The Midterm elections featured healthcare as a key voting issue. Approximately 55% of voters indicated support for the Affordable Care Act and voted accordingly with healthcare as a top issue driving their decisions. The Republican position of “repeal and replace” did not play well with voters. Conversely, the Democrats ran on the message of enhancing the Affordable Care Act which clearly resonated with voters as evidenced by the large pick-up of seats along with control of the House of Representatives by the Democrats. The challenge now will be to keep the promises of enhancing the ACA.
Overall the ACA did some very good things, including:
- Provision of health insurance through Medicaid expansion and creation of the health exchanges to over 20M Americans who previously did not have insurance coverage.
- Extension of insurance coverage to young adults allowing them to remain on their parent’s plan until age 26.
- Creation of essential health benefits as mandatory elements of the health exchange plans to ensure appropriate coverage for all enrollees.
- Elimination of pre-existing conditions as an exclusionary tactic by insurers.
- Elimination of life-time caps on coverage for enrollees.
However, the ACA is still far from perfect and there are many elements that could benefit from a revised approach. Access to health insurance is still an issue, as Medicaid expansion did not happen in all states and there are limited options for exchange plans in some areas. Overall there are at least 16M Americans that still lack health insurance coverage. The cost of health insurance is a major issue with many patients struggling to afford monthly premiums. Underinsurance is a problem. Many patients may only be able to afford a high deductible Bronze plan, but the out of pocket deductibles become problematic and in essence the plan simply becomes an expensive catastrophic insurance option and not something that helps with day-to-day healthcare needs. With the removal of the “individual mandate,” attempting to balance risk pools and attract enough healthy individuals into the pool to spread out the costs of care for high cost patients is problematic. And overall, making sure that adequate funding is in place to pay for all of the ACA elements is an ongoing challenge.
At the end of the day, while the details are complex, the approach to healthcare policy should be crystal clear in terms of how reforms are considered and evaluated. Any healthcare reform ideally should do three things:
- Improve access to healthcare for all Americans,
- Improve the quality and outcomes of that care, and
- Work to reduce the cost of delivering care.
Healthcare should not be a Republican or a Democratic issue. Healthcare should be an American issue. We spend over 18% of our total GDP at $3.3 trillion dollars annually on healthcare. We can and must do better in all of the above areas and everyone should hold all elected officials accountable for their performance on improving healthcare.
Continuing Drug Shortages
We have seen no significant abatement of the ongoing issues surrounding drug shortages this year and there are no indications that this situation will improve in 2019. As of this publication there are well over 200 drugs in shortage situations. The reasons for this are multifactorial and include:
- Interruptions in active pharmaceutical ingredient supply limiting manufacturing capability
- Regulatory sanctions resulting in extended shutdowns of manufacturing with no viable market options to pick up the reduced capacity
- Companies leaving markets to pursue more lucrative product opportunities and thus leaving a market void
- Natural disasters such as hurricane Maria which severely damaged the pharmaceutical industry in Puerto Rico
The results of these shortages are very impactful. Hospitals struggle on a daily basis to ensure that their patients have access to the appropriate medications. Finding acceptable alternatives to drugs in critical shortage situations is an ongoing challenge. Communication of shortages and alternatives to the hospital and medical staffs is a major challenge. With electronic health records and automated dispensing cabinets, keeping IT and automation updated with new products is a regular challenge. Drug budget control is a significant challenge with the need to purchase many products off-contract or to select products that may not be first choices for the formulary simply because “that is all you can get.” For many organizations these choices represent millions in additional cost to the drug budget.
Many of the above elements remain “hidden costs” with pharmacy departments working behind the scenes to mitigate these effects as much as possible. However, with shortages continuing next year, organizations would be well advised to take a serious look at how shortages are being managed and to put a formal line in the budget for the personnel and tools needed to effectively address this issue.
Escalating Drug Costs
Pharmaceuticals remain one of the fastest growing elements of US healthcare spending. This year the total prescription drug spend is expected to exceed $460B and projections are that by the end of 2019 that total will be at half a trillion dollars. Prescription drugs now represent approximately 17% of the total US healthcare spending. Much of this increase is being fueled by the continued development of specialty pharmaceuticals (high cost drugs used to treat complex patient conditions). Specialty pharmaceuticals currently comprise approximately 35% of the total drug spend yet represent less than 3% of prescription volume. Specialty pharmaceutical costs driven largely by the development of new molecular entities are expected to rise 17-22% next year. By the end of 2019, specialty pharmaceuticals are expected to consume 40-50% of the total US prescription drug spend.
While rising drug costs represent a challenge for hospitals on the inpatient side they also represent a significant opportunity on the outpatient side. Hospital based retail, mail and specialty pharmacy services for employees and patients represent an opportunity to improve continuity of care and also to generate significant new revenue. All organizations large or small should have a defined strategy around specialty pharmacy. Whether they choose to do it themselves, partner, or outsource, a careful examination of market size, market dynamics, potential investments and return on those investments, and business plans are in order.
President Trump and HHS Secretary Azar have released their blueprint to control drugs costs. At this point the document is less of an actual blueprint and more of a collection of potential strategies but it does signal a commitment on the part of the Trump administration to address rising drug costs. I would not anticipate any significant movement in terms of price controls on trade name drugs but for 2019; I do think we can expect some movement in controlling the huge increases in generic drugs that we have seen the past two years.
The recent announcement of an Amazon, JP Morgan and Berkshire Hathaway alliance has created significant interest in the ability of this consortium to act as a disruptive force in healthcare delivery. In their release, the companies said their initial focus will be on “technology solutions” to provide “high‑quality and transparent health care.” Speculation is that one of the first things the group may look at is innovative models of accessing primary care both “live” and using online tools. Their acquisition of PillPak would seem to support the technology and innovation aspects of this approach. The appointment of Dr. Atul Gawande as CEO for the new healthcare company also signals a serious commitment to innovation and quality.
Amazon may also leverage their acquisition of Whole Foods to enter the retail pharmacy market via the grocery store route, but their number of stores is significantly limited. This would likely pose little threat to the current market. There is also the potential for Amazon to get into the business of selling pharmaceuticals and compete with the wholesale drug market.
There has also been speculation that an Amazon entry strategy might revolve around a partnership with one of the big PBMs. However, I don’t think Amazon would be successful just partnering with a single PBM. Also, from the PBM perspective, Amazon doesn’t really add much in additional market share for the largest PBMs. United Health-Optum controls its market very tightly. CVS‑ Aetna will look very similar to United Health‑ Optum and could further serve to block competitive entries like an Amazon. Express Scripts, as the third major PBM player would not be likely to gain much market share from an Amazon partnership. However, given the fact that ESI has not matched CVS and UHC/Optum, they will need to consider options.
The formation of Civica Rx also represents a potential market disruption. This is a non-profit generic drug company formed by Intermountain Healthcare, Mayo Clinic, Catholic Healthcare Initiatives, HCA Healthcare, Providence St. Joseph Health, SSM Health, and Trinity Health. Civica Rx is focused on helping hospitals and patients address concerns around rising drug costs and drug shortages. It is initially targeting 14 generic drugs. Production will be accomplished initially via contract manufacturing as their own manufacturing lines are being built. There is growing interest among hospitals across the country with this venture, however to date the 14 target drugs have not been released and the ultimate impact on shortages and pricing can’t be estimated.
The safe preparation of compounded sterile products both from a patient and healthcare worker perspective remains a focus for 2019. We can expect to see enhanced options for preparation including guided prep systems and next generation robotics.
USP is in the process of soliciting final comments for Revised USP Chapter <797> and the new USP Chapter <800> dealing with hazardous drugs. Additionally, USP is coming out with an entirely new chapter <825> Compounding Radiopharmaceuticals. The intended implementation date for these chapters remains December 2019. The enhanced quality standards in these chapters present multiple challenges for hospitals including:
- Sterile preparation facilities. Decisions regarding facility upgrades and remodels generally require significant capital investments and plans need to be underway to ensure compliance with the December 2019 date.
- Decisions on Facilities and Beyond Use Dating will need to be made. It is permissible to compound outside of ISO 7 cleanroom conditions, but the maximum allowable BUD is 12 hours.
- The need for enhanced systems to guide and document quality monitoring requirements should be considered.
- For organizations not yet deploying Closed System Transfer Devices (CSTDs) as supplemental engineering controls for hazardous medications plans will need to be developed to implement a CSTD for administration of cytotoxic medications as this is currently a “must” in Chapter <800>. Use of CSTDs for pharmacy compounding of hazardous medications should be considered as well.
- Systems to regularly test for surface contamination of hazardous medications should be considered.
- Separate areas to unpack hazardous medications and negative pressure storage areas for hazardous medications will be required.
- Enhanced cleaning, decontamination and disinfection processes will be required.
- Personnel monitoring process for healthcare workers handling hazardous medications should be considered.
- Radiopharmaceuticals represent a unique class of drug products where compounding activities include the use of radionuclide generators, the preparation of commercially-manufactured radiopharmaceutical kits, the dilution of FDA-approved multi-dose vials, the labeling of human blood products with radionuclides, and the preparation of patient-specific doses.
The combination of all USP revisions will continue to challenge medication management services with not just the facility requirements, but also the continuous diligence required for full compliance. In response to these challenges the American Hospital Association has petitioned USP for an 18 month delay in Chapters <797> and <800> implementation. However it is important to recognize that while difficult, these new standards represent important patient safety advancements. A paradigm shift in the approach to these practice standards as requirements to meet compliance must change to a desire to meet standards and exceed them for patient and employee safety.
At the same time that USP standards are in process, State Boards of Pharmacy are also actively working on enhancements to their regulations as well as continuing to elevate the training around sterile compounding compliance for their inspectors. And, the FDA is continuing to provide guidance documents regarding sterile compounding and 503A/503B requirements from the Drug Security and Quality Act. It should be noted that while 503A compounding remains the primary responsibility of State Boards of Pharmacy, the FDA can and will investigate any concerns in this space.
Pharmacy workforce issues with both technicians and pharmacists will be a challenge for 2019. As we work around the country at Visante with a wide variety of hospitals and health systems we are seeing a developing trend with technician shortages. Many organizations are now routinely experiencing annual tech turnover of 20-30%. This presents problems in terms of safety, efficiency and cost. Virtually every major error involving medications in the last decade has started with a technician. Having well-trained and experienced technicians is an important element of a robust medication safety program and high turnover rates are a concern. Continually replacing technical staff also contributes to lower efficiency and productivity and there is an associated hidden cost with training and lost productivity that should be accounted for. There is currently no national standard approach to technicians in terms of licensure, registration, and certification. As a result, there are a wide variety of approaches to education and training for technicians and many areas of the country struggle with finding reliable sources of well-educated and trained technicians. Some key market dynamics for technicians that we observe that should be addressed in 2019 include:
- Pay scales. Typically, pharmacy technicians are paid less than other technical positions such as lab or radiology techs. As a result, this becomes more an entry-level job rather than a career and pharmacy techs routinely leave for higher paying positions.
- Lack of career advancement opportunities. With limited growth potential in the pharmacy tech job classification we commonly see good techs that have reached the top of their job leave for more career options with more growth potential.
- Limited education and training options. Many locations around the country do not have reliable tech training programs in their local area and must still rely on “on the job” training. However, there are now ASHP accredited tech training programs that are virtual and provide access to training regardless of location.
- Younger undecided job seekers are often attracted to pharmacy tech positions and these individuals in many instances are uncertain about a future career path. They work as a tech for a few years and gain healthcare experience and then leave for something better once they decide what they really want to do. However there are now programs that seek out grants for displaced workers to train as techs and also grants for spouses of military personnel. These “second career” individuals are much less likely to leave and more likely to view this new opportunity as a long-term career option.
The issue with pharmacists is just the opposite – oversupply of qualified pharmacists in many areas of the country. With the proliferation of pharmacy schools over the last 10 years we are seeing a saturation of pharmacists in many locales, particularly the larger metro areas. This is creating extreme pressure for residency positions and jobs. As a result we are seeing declining wages in some areas consistent with an oversupply. However, as we continue to see an aging population and as more people gain access to health insurance, we are also observing an increase in the demand for medication therapy. And, we are seeing a continued escalation in the development of new molecular entities and an elevation in the sophistication and complexity of medication therapy. This creates opportunities for pharmacists and for 2019 we should accelerate our work to promote pharmacists as the medication therapy experts on the medical team and to create opportunities for pharmacists to practice at the top of their license which opens up new and expanded roles for pharmacists, so we can best take advantage of this well educated and available workforce.
The 340B Program has grown considerably since its inception and now represents approximately 4% of the total US prescription drug spend. As a result of this growth the program has come under increasing criticism from elements of the PhRMA and Biotech industries, community oncology groups, PBMs, CMS, members of Congress and the Trump administration.
For 2019 CMS is suggesting further reductions in payments to 340B hospitals for Part B drugs and biologicals. As part of its proposed payment regulation for hospitals under the Outpatient Prospective Payment System (OPPS) for 2019, CMS proposes continuation of the 30 percent payment reduction for Part B drugs implemented earlier this year for certain hospitals in the 340B drug pricing program, and further proposes to extend the payment reduction to drugs provided in non-excepted off-campus hospital outpatient departments (HOPDs) that are subject to reduced “site neutral” payments. CMS also is working to change how the payment reduction applies to certain biosimilar products, reducing the size of the payment reduction for these products, and clarifies the application of the payment cut to new drugs. These changes would represent significant financial losses for some hospitals and should be monitored closely.
The ultimate success of the lawsuit contesting the payment cuts generated by hospital groups like the AHA remains questionable in terms of reversing these cuts. However, with the results of the midterm elections and Democrats regaining control of the House there is an opportunity for legislative action to reverse these cuts. While the House under Democratic control would likely support this move, enough bi-partisan support in the Senate would need to be created.
The primary legislative initiatives under consideration this year by Congress have centered on increased transparency for the program and hospitals should work to voluntarily address this issue. All hospitals participating in the 340B Program should generate an annual report that clearly delineates how and where the savings generated from the 340B Program are being used in their organization to support the intended mission of the program which is to expand care to vulnerable patient populations. There were also proposals to move away from the DSH Adjustment Percentage as a key qualification element in favor of a value such as charity care. However, hospitals would be well advised to keep close watch on this trend since charity care is a defined value and is not the same as uncompensated care which is more relevant to deciding where additional assistance may be required.
Bottom line for the 340B Program is that the midterms with a Democratic House produced a very good result for the program and we do not anticipate any major legislative sponsored reductions in the program for 2019. However, the best defense against any program criticism or attempts to reduce it is a robust and well-documented compliance program that clearly delineates program integrity with current requirements and connects savings to appropriate utilization.
Unfortunately, the current opioid epidemic shows no signs of abating in 2019. Every day, more than 115 people in the United States die after overdosing on opioids and the total “economic burden” of prescription opioid misuse alone in the United States is approximately $80B annually and rising. It is hard to find someone that hasn’t personally been impacted or doesn’t know someone touched by this problem. The impact of the problem is highlighted in the following statistics from The National Institute on Drug Abuse:
- Roughly 21 to 29 percent of patients prescribed opioids for chronic pain misuse them.
- Between 8 and 12 percent develop an opioid use disorder.
- An estimated 4 to 6 percent who misuse prescription opioids transition to heroin.
- About 80 percent of people who use heroin first misused prescription opioids.
- Opioid overdoses increased 30 percent from July 2016 through September 2017 in 52 areas in 45 states.
- The Midwestern region saw opioid overdoses increase 70 percent from July 2016 through September 2017.
- Opioid overdoses in large cities increased by 54 percent in 16 states.
With the advent of much more powerful pain medications including the recently released Dsuvia (sufentanil sublingual), which is 5-10X more powerful than fentanyl, physicians were given significantly enhanced medications to manage pain. However, the unintended consequence was an enormous increase in people addicted to prescription pain medications. It is possible to become addicted after a single course of treatment and it is impossible to predict exactly who might have this addiction predilection.
For 2019 hospitals and health systems should have better opioid management as a priority and some things to consider include:
- Creation of an Opioid Stewardship Program similar to what many organizations have successfully done with Antimicrobial Stewardship programs to reduce the development and spread of multi-drug resistant organism. An Opioid Stewardship program is a multidisciplinary program providing education, clinical support, monitoring and direction for safer and more effective use of these agents.
- Enhanced use of multi-modal pain therapy to reduce reliance on opioids
- Use of smaller quantities when opioids are prescribed to minimize addiction potential
- Use of formalized Pain Management Services that include clinical pharmacists to help better manage both acute and chronic pain with less use of opioids
- Enhanced education for physicians around pain management options to ensure optimal use of non-opioid therapies where appropriate
Expansion of Value Based Payment Models by CMS
One of the very positive results of the Affordable Care Act has been a movement away from our traditional method of paying for healthcare using “volume” indicators toward a “value” based approach where better quality and cost outcomes are the basis for payment. We have seen the proliferation of Accountable Care Organizations (ACO) and ACO-like programs. An ACO is typically a collaboration between a physician group and hospital group where they agree to be accountable for the care of a defined patient population for a defined time period, such as a Medicare ACO that requires a minimum of 5,000 covered lives for three years.
There are two basic approaches to ACOs and value-based payment. In the simplest approach the ACO receives quality and cost targets and is incentivized by additional payments if they hit their required quality and cost goals. In the second model the same basic quality and cost targets are present but there are enhanced levels of payments, however these come with a “down-side” risk of reduced payments if the targets are not reached. Recently HHS Secretary Azar announced his intention to eliminate the “no risk” ACO payment option and move to the second model only. It has also been a stated goal of CMS to move at least 90% of ambulatory payments to an ACO or bundled payment type arrangement over the next 10 years.
Expanding on the ACO like approach, last July CMS implemented the Oncology Care Model as a demonstration project. This was a unique arrangement of government and private insurance along with physicians and hospitals to create a model that delivered better quality and cost to Medicare patients receiving chemotherapy. The program offers add-on payments of $160/month/patient to the regular Fee for Service payment for the delivery of a defined set of services targeted toward supporting better outcomes. There are additional shared savings available as well for achievement of defined cost goals. Currently with this model there is no downside risk associated with missing the target goals, but consistent with Secretary Azar’s ACO position I would expect this to change as well. This program is scheduled to run through 2022 but last month Secretary Azar announced plans to expand this model.
PBM Evolution toward New Delivery Models
The PBM industry has made significant contributions to better management of the US prescription drug spend yet it has come under increasing criticism. Efforts focused on PBMs feature prominently in President Trump and Secretary Azar’s Blueprint for Drug Cost Reduction. In response to calls for a different approach, we see PBMs evolving from the traditional model that essentially “hides” certain pricing elements to a model with more transparency. The new fully transparent PBM programs eliminate concerns about hidden fees, rebate amounts, Maximum Allowable Cost list and spread manipulations.
We also see the introduction of new terminology with companies like Ventegra now branding itself as a Pharmacy Services Administrator (PSA) as opposed to a traditional PBM and offering a fully transparent approach and a greater emphasis on 340B and specialty pharmacy options along with enhanced medication therapy management programs.
With specialty pharmaceuticals closing in on representing 50% of the total US prescription drug spend, increasing emphasis is being placed on better management of these high-cost drugs. Traditionally, specialty drugs have been split between the medical benefit and pharmacy benefit. Generally, infused and injectable specialty medications are covered under the medical benefit, while oral and self-administered injectable medications are covered under the pharmacy benefit. It is often more difficult to manage the drug spend in the medical benefit since claims are often submitted and processed after the drugs have been administered. In the pharmacy benefit claims are adjudicated “real time” on-line, providing more timely management opportunities. We are seeing a slow shift from medical benefit to pharmacy benefit for specialty medications.
For 2019, hospitals and health systems would be wise to evaluate their current PBM performance for their employees and any “at risk” populations they are responsible for – and pharmacy should be part of this analysis. Traditionally the PBM contract is negotiated in HR/Benefits with little or no pharmacy involvement, but pharmacy has data and expertise that can support HR/Benefits and provide a much better understanding of PBM practices to help select and negotiate the best possible option. For health systems with their own retail and specialty pharmacies, “insourcing” more employee prescriptions may also offer significant cost reduction opportunities.