2013 Pharmaceutical Industry Outlook: Post-Election Impact to Healthcare Reform & Health Policy
The 2012 election was filled with tight races, close victories and upsets. Now that the votes are in, and the Obama Administration begins a second term in office, questions remain about the continued implementation of the Patient Protection and Affordable Care Act (ACA) and its impact on patient access. At the most basic level, the reelection of President Obama means the ACA will move forward, which does provide some clarity on key patient access issues, such as the expansion of insurance coverage to benefit the uninsured in 2014. With the election behind us, we at AmerisourceBergen Consulting Services now expect to see a flurry of regulations released related to healthcare reform – many of which were slowed prior to the election, as insurance companies, states, hospitals and other providers were waiting for more details before moving forward.
The following article outlines the key actions of a second Obama Administration and its impact on access to healthcare, payment reform, quality initiatives and industry; the solidification of trends occurring in the public and private sectors – some of which pre-dated the ACA, and some of which the ACA spurred; and steps manufacturers will need to take to succeed in the evolving healthcare marketplace.
Key Actions of a Second Obama Administration
We expect a number of potential controversial regulations to be released in the coming weeks, as we’ve been waiting for clarification on what benefits an insurance policy needs to cover. In addition, we have many specific questions related to employers and how the penalties might be leveraged depending on the definition of part-time versus full-time employees – and other aspects of the individual mandate.
Without further payment reforms and provider incentives, patients will likely experience reduced access to physicians and/or longer wait times due to a few factors. While we expect to see an increase in the number of the insured Americans through the individual mandate and Medicaid expansion, and the increased availability of insurance plans via state exchanges, there won’t be an increase in the number of physicians accommodating the increased demand for services. In fact, we expect to see more physicians retiring sooner than anticipated and fewer admissions to expensive medical schools, as a result of the continuation of decreasing physician payment rates.
Because terms around the expansion of Medicaid remain unclear, we may see the administration offer more flexibility to the states, particularly in terms of encouraging participation and expanding Medicaid as a way to extend access to the uninsured. This will be a key issue to watch because not only will it vary by state, but it will also grow fairly significantly in the coming year, spurring important changes to reimbursement. It could potentially have a negative impact to the pharmaceutical, biotechnology and medical device industries from an economics perspective, given that Medicaid expansion will result in the likely implementation of additional cost containment affecting drug payments.
From a payment reform perspective, it does look like more states are moving toward drug reimbursement based on average acquisition cost (AAC) or other similar methodologies.
State Insurance Exchange Implementation
Following the election, the Department of Health and Human Services (HHS) announced that states would have additional time to submit plans for health insurance exchanges under the ACA. States still must meet the mid-November deadline to declare whether they plan to run their own exchange, but they have until mid-December to submit the detailed applications required by federal officials. States that will be running exchanges must have them fully certified and operational by January 1, 2014.
There are about thirty states that are unclear in terms of how they will move forward on the state insurance exchange. Many were waiting for the election results to decide whether or not they’d move forward, while others have been working behind the scenes and are ready to go. Those that are behind also have the option of going with the federal program.
At this point in time, it’s unclear whether or not we’ll see the independent payment advisory board (IPAB) take a more aggressive stance in term of coverage. In the current model, the IPAB can make coverage decisions based on the comparisons of different treatments, drugs, etc. using tools such as comparative effectiveness research (CER). This is an area of growing bipartisan concern, so it’s quite possible we will see the authority of this piece of healthcare reform be scaled back over time.
The sustainable growth rate (SGR) fix is another area to watch, as it’s a looming threat to Medicare reimbursement for physicians. This is the one area where the short-term impact was the same regardless of the outcome of the election. Both parties were very committed to addressing this issue in the short-term, as there is widespread recognition that providers cannot take sharp cuts in reimbursement and provide the same level of patient access to care. Overall, Medicare reimbursement to physicians has not kept pace with inflation for more than a decade, and the issue needs to be addressed. The Fiscal Commission’s solution to the SGR fix is to freeze physician payment rates in 2013, decreasethem by one percent in 2014, and then subject rates to an SGR that could be reset in 2015, using the 2014 spending level as the base. There are other groups, including the American Medical Association (AMA), that have talked about doing away with this formula entirely and transitioning to a new process. Recommendations for this include:
· doing away with a “one size fits all” approach;
· setting a five-year transition period;
· enacting models such as capitation or “case management” fees for coordinating care;
· providing incentives for meeting quality benchmarks;
· developing medical homes and related models; and
· drafting new legislation allowing patients and providers to contract directly with Medicare.
Confirmation of Marilyn Tavenner
There’s been widespread speculation as to whether or not Marilyn Tavenner will be confirmed as the permanent leader of the Centers for Medicare and Medicaid Services (CMS). She’s been serving as acting administrator since Dr. Donald Berwick resigned in December 2011. Because officials at CMS are taking a leading role in the implementation of the ACA, the Medicare federal health insurance program for the elderly, and the joint federal-state Medicaid for low-income Americans, the appointment of a permanent lead to the agency will be an issue to watch.
Solidification of Trends Occurring in the Public & Private Sectors
Overall, economic pressures are going to continue, and with Congress still divided, it’s going to be difficult to make dramatic changes – especially to programs like Medicare. As a result, we’re going to see more focus on the regulatory side, and with regards to Medicare, providers are going to have to watch out for the potential threat of additional cuts in reimbursement. In addition, possible proposed legislation could grant authority for government to negotiate prescription drug prices for Medicare.
Manufacturers will share in these challenges as cost pressures are going to force them to really demonstrate the value of their products far beyond the FDA approval process. As a result, we will continue to see the incorporation of comparative effectiveness research (CER) and healthcare effectiveness outcomes research (HEOR) data in coverage decision-making. Manufacturers could also see possible proposed legislation or regulation to address drug shortages, likely along the lines of forcing them to continue production, or mild incentives around stimulating production, of drugs in limited supply.
We’re going to see a shift that could, in the short term, bring on additional challenges as both public and private payers attempt to move away from fee-for-service towards more bundled payment arrangements. This will be a difficult transition for providers in the short-term as they try to remain whole through the process. As a result, manufacturers will need to continue to support patients and providers in new ways. This means, in the end, manufacturers will not just compete on price, but also on services and the value or health outcomes their treatments offer. It’s still unclear whether we’re going to see more at-risk models emerge in the U.S., but if we do, manufacturers will have a very direct role in the risk and outcomes of those treatments.
Accountable Care Organizations (ACOs), medial homes and other new payment models are encouraging the creation of new care models that include both vertical and horizontal integration across providers. Recent data suggests one in ten patients in the U.S. now is served through an ACO or other integrated delivery models as both public and private payer approaches continue to grow. This growth means physicians, hospitals, pharmacies, and other care models must work together in new ways – including financial alignment and focusing on quality and outcomes.
How Manufacturers Can Succeed in the Evolving Healthcare Marketplace
While the post-election landscape does present many challenges in terms of healthcare reform, there are many things manufacturers can do to prepare for the changes on the horizon – including gaining a solid understanding of all the key players: the payers, providers and patients.
First and foremost, expanding managed markets access strategies is critical, including generating health outcomes and economic data to support the value proposition of their products. This was a critical step regardless of the election outcome, but now that we know the ACA is moving towards full implementation, this clarifies that at least in the short term, data is likely to become more important to government payers than it is for private payers.
Secondly, manufacturers need to invest in services that support healthcare providers, such as reimbursement triage, patient education and training, adherence programs, etc. The coverage hurdles that patients have to reach are going to grow – and this will create extra work for providers as a result. This will be difficult for providers as they are already operating in a constrained environment and reimbursement and cost pressures will add additional challenges. Manufacturers should be looking for ways to offer backing for services providers are not reimbursed for and don’t have the staff to support.
Thirdly, modeling the cost impact and outcomes analysis of treatment modalities and looking at new payer contracting strategies are key opportunities for manufacturers. And lastly, as Medicaid expands and state insurance exchanges are implemented, manufacturers will have the opportunity to redesign patient access programs and reimbursement support services to reflect the changes to coverage configuration.
As healthcare reform moves forward in this difficult economic environment, there will be many challenges – from state-specific issues and challenges as insured patients try to gain coverage, to new types of payer pressures and an increased need for manufacturer contingency strategies that support market access for their products.If manufacturers understand the players and put the right strategies in place, they will be poised for success as elements of the ACA are implemented.