s Health Insurance Plans (AHIP) conference that the agency may change how it calculates MA star ratings. CMS is considering adjusting the ratings for socioeconomic characteristics of beneficiaries after finding that health plans that enroll more low-income and disabled individuals score worse on certain measures in the star rating system. Slavitt said that CMS plans to propose policy changes and request industry feedback later this fall (see the October 27, 2015 Health Care Current).
Background: CMS uses the HCC risk adjustment model to calculate risk scores for individuals enrolled in MA plans and other demonstrations. Health plans receive larger capitated payments for individuals with higher risk scores because they are more costly to care for. CMS uses two different risk adjustment models – one for individuals who reside in the community and another for individuals who live in long-term care settings.
AHRQ: 1.3 million fewer hospital-acquired conditions from 2010 to 2013
From 2010 to 2013, 50,000 fewer people died as a result of hospital-acquired conditions (HAC), saving $12 billion in health care costs over the same period, according to the Agency for Healthcare Research and Quality’s (AHRQ) latest estimates. Nationally, the HAC rate declined by 9 percent from 2012 to 2013, and by 17 percent from 2010 to 2013. All told, there were 1.3 million fewer HACs during this period. Most of the changes came from decreases in adverse drug events (43.8 percent), pressure ulcers (21.2 percent), and catheter-associated urinary tract infections (14.4 percent).
Since the Institute of Medicine published To Err Is Human: Building a Safer Health System in 1999 and Crossing the Quality Chasm: A New Health System for the 21st Century in 2001, federal agencies have been focused on preventing patient harm in the health care system. An HHS Office of the Inspector General (OIG) report found in 2010 that 27 percent of Medicare patients that were hospitalized had injuries associated with their care. Since then, CMS and HHS have initiated several national programs to curb the rates of injury and patient harm across the US. The Partnership for Patients is a large learning collaborative that aims to improve patient safety in acute care hospitals and care coordination when patients are discharged. More than 3,700 hospitals participate in the program, accounting for approximately 80 percent of hospital discharges in the US. CMS has provided technical assistance to hospital systems across the US through national Quality Improvement Organizations (QIOs) and the Community Based Care Transition Program. Despite the drop, these programs will continue to focus on enhancing patient safety; in 2013, there were still approximately 121 HACs per 1,000 discharges (approximately 10 percent of patients who are hospitalized experience one or more HAC).
(Source: AHRQ, “2013 Annual Hospital-Acquired Condition Rate and Estimates of Cost Savings and Deaths Averted From 2010 to 2013,” October 2015)
Report: Medicaid managed care saved $2.4 billion in 2011
The Association for Community Affiliated Plans (ACAP) released a report that evaluated how much states have saved by moving Medicaid enrollees into managed care arrangements. Overall, researchers found that the Medicaid managed care organization (MCO) model saved Medicaid $2.4 billion in 2011. They estimate these savings will grow as more states move their Medicaid populations into managed care and as enrollment from Medicaid expansion increases. The report projects that the MCO model could save $6.4 billion in 2016 and that moving all Medicaid enrollees into a capitated model could save $50.1 billion from 2016 to 2025.
Since 2000, states have increasingly shifted their Medicaid populations into managed care contracts. The percent of Medicaid expenditures paid through capitated arrangements increased from 14.9 percent in 2000 to 29.7 percent in 2011. It is projected to reach 44.3 percent in 2016:
In these arrangements, states contract with MCOs to create clear points of accountability for facilitating services, improving access to care, effectively measuring and improving quality, and achieving cost savings. Today, 38 states have contracted with at least one MCO.
(Source: The Menges Group, “Projected Savings of Medicaid Capitated Care: National and State-by-State,” October 2015)
House E&C subcommittee passes mental health bill; Democrats offer alternative proposal
Last week, the House Energy and Commerce Subcommittee on Health passed (18-12) Representative Tim Murphy’s mental health bill, the Helping Families in Mental Health Crisis Act. It would shift funding from the Substance Abuse and Mental Health Services Administration (SAMHSA) to a new office in HHS, the Office of the Assistant Secretary for Mental Health and Substance Use Disorders.
The bill also includes several other provisions:
Shortly after the E&C subcommittee passed the bill, House Democrats released an alternative proposal. The Democratic policymakers would keep funding for SAMHSA as is and would create an assistant secretary for mental health, who would also be the administrator of SAMHSA. Many Democrats oppose AOT laws, thus their bill does not include the same provisions as Representative Murphy’s law. From here, it is unclear whether the bill that passed the subcommittee would pass the larger House, and it is unclear how many of the provisions will be paid for. The Congressional Budget Office has estimated that Representative Murphy’s bill would raise direct spending approximately $3 billion from 2016 to 2024.
On the Hill & In the Courts
EEOC proposes new rule regarding employer wellness programs
The US Equal Employment Opportunity Commission (EEOC) proposed to amend Title II of the Genetic Information Nondiscrimination Act (GINA) to provide more specific guidance on the incentives employers can offer to spouses for participating in a wellness plan in exchange for their health information.
Title II of GINA protects job applicants and current and former employees from discrimination based on their genetic information. Employers cannot use genetic information to make employment decisions. They also are prohibited from requesting, requiring, or purchasing genetic information unless one or more of the six exceptions applies. One of these exceptions is in cases where an employee voluntarily accepts health or genetic services offered by an employer.
Under the proposed rule, an employer can offer an incentive to a spouse that meets one of the following criteria:
- His or her spouse is covered under the employer’s health plan
- He or she receives health or genetics services offered by the employer
- He or she provides past or present health status information
The incentive may be a financial or in-kind reward or penalty (e.g., time-off, prizes). EEOC would limit the total incentive to 30 percent of the total cost of the employee’s plan. The incentive levels are similar to those in the proposed rule under the Americans with Disabilities Act (ADA), HIPAA, and Title I of GINA.
Analysis: Employers continue to adopt wellness strategies that aim to encourage health, lower absenteeism and presenteeism, and reduce health care expenditures, but some stakeholders are concerned about aspects of these programs. For example, privacy advocates raise concerns about employers’ access to sensitive health information. With fitness-related wearables, advocates are concerned that employers could use them to track employee whereabouts. Some patient advocates are concerned that cost savings will be achieved at the expense of the disabled or unhealthy.
A representative for the American Benefits Council said that the new rule confirms that GINA allows companies to encourage spouses of employees to complete health risk assessments. Others have said, however, that the proposed rule does not do enough to mitigate employees’ privacy concerns and may urge employees to provide information that could ultimately lead to discrimination.
Regardless, even some of the “believers” are skeptical that employee wellness programs will limit or reduce health care costs. Results from Deloitte’s 2013 Survey of US Employers found that while 36 percent of employers use health improvement tactics as part of their strategy, only 25 percent believe this will have a high impact on managing or reducing health care costs. Ultimately, employers are likely to continue using wellness strategies – not only to encourage healthy habits among their employees, but also to bolster recruitment.
FDA seeks feedback on how to use innovative technologies in clinical research
The US Food and Drug Administration (FDA) issued a request for comments soliciting input on ways to use innovative technologies, such as mobile health technology, telemedicine, and remote sensors, for more efficient clinical research. The FDA is requesting stakeholder assistance to identify new ideas for evaluating medical products, as well as barriers and challenges that currently hinder the use of these innovative technologies and methods.
More specifically, the FDA hopes to gain insight on:
- How companies are using new technologies, communication infrastructure, and innovative methods to conduct clinical investigations
- What approaches may encourage greater adoption and use of these technologies and methods
- Barriers or challenges that may discourage companies from using these approaches (e.g., regulatory requirements or documenting informed consent)
- Specific patient groups or therapeutic areas that may benefit from these types of technologies
- Risks and/or benefits to trial participants that could occur when using these technologies
- Any potential human subject protection issues (e.g., data authenticity and reliability, data encryption capabilities)
- Challenges in using the bring-your-own-device (BYOD) model, which is where trial participants use their own smartphones or tablets for data collection purposes
Related: This request for comments is another step that the FDA is taking to improve and update clinical research to make the process more efficient and patient-centered. The request came shortly after the FDA Center for Devices and Radiological Health (CDRH) released ten priorities for 2016 to improve the clinical research process surrounding medical device and radiation-emitting products (see the October 27, 2015 Health Care Current).
FDA delays track-and-trace enforcement
The FDA again delayed enforcement of a provision in the Drug Supply Chain Security Act (DSCSA) that requires all drug packages to have a unique and traceable serial number. The policy went into effect on July 1, 2015, but FDA has not been enforcing the pharmacy tracking requirements. Previously, it said that it would begin enforcement on November 1, 2015 (see the July 14, 2015 Health Care Current), but it is extending enforcement until March 1, 2016.
The track-and-trace policy requires companies that handle drugs, such as manufacturers, repackagers, wholesalers, and dispensers, to record and transmit complex transactional data at every step in the supply chain. The goal was to allow federal officials to more easily and efficiently identify the source of a certain drug should a problem arise. Implementation has proven to be complex, especially for smaller, independent pharmacies and health systems. The American Society of Health-System Pharmacists (ASHP) said that the extension will give these smaller companies ample time to comply with the regulations.
Background: The DSCSA aims to track prescription medications through the supply chain beginning with the manufacturer through to the point of sale. The DSCSA also outlines an implementation guide for an interoperable electronic tracking system. The system, which is set to launch in 2023, will allow the FDA to more effectively protect consumers from potentially dangerous products.
Report outlines recommendations for engaging providers in Medicare-Medicaid integrated care programs
The Integrated Care Resource Center and the Center for Health Care Strategies, Inc. published a technical assistance brief that makes recommendations for states to better engage physicians, hospitals, nursing facilities, and community-based service providers that provide care to people with Medicare and Medicaid coverage (also sometimes called “duals”) in managed care programs. States can:
- Use goals and objectives of the program to develop high-level messages and disseminate them across multiple outlets. Virginia, Idaho, and Florida are examples of states that have done this.
- Emphasize that the programs are joint federal-state programs to get better buy in from providers that may consider themselves to be “Medicare providers” and are reluctant to work with states.
- Engage physician and hospital associations early on to help with program design and implementation. Ohio and New Jersey found this to be a particularly successful strategy.
- Customize information to different types of clinicians based on their patients’ medical and social service needs to help enhance provider engagement.
- Create mechanisms to identity and address common provider issues to assure them they will be paid on time, administrative burden will be no worse, and patient services will continue. New programs often bring out new concerns for providers.
- Maintain transparency surrounding program challenges and successes to improve providers’ willingness to participate with health plans and their ability to respond to concerns from their patients. One example is Florida, which developed a form for providers to submit questions for feedback. State staff met daily to review and address these issues.
- Encourage health plans to align their provider training and prior authorization documentation rules so that providers can attend fewer trainings and will be better able to identify similarities and differences between plans, reducing administrative confusion.
(Source: Sarah Barth and Michelle Herman Soper, Center for Health Care Strategies, “Engaging providers in integrated care programs for Medicare-Medicaid enrollees: Tips for states” October 2015)
Around the Country
CMS approves Montana's Medicaid expansion waiver
Last week, CMS approved Montana’s five-year Medicaid demonstration project, making it the 30th state to expand Medicaid under the Affordable Care Act (ACA). Approximately 70,000 individuals are expected to be eligible under the expansion, but it is likely that not all of those individuals will enroll.
The program targets Montanans with incomes at or below 138 percent of the federal poverty level (FPL, about $16,000 per year for an individual and $33,000 for a family of four). Under the Section 1115 waiver approved by CMS, some beneficiaries will need to pay premiums and copayments, but these are capped at a specified percentage of their income. Montana will not disenroll individuals at or below 100 percent of the FPL who fail to pay their premiums.
Blue Cross and Blue Shield of Montana will act as administrator of the expansion program. This makes Montana the only state to offer its expansion through a private health plan.
Medicaid director survey shows ongoing change across Medicaid programs
Largely reflecting the growing size, scope, and complexity of the programs, most Medicaid directors also have an increasingly complex role in health system reform. The National Association of Medicaid Directors (NAMD) completed its Fourth Annual Operations Survey, which found that directors are committed to payment and delivery reform that improves outcomes, contains costs, and ensures program integrity and sustainability. For 2015, the median budget of Medicaid directors was $6.8 billion, an 11 percent increase over 2014. Medicaid programs provide services to more than 72 million enrollees.
Medicaid agency directors’ jobs have expanded to reflect the program’s increased role in health system-wide or multi-payer payment and delivery reform. Many Medicaid directors also administer health reform initiatives funded through federal or foundation grants. The survey found that 81 percent of directors reported adding new program integrity capabilities.
Governors and Medicaid directors are increasingly using a variety of tactics – including performance-based payment models, patient-centered medical homes, health homes, alignment of physical and behavioral health programs, super utilizer programs, and population health initiatives – to improve outcomes and contain costs. However, many see their agencies’ limited workforces, data and systems infrastructures, funding, and complex processes for procurement as barriers to innovation. Workforce issues are a top concern, as many directors find it difficult to recruit and retain staff as they face budget pressures.
Finally, the survey found that many directors face pressure to maintain operations while improving outcomes and shifting performance expectations. Despite these challenges, most still report that they feel fulfilled in the job and are working to improve the delivery of health care in their states.
Analysis: Medicaid programs are one of the many human services programs that are operated at the state level. In many human services agencies, day-to-day operations consist of programmed actions and reactions, inputs and outputs, moving back and forth among government workers, their data systems, and their clients. Often, success is defined primarily by the timeliness and accuracy of these transactions rather than their results.
In the October 27, 2015 Health Care Current, Mark Price, US Public Sector Leader, Deloitte Consulting LLP, explained how human services can become transformational rather than transactional, focusing resources on doing the right work for the right people at the right time and thus achieving meaningful results. A transformational system can improve the health care programs that human services agencies provide for their citizens. It can target services to those who not only are neediest, but also the costliest individuals. It can also help agencies capture the right individuals (e.g., super utilizers) early, prevent their cases from escalating, identify redundant services, and streamline those that add the most value to individuals’ lives. The survey of Medicaid directors indicates that many are already shifting their focus to delivering transformational services, rather than purely transactional services.
(Source: National Association of Medicaid Directors, “State Medicaid Operations Survey: Fourth Annual Survey of Medicaid Directors,” November 2015)
NIH to study mobile health impact on heart disease
The National Institutes of Health (NIH) awarded a five year grant to the University of California in San Francisco for the creation of Health ePeople, a platform for researchers to study mobile and wireless health outcomes for cardiovascular disease in a less costly, more streamlined manner.
With the platform, researchers will have access to a large cohort of volunteers, along with a convenient, affordable means for collecting their health data through mobile and wireless technologies. Any adult from around the world with a working email address is eligible to join the study, which is enrolling now but will not start for several months. The researchers hope to enroll one million participants.
The Health ePeople study builds off the innovative Health eHeart Study, which collected cardiovascular data using online and mobile technology such as smartphone apps, electrocardiogram smartphone cases, and portable blood pressure cuffs. Health ePeople will collect mobile health data from sensors, devices, apps, and data from online surveys and electronic health records to study clinical outcomes. The research team plans to collaborate with other mHealth initiatives, including the NIH Precision Medicine Initiative and the national Patient-Centered Clinical Research Network (PCORnet), an initiative of the Patient-Centered Outcomes Research Institute (PCORI).
The Health ePeople study will use modular electronic consenting and options for external investigators to use and recruit their own participants. The team has created a study management portal with a messaging system that allows researchers to access real-time information and a private, secure database.
Cardiovascular disease was chosen because it is a common killer in the US and around the world. Other researchers interested in using the infrastructure may be able to adapt the platform for use with other diseases and disciplines.
Analysis: The landmark Framingham Heart Study began in 1948, decades before electronic health records and mobile devices became common. The Framingham Heart Study identified smoking, high LDL cholesterol, and high blood pressure as major independent risk factors for heart attack and stroke, ultimately leading to dramatic reductions in morbidity and mortality from these diseases by targeting these risk factors. This highly successful model has been challenging to replicate for less common diseases, which often require a prospective cohort of several thousand individuals and may not provide enough statistical power to detect risk factors. The barriers to these studies have been the relatively high cost of recruiting participants, collecting comprehensive data, and following participants over time.
Mobile technologies and other components of connected health – or technology-enabled integrated care delivery that allows for remote communication, diagnosis, treatment, and monitoring – have changed the research landscape and led to significant reductions in the cost of data storage and comparable increases in analytic capabilities. There is a growing interest in using phones, wearables, in-home devices, and related connected health tools (see related data from Deloitte’s 2015 Survey of US Heath Care Consumers in the recent paper, “Health care consumer engagement: no ‘one-size-fit-all’ approach”). In addition to technological advances, patients have become more engaged in health care and health research, more connected and organized through social media, and are ready for innovative new treatments.
All of these factors make these types of studies possible and are setting the stage to realize the goal of the NIH’s Precision Medicine Initiative Cohort Program. The ambitious program aims to build a large research cohort of one million or more Americans that will provide the platform for expanding our knowledge of precision medicine approaches.