Paying for Pills or Paying for Outcomes Joel

Paying for Pills or Paying for Outcomes? Joel White May 22, 2018

About CAHC Vision • A vibrant and competitive health system where every person has access to coverage they can afford Mission • Enact policies that lower health costs and expands access to affordable coverage Principles 1. Promote competitive, efficient and transparent markets 2. Expand choices for consumers and employers 3. Support value-based delivery and payment reforms 4. Support incentives for wellness and prevention 5. Promote entitlement reforms that improve long-term program stability, strong safety nets, patient choice, efficiency and value 2

CAHC’s Members Employer Payer/Provider Patient Biopharmaceutical Tech/Broker 3

Health Costs What is driving health costs and premiums, and what impact is it having on affordability? 4

Quick Overview of Health Costs • US Spends more than $3. 3. trillion on health care o o About 1/3 rd or almost $1 trillion of spending is waste People are paying more and getting less Prices are main culprit in driving health spending (costs) Prices are directly correlated to market concentration • Even so, we have worse outcomes than most developed countries • Because medical costs are rising, premiums and costs are increasing. About 80 percent of the total are medical costs 5

Medical Cost Growth Relative to Wages Medical Cost Trend Average Wage Consumer Price Index (CPI-U) 180 • Since 2010, the medical cost trend (MCT) has grown by 73% 170 160 2010 = 100 150 140 130 120 110 100 90 2011 2012 2013 2014 2015 2016 2017 2018 Source: Pricewatershouse. Coopers; Census; BLS, CAHC Calculations • Since 2010, the MCT has grown four times faster than the average wage and five times faster than the Consumer Price Index

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Value Based Payment Arrangements What are VBAs and what has been the federal take up? 10

What Are VBAs? A value-based payment arrangement is an agreement in which the payment terms for medication(s) or other health care technologies are tied to agreed-upon clinical circumstances, patient outcomes, or adherence to a care plan • Prevention of hospital admission or readmission • Reduction in A 1 C • Completion of anti-biotic or Hep C medication

VBAs in Commercial Contracts, not Federal or State programs Why? • Anti-kickback statute (AKS) • Medicaid “best price” • Pre- and Post-market communications between plans and manufacturers are restricted by FDA • Others: ASP, AMP, Stark

CAHC Rx Value Approach Build a consensus-based approach that engages the wide range of affected stakeholders in a concerted effort to address drug costs and overall health care spending. 13

VBA outline • Pre- and post-market communication between payers and manufacturers • Stark/Anti-Kickback – allow care coordination • Allow for donated technology and reporting systems • Exceptions for Medicaid Best Price and AMP 14

Impact of Value Based Payments Savings $71 billion üAnnual total health savings when fully implemented ü$3 to 6 billion in 10 year taxpayer savings Volume of Drugs and Prices % of Drugs in a Value Based Payment Arrangement 10% 39% ü Prices decline by 10 percent, but volume increases by 10 percent. ü No change in Rx Spend ü +5% Rx Volume -1% Associated Hospital and Physician Spending ü Three-Month Speedup of Time to Formulary/VBA ü 39% by 2026, up from 4% today

White Papers

Federal Response to Date • American Patients First – “we need more negotiations to drive down costs” • CMS – Use CMMI to tie new, expensive products to a VBA • Kimrya (pediatric cancer) • Luxturna (blindness) • Congress is working on legislation

Council for Affordable Health Coverage 440 First Street, NW, Suite 430 Washington, D. C. 20001 (202) 559 -0192 Joel. white@cahc. net Cahc. net @C 4 AHC THANK YOU 18