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Video Transcript: Health Reform and Pharma: What Happens Next?

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

Gina: The uncertain future of health reform. Looming cuts to Medicare physician reimbursement. The prognosis on biosimilars. How should manufacturers react to the changing direction around healthcare legislation, and how do these events also affect patients and providers? Join us to find out. “In the Know” starts now.

Hello and welcome to “In the Know,” your source for insight and analysis on the issues that matter to specialty pharma. I’m your host, Gina Clark.

Today, we get a report on how the legislators and policymakers in Washington, D.C. are approaching healthcare in the wake of the recent Massachusetts senate election. We’ll discuss what manufacturers, providers and patients can expect next, as well as some key issues that may merit more attention now that major health reform looks less viable.

Returning to In the Know is Peyton Howell, President of Consulting Services & Health Policy for AmerisourceBergen Specialty Group. Thanks for joining us again, Peyton.

Peyton: Thanks, Gina.

When we last sat down together last October, the prospects for some form of major healthcare legislation passing seemed all but certain. Following the Massachusetts senate election, the direction for potential health reform now seems far less clear. From your perspective, how has the Massachusetts election changed the immediate future of health reform, and what possible next steps do you see?

Peyton: What a great question. Yeah, well, it’s clear as mud right now, Gina. It’s absolutely true, a lot has changed and it could make great television if it wasn’t our healthcare system we’re talking about in the debate. I guess in some ways though, it shouldn’t be a surprise as a challenge because it affects all of us and we have a great system in the United States with incredible access to technology, choice of healthcare provider, things that don’t exist outside of this country. But it’s also very costly, so trying to balance out all of those two important things in a way that affects us all is pretty challenging. So, given the Massachusetts election and what that means, there are really only two schools of thought emerging in Washington D.C. that we’re hearing about. One school of thought is actually that no major legislation will happen this year. And that’s possible. Obviously that’ll lead to a lot of rhetoric from both sides, and probably the blame game, going on for the year. I’m probably of the ilt that we’ll see smaller pieces of reform come this year, and there is some evidence really, even this week, that appears to be the case. So in the President’s proposed budget, for example, we saw a few nuggets of reform being proposed, we’re seeing some independent reforms coming through. Those are all much harder to have happen, but I think that probably will lead to some small successes and some small changes that might then pave the way for some future, large-scale changes. So, I think those smaller reforms may, in fact, be the way we see things moving forward.

How could this change in direction for health reform help or hurt key stakeholders including manufacturers, patients and providers?

Peyton: You know there is some good news and some bad news. So, let’s start with the good news. The good news of the reform not happening, first of all, is that there are a lot of unknowns in such a giant piece of legislation that had moved, actually, fairly quickly through the fall in terms of scale. One piece of good news is that, buried in the detail, were some things that were fairly concerning, particularly over the holidays when we all had a chance to dig through it. So, beyond just the general concern of what’s the cost of this to employers and what’s the big pieces, we did find a few things that were concerning to me. For example, a good example would be, the independent Medicare board that was proposed in there, that was kind of a hidden item that wasn’t getting the headlines the public option was getting. When you dunk right in, that’s something you would particularly think about, like cancer patients and patients suffering from other diseases, where therapies might be expensive, you might see very quick changes in both coverage and payment for technologies overnight. And one of the things that’s looming, if that was to pass in its current form, is there wouldn’t be the current mechanism to be able to transmit a voice to changes like that in the legislative process. So that’s a real concern when I think about all the specialty issues that we face and what are the hidden pieces of reform, that having things stall we can put a bright light on those. The bad news is we still have a major issue with the uninsured and underinsured in this country and that was obviously a lot of excitement in terms of access to therapies, therapies we know are lifesaving, life changing for patients. Fifty-two million people in the United States are uninsured and most of them go with very limited access to those types of treatments so that is the excitement, if you will, for the entire healthcare industry related to those patients having appropriate access. For the cost of those patients being carved up more appropriately, so that’s the good news and the bad news.

How are the changes in healthcare reform impacting Medicare Part D?

Peyton: You know a lot of hope was pinned in healthcare reform in addressing the donut hole or that gap that exists from Medicare Part D. So that was one of the exciting things, particularly for seniors, obviously, that was part of healthcare reform. Without healthcare reform happening, I don’t think we are going to see any of those changes happening. There is really no way to advance that forward, particularly without the expansion coverage over all. So given that, I think we’re really stuck with the current system and there are a number of reports that the copayments for patients under Medicare Part D are more likely to grow, so both the deductable part as well as copayments of the drug coverage. That’s an issue because we know that those copayments have an impact for seniors, they have an impact for patient adherence and compliance. It creates a whole new issue in terms of the underinsured. So that’s a significant issue and I think one of the battle cries we’ll hear in terms of looking at what types of reforms will relate to Medicare Part D and those gaps in coverage.

Looming cuts to Medicare physician reimbursement is one key issue that has stirred up significant discussion and concern. Can you explain this issue and whether it looks like it will be addressed in some form?

Peyton: First let me explain it, because you’re right, it is one of these technical issues, but it’s huge in terms of its impact. So for several years we’ve had a flaw in that Medicare reimbursement formula for physicians and what it’s created is an artificial cut in Medicare reimbursement for physicians that has been temporarily patched every year, actually for seven years now. So as we’ve patched it every year, the cost of really fixing it permanently has grown. Not that physicians have been given an increase in Medicare reimbursement – actually it’s been relatively flat in reimbursement for the past seven years, but because it hasn’t been paid for from “government budgeting” perspective, that means fixing Medicare reimbursement for physicians and just holding the reimbursement flat. That costs over two hundred billion dollars, which is a tough one to swallow. And in this era of budget concerns and obviously fighting growth in the deficit, this a looming issue that has been long overdue and is a huge distraction in Washington because everyone knows it’s not right, everyone knows it needs to get fixed permanently, but doing so is costly and no one wants to vote for something as expensive as that. Again, the optics are bad. In reality, this isn’t something in terms of a price increase, it’s a looming critical issue. A temporary fix was put into place not long after we met last and expires in March. So depending on when someone is viewing this, we may or may not have this issue fixed. It could go into emergency measures; that has happened before on this issue where physicians actually begin to face that twenty plus percent pay cut and then it’s retroactively fixed when the government is able to pass something. One recent proposal that’s come about on this, which would be a fix, would be to address this issue in a jobs bill. We know that the President is looking to create some kind of job-type stimulus bill, and that would move forward, perhaps, very quickly. So that might be a vehicle, but again, because of the costs, there may not be a permanent fix. A five year fix has been proposed, which is a lot better than a one year fix, but we could revert back to another temporary fix on this issue, which is unfortunate because it really takes a lot of the attention on healthcare and healthcare reform and puts it back on this nagging overdue issue, but it’s one that we need fixed. We need physicians seeing Medicare patients. Medicare patients are the largest body of patients in the country and we all become one eventually, so it’s a critical issue in terms of access to care, and one I’m hopeful will get fixed permanently sooner rather than later.                 

Prior to all the upheaval, there were a number of issues, such as biosimilars, where agreement on legislation seemed all but accomplished. What’s the outlook now for these issues?

Peyton: What a great example of where we have actually reached compromise. Industry compromise, government compromise, we’ve gotten everyone pretty much on the same page with a twelve-year biosimilars piece of legislation that was part of healthcare reform and now there’s not an obvious vehicle for that to move forward. I know Bio, which is the big trade association for biotech companies, is trying to move forward. It’s even proposed to separate legislation, but politically separate legislation on anything, I know, is going to be an uphill battle, as we talked about, in terms of what vehicle there will be. So that’s one of the bad news type categories of something we had consensus on and rallied everybody together, but part of the reason we rallied the industry together was we’re going to have a new segment of patients who are going to have access to those technologies. So it’s hard to fix some of these until we’re ready to address some of the costly issues of the uninsured. And for me, it’s one of those issues that it’s hard to fix because they’re coupled together, and pulling them apart is actually kind of difficult.  

What other types of healthcare legislation or regulatory changes are important for pharmaceutical manufacturers to monitor, regardless of what happens next regarding health reform?

Peyton: There are quite a few things to monitor right now without a doubt. Obviously there is the big picture; we continue to hear about a public option and what that might look like, those types of things. Specifically, I’m tracking things for manufacturers related to that Medicare review board, for example, that could tie into competitive effectiveness and how that type of data might be utilized to change either coverage or payment or overall consistent benefits, so that’s obviously a critical type issue that we all need to watch. Another issue that’s crept in over the past couple of weeks, that we all obviously thought was gone, is CAP, the Competitive Acquisition Program, the President’s proposed budget. Again, that’s just a proposed budget that had an increase in funding to have a CAP plan, again, something we thought was gone but with that healthcare reform happening, we’re back to some of these old issues creeping right in from a regulatory perspective. So, again, we need to keep a close eye on that as well as any other changes on the Medicare Part B side specifically. Of course on the regulatory side, REMS is an important thing to watch and we’ve continued to see the FDA provide more clarity in terms of what they’re looking for, they’re seeking industry input right now, and as AmerisourceBergen, we’ve been involved in providing that input and also partnering with HTMA to provide supply chain-type feedback to REMS so that we can look forward to models in the future. That really makes sense in terms of leveraging supply chain deficiencies; there is a lot to be done in that area this year as well. So there is still a lot happening and a lot to do in terms of watching both legislation as well as regulation coming out of Washington.

So, what should manufacturers be doing now in the wake of this uncertain direction for health reform?

Peyton: Right, well this is an opportunity that you can retrench and look at your assets in Washington. I think we’re likely to see issues creep in unexpectedly and we’re going to need to respond to those quickly, and a great example, that came in very quickly, where you can say that the industry performed very well, was a tax that was proposed related to cosmetic surgeries, often called the Bo-tax, and it’s a great example where industry was prepared, addressed the issue very quickly and was successful in being able to shift it to a very different type of tax, but still a tax. It’s not a Bo-tax or a related any kind of medical tax at this point. That’s a good success story, I think, for all of us to look to in terms of the importance of staying engaged so you can be proactive when those types of situations occur in Washington, and so that you’re not delayed in response. So that’s your number one, staying engaged, staying a part of the fight, is critical. Number two, using time as an opportunity is critical. We know going forward that we’re going to have to find ways to get more value out of our healthcare dollars. So that points me back to making investments now in health outcomes, in evaluating what you have in terms of assets, in terms of comparative effectiveness research. One of the biggest growing areas of our consulting practice had been doing kind of comparative effectiveness research analysis to kind of gap analysis or a CER, gap analysis type studies. Those are great things to do now before legislation, because you, as a manufacturer, can really make changes to better position your products to tell a story, to have the data to support the advocacy of your product, and then you can really weather whatever storm or changes happen in Washington. I think people who haven’t made those investments are going to be challenged, because we know we’re going to see changes in Washington just inevitably because of our current budget crisis. With those factors in place, those are two important ways too, I think, that manufacturers can take action and invest it now.              

Peyton, it looks like our time today has run out. Thanks, as always, for being with us.

Peyton: Thanks for having me.

And thank you for joining us—we’ll be back soon with another webisode. Until then, if it’s on your mind, it’s In the Know.

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