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Video Transcript: Health Policy Changes: What Continues to Keep Pharma Up at Night?

Webisode transcriptions completed by third-party vendor. AmerisourceBergen Specialty Group assumes no liability for the accuracy of the content.

Gina: The future of health reform, new discussions on Medicare physician’s reimbursement, comparative effectiveness at a major private payer. What recent legislative and regulatory developments have the greatest potential to impact the pharmaceutical community? And what should manufacturers be doing in response?

Join us to find out! In The Know starts now.

Hello and welcome to In The Know, your source for insight and analysis on issues that matter to specialty pharma. I’m your host, Gina Clark.
Today we received the latest in our series of updates on healthcare related activities in Washington D.C. We’ll discuss what the healthcare reform law actually means for manufacturers, providers and patients. As well as how recent political appointments and mid-term primaries might influence pharma decision-making.

Returning to In The Know is Peyton Howell, president of AmerisourceBergen consulting services and one of the country’s foremost experts in public policy and patient access trends. Thanks for being with us today, Peyton.

Peyton: Thanks for having me, Gina.

Gina: Since we last met in February to discuss health reform, the proposed bill has been signed into law aside from what we see reported in mainstream media, what happens now?

Peyton:  Great question. What an adventure it’s been actually the past few weeks. What happens next is kind of interesting because when you look at the healthcare reform legislation that did pass at the end of March, it is somewhat loaded in terms of activity towards 2014. So the big coverage expansion that we’re hearing about and that people are anticipating does indeed happen but really the full roles really move toward 2014. So in 2010, 2011 most of the changes are subtle and it’s the beginning of the changes in the regulatory process itself. So it can feel a little bit more specific. I’ll give you some examples, from the manufacturers’ perspective there are some changes that went in immediately that are fairly material. First of all, there’s the Medicaid managed care rebates, which are new, and the expansion of the Medicaid rebates. Those two pieces together are one of the most key funding sources for healthcare reform. And because they’re effective immediately manufacturers are going to feel those this year in terms of their own financial situation. But they won’t feel the benefit of those new patients coming into insurance and coverage and benefits until 2014. So there’s a bit of a squeeze there. So those two pieces are very material and insignificant. For 2011, we have some new industry fees that also begin to hit so most manufacturers are beginning to look at the cost of those types of issues this year in anticipation of January 1st. And then the last piece is an expansion of the 3-40B program, so 3-40B programs been growing in influence well before healthcare reform, but actually for next year we do have a change in terms of expanding to include other types of provider sites. One of the most material is the freestanding cancer centers. So that’d be your large cancer centers like an MD Anderson. Now not all of those sites qualify for a 3-40B pricing yet, however when they do become eligible, which is anticipated, in fact for many this year, then that cost will also be another impact for manufacturers. So the manufacturers have a lot of moving parts right now. For payers it’s a little bit of a different scenario. For payers the big impact is much more nitty gritty and you’ve been hearing that payers aren’t happy overall with the healthcare reform but in reality they did win the big argument which is that there is no true public option within the healthcare reform bill. But the Medicare advantage rates have been cut for 2011, yet it’s really too late for payers to pull out of this plan at this point in time. So I happened to be with a group of our managed care experts this past weekend at MCN, managed care network, and the medical directors and pharmacy directors said for 2011, what they anticipate is that they need to qualify for those quality bonuses that the government has offered as part of healthcare reform in order to make those Medicare advantage cuts palatable for staying in Medicare advantage. So it’s going to be really important for the next few months to watch what happens with the Medicare advantage plans. For the longer term we may see significant changes with Medicare advantage that could impact beneficiaries in 2012 and beyond. But that’s where we’re at right now, a lot of changes and a lot of detailed regulations coming out specific to some of those changes versus the big reform changes in terms of more coverage.

Gina: What about from a patient’s perspective, what does the health reform law do for patient populations this year?

Peyton: Yeah, the patient’s perspective does depend on your current situation if you currently have employer provided group type insurance plans the reality is that you’re probably not seeing any changes at all. Different for this year, for next year you may be impacted in a beneficial way by some of those specific changes like no lifetime maximums or being able to keep your adult children on coverage, but otherwise really no significant changes in that group. If you’re a Medicare part D patient though, so if you’re a Medicare eligible and you’ve already opted for that Medicare part D pharmacy benefit, there are some changes that do go into effect for this year. They’re not giant but if you become eligible or reach that donut hole, that lapse in coverage in that benefit there is a $250 rebate that patients will begin to receive this year. And as each year going forward there is a closing of that donut hole. Now copays don’t go away but the donut hole, which really created that gap where you had no benefit at all from your pharmacy benefit, that does begin to actually change and then is fully closed by 2020. So Medicare patients do begin to see some very specific changes and I think we’ll see that each year there are new changes on both the medical benefit, the part B side as well as that part D benefit for beneficiaries to be aware of. Now if you’re uninsured and you’re only waiting for this coverage, most people will not become eligible for coverage until 2014. But there are some patients that will benefit this year, particularly those that would fall into high-risk pool insurance plans. So families that are really in catastrophic type situations. They will get some relief and those regulations are just coming out now as well.

Gina: In recent weeks we’ve seen some interesting results in the state primary elections, including the defeat of Senator Arlen Specter of Pennsylvania and the victory of Rand Paul in Kentucky. How should the pharma industry perceive these results?

Peyton: It’s interesting, it’s certainly another movement or method we’re seeing a movement to change and incumbents are definitely at risk for that. It’s not a new movement and we know change has been in the air but it certainly does echo that the Clinton administration where we then came back to a mixed Congress right after those midterm elections. So it will be very interesting to watch the race here. Certainly in a case of Arlen Specter, we really lost someone who understood cancer care and that is a personal concern for me because there aren’t very many members in the Senate particularly that have been as in tune to issues important to cancer care patient access in that area. But it certainly is a statement I think to candidates and to the pharma industry as a whole that change is in the air and it may mean we may see some changes to healthcare reform down the path. I don’t think we’re going to see gigantic changes but we normally see in big pieces of legislation some modification as time goes on and that certainly is an indicator that after these elections we might see programs be tweaked in some important areas.

Gina: The FDA just named Leah Crystal as the office of new drugs’ acting director for bio similars, a role in which she will coordinate ONDs implementations of the new bio similars approval pathway set by the healthcare reform law. What impact do you expect this to have on the pharma community?

Peyton: Very important new role, as you know it’s something we’ve all been waiting for further clarification so I do expect for the pharma community this will help expedite clarity in terms of some of the next steps, the details of the regulations associated with bio similars. As part of healthcare reform that law is very general and so the regulatory next steps are critical. She is seen as being someone who is very aware of the industry of the details and of the concerns related to bioequivalence. So I think it’s being viewed very positively. It’s breaking news so it’s fresh news that just came out but overall we’re seeing a positive response and certainly an understanding at the leadership level of how different specialty products are from oil solids, which is important.

Gina: Let’s turn our focus to the scheduled cuts in the Medicare physician reimbursement. I understand there are some proposals on the table to address this issue. Can you walk us through what’s currently being discussed, at least as of late May, and what effect they will have.

Peyton: Yeah, I’d like to. This has been a soap opera in the making. So we’ve had what’s often referred to as the “Doc” fix issue which has been created by a flaw in the Medicare system referred to as sustainable growth rate or SGR and this flaw has been going on actually since 2004 but it’s been escalated in terms of its impact because when you do a temporary fix in the government you pay for that later. So that means that physicians have had a looming 22 percent pay cut in all Medicare reimbursement since January 1st of this year. We’ve been patching it with temporary fixes and you’ll remember that when we met last time they were in the midst of this crisis. Following that they actually made a temporary patch, which is good through the end of May. So we’re in that situation right now and there’s a current bill that was introduced just a couple of days ago that has both Senate and house support to create a slightly longer term fix for this issue, a three year fix. And it’s wrapped up in a whole bunch of things that are frankly more popular. So it’s wrapped up in some emergency measures related to people that are unemployed extending cobra benefits, supporting people with very low incomes in terms of Medicaid eligibility. So it’s put in with a number of emergency provisions that have some momentum. But I’ll tell you, this is a very difficult situation that physicians are in because it’s very expensive simply to hold reimbursement for physicians flat. So we’re just trying to hold the status quo. We’ve had relatively flat reimbursement for almost a decade for physicians. So it’s a very critical situation that we’re in and the challenge isn’t that everyone doesn’t support the change, it’s how to pay for it and because it’s costly. So this is a challenging situation and I don’t expect it to go away anytime soon. The longest, best case scenario would be that it’s fixed by 2013, that would be the best news we could possibly have but that would actually create a new cleft on January 1, 2014 of a 35 percent pay cut for physicians. So it’s kind of one of those deep breath kind of moments, even the best case scenario has some real challenges to it and it’s not clear if there are senate votes to even support that type of long term fix. We could very well end up in another temporary stop gap provision. My hope, to be honest with you, is that we do pass something and don’t go into these very short band-aids where we’re holding claims, because that’s where it’s obviously very stressful for physician practices across the country.

Gina: There has been congressional discussion about expanding the 3-40B drug discount program to inpatient drugs for use by patients who lack prescription drug coverage. Can you discuss what impact this might have and why it is yet another key issue for pharma manufacturers to keep their eyes on?

Peyton: Yeah, this is another big one of potentially breaking news. So within healthcare reform 3-40B was not expanded to include the inpatient side but was expanded to include some other freestanding type outpatient centers like I had mentioned previously. Just this past week, we’ve seen some movement related to adding in another provision to actually include in patient access to 3-40B pricing, but it has an important nuance to it and therefore has the support currently of the pharmaceutical industry which is surprising because obviously these are tremendous discounts. But that nuance is that these discounts can only be used for uninsured patients and that’s a big change. Currently the 3-40B program is utilized by eligible facilities, so those disproportionately serving the underinsured, but then they use that low pricing and use it for all of their patients. This change would begin to set up a very different element in terms of compliance, which would be a C change, so this inpatient piece is definitely one to watch. It could end up being attached with that Medicare physician “doc fix” issue we were just discussing, so it might be wrapped up into that. Right now it looks like it actually saves a little bit of money. Not giant, because again, it’s expected to only impact a very limited number of patients at eligible facilities. So a very important one for pharmaceutical companies to watch because maybe it will change how 3-40B pricing is used so that it’s narrowed actually to be for appropriate patient populations rather than widespread use across eligible entities. So, it’s a big one.

Gina: Okay, so earlier this month WellPoint became the first benefits company to release guidelines for the submission and evaluation of comparative effectiveness research—that it plans to use reviewing drugs for its formulary. What should manufacturers take from that announcement? Is it a harbinger for sweeping change across managed care or is it just a toe dipped in the water of what will become a gradual process?

Peyton: This is big news and some people might have missed why it’s big. The big part is the transparency. So although WillPoint announced a couple years ago this new process, they haven’t said they’d put the details of this process out into the public domain. So this week’s announcement really is a big change in terms of putting that information out for other payers to be able to utilize and for pharmaceutical companies to be able to understand the kind of guidance they would like to see, particularly in terms of more outcomes data. I think it really takes the bar to the next level in terms of manufacturers needing real world outcomes data. As you know, this is something near and dear to our consultant group an area that we are very focused on. But instead of that being a “nice to have,” this does move the bar to being something you really have to have moving forward. But I was with some of our managed care experts at an MCN meeting just a few days ago. I asked them what they thought about this change and 82 percent of that audience said that they believed other pairs would follow soon, based on WillPoint’s announcement. So pretty significant in terms of what manufacturers need to consider, well beyond FDA approval like data on their products.

Gina: Well back to health reform for our final question, payers, particularly private payers, seem to be quite at odds with the changes taking place. From what you’ve seen how will this impact things like formulary and coverage decisions?

Peyton: Yeah, it’s a tough one to tell. We know that payers are going to have a negative impact from those Medicare advantage cuts we talked about. But they also could be one of the bigger winners in healthcare reform, particularly if it’s not through a public option. So very important for them, are patients being able to get private insurance through those clearinghouses or exchanges versus actually going on to only just Medicaid roles. Another win, potentially for a lot of payers, will be Medicaid managed care. So if states, because of their own budget crisis, are moving toward Medicaid managed care versus traditional Medicaid as a way to save money, the players in that space are the same payers. So while they’re ringing their hands at the moment because of the Medicare advantage cuts, which I know are significant, the reality is that there are really a lot of spots where the payers can win and they’ll have some more tools in their tool chest, if you will, in terms of managing formulary type issues. So they will be able to be more aggressive in terms of true managed care. So it will be interesting to watch how those pieces come together, but when you combine it with WillPoint’s announcement this week, it does seem like they’re prepared to move to the next level in terms of how they manage benefits.

Gina: Along those lines, should we expect even greater changes in the areas where cost of care is substantial, like oncology?

Peyton: That’s the big controversial one and healthcare reform, very careful language that cost would not be a consideration in terms of coverage or reimbursement but the reality is we are beginning to see that on the private side. So I think we all need to be able to understand the cost and outcome or “value perspective” of all of our treatment regimens when we look into the more distant future.

Gina: Peyton, as always, great insight. Thank you so much for being here and sharing with us what you know and what we can learn about healthcare reform.

Payton: Thanks so much for having me.

Gina: And thank you for joining us, we’ll be back soon with another all new Webisode. Until then, if it’s on your mind, it’s In The Know.

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