Entries in Cost & Utilization (82)


Annual Global Oncology Medicine Spending Tops $100 Billion

by Clive Riddle, May 7, 2015 

The IMS Institute for Healthcare Informatics has just released a new report:  Developments in Cancer Treatments, Market Dynamics, Patient Access and Value: Global Oncology Trend Report 2015 which tells us “total global spending on oncology medicines – including therapeutic treatments and supportive care – reached the $100 billion threshold in 2014, even as the share of total medicine spending of oncologics increased only modestly.” 

The report found that “growth in global spending on cancer drugs – measured using ex-manufacturer prices and not reflecting off-invoice discounts, rebates or patient access programs – increased at a compound annual growth rate (CAGR) of 6.5 percent on a constant-dollar basis during the past five years. Oncology spending remains concentrated among the U.S. and five largest European countries, which together account for 66 percent of the total market, while the rising prevalence of cancer and greater patient access to treatments in pharmerging nations continues to grow and now accounts for 13 percent of the market” 

Murray Aitken, IMS Health senior vice president and executive director of the IMS Institute for Healthcare Informatics tells us“the increased prevalence of most cancers, earlier treatment initiation, new medicines and improved outcomes are all contributing to the greater demand for oncology therapeutics around the world. Innovative therapeutic classes, combination therapies and the use of biomarkers will change the landscape over the next several years, holding out the promise of substantial improvements in survival with lower toxicity for cancer patients.” 

Findings shared in the report include: 

  • Growth in the U.S. has risen more slowly at 5.3 percent CAGR, reaching $42.4 billion in 2014, representing 11.3 percent of total drug spending compared to 10.7 percent in 2010.
  • in the EU5 countries oncology now represents 14.7 percent of total drug spending, up from 13.3 percent in 2010.
  • Targeted therapies now account for nearly 50 percent of total spending and have been growing at 14.6 percent CAGR since 2009.
  • Within the U.S., two-thirds of Americans diagnosed with cancer now live at least five years, compared to just over half in 1990.
  • The availability of new oncology medicines varies widely across the major developed countries, with patients in Japan, Spain and South Korea having access in 2014 to fewer than half of the new cancer drugs launched globally in the prior five years.
  • Average therapy treatment costs per month have increased 39 percent in the U.S. over the past ten years in inflation-adjusted terms. Over the same period, patient response rates have improved by 42 percent and treatment duration has increased 45 percent, reflecting improved survival rates.
  • Within the U.S., patient out-of-pocket costs have risen sharply for intravenous cancer drugs, increasing 71 percent from 2012 to 2013, reflecting changes in plan designs and increased outpatient facility costs. 

An interactive version of the full report is available via iTunes, but requires am iPad for viewing. Pdf versions of exhibits can be downloaded here


What are the implications of the upward spiral occurring in the specialty drug cost trend?

By Clive Riddle, May 1, 2015 

What are the implications of the upward spiral occurring in the specialty drug cost trend?" That was the question asked of experts in the current issue in MCOL’s ThoughtLeaders. A running theme in their responses was that this will further drive the value-based payment movement. Our ThoughtLeader Dr.  Peter Kongstvedt also takes us a “wonk on the wild side: predicting policy implications including more legislation. 

Here’s some excerpts from their responses in ThoughtLeaders: 

Vicky Parikh,  MD, MPH, (Executive Director, Reliance Health and Executive Director, Mid-Atlantic Medical Research Centers) frames the discussion, and points to further cost-sharing as the consequence – “Specialty drugs can cost more than $600 per treatment, $4,000 or more a month and can reach expenditures up to $100,000 a year. By 2020 the overall spending for specialty drugs could potentially reach $400 billion, or 9.1% of national health spending. In 2009, .12 cents out of every dollar spent went to specialty drugs. Now, that amount has risen to .32 cents out of every dollar. But what does the increase of prices for specialty drugs have to do with anything, when most individuals have a health plan that pay for medical expenditures? Employer based health plans could cause employees to see a change of benefits, increasing deductibles and overall shifting of the more expensive bills being passed towards the employee. 

Jeremy Nobel,  MD, MPH, (Northeast Business Group on Health,  Executive Director, NEBGH's Solutions & Innovations Center and Faculty, Center for Primary Care, Harvard Medical School)  sees the trend hastening value-based purchasing – “The upward spiral on Specialty Pharma costs will likely accelerate the pace at which patient-centered care will reshape the healthcare marketplace from ‘volume-based’ to ‘value-based.’ Facilitated by highly personalized care coordination, back-stopped by advanced analytics, and rewarded with a host of outcomes-based payment mechanisms, providers and systems that can adjust to that ‘new normal’ will become dominant players. From a purchaser perspective, the traditional focus on reducing costs of "components of care" and managing unit price through volume discounts for everything from drugs to hospital days, to office visits and diagnostic tests, needs to move rapidly and comprehensively towards a focus on ‘total cost of care’ with a payment model that rewards cost reduction as long as quality benchmarks are maintained. And with the inevitable market entry of new medications like the PCSK9 class of drugs targeting extremely common conditions like hypercholesterolemia, the current Rx cost/value management mechanisms for Specialty Pharma will ‘fall short’ quickly.”  

Cyndy Natyer, President, CyndyNayer.com and Founder/CEO of Center of Health Engagement) also looks to value – “My goal is to shift the conversation to what is the value of the drug, and if it can prevent high cost conditions from becoming higher costs, then a higher priced drug may well be worth the negotiated spend…On the other hand, some of the drugs in the specialty arena are going thru yearly increases of thousands of dollars without new technology or formulations. In this case, the price escalation without better outcomes must be considered when negotiating the price of the drugs. We are even seeing many-hundred-percent increases in some common drugs, not specialty, for common chronic illnesses, again with little or no attribution to new technology in the drugs. In each case, I'd like to think that we will not simply deny a drug to a patient because of the cost, and that we would not waste valuable time demanding that folks fail on the drugs we know will not suit them because they are cheaper.” 

Constance A. Wilkinson (Member of the Firm, Epstein Becker & Green, P.C.) and Alan J. Arville (Member of the Firm, Epstein Becker & Green, P.C.) also go down the value-based path – “Manufacturers (and payors) will continue to pursue a value-based purchasing strategy, such as an outcomes-based approach, to support the value proposition of the drug. Such arrangements build in financial incentives or penalties for manufacturers that are contingent upon negotiated performance standards (typically based on quality or health outcomes). There are particular challenges in implementing this approach for federal health care program beneficiaries due to the potential implications to manufacturer drug price reporting under those programs, and the attendant financial consequences.” 

Peter R. Kongstvedt, MD, FACP (Principal, P.R. Kongstvedt Company, LLC) sees policy implications - “The two most significant long-term implications of rising specialty pharmacy drug costs are to create the pressure for another round of "health reform" and on international trade policy. These are obvious choices, I know, but let's look closer and take a wonk on the wild side ("...and the wonks go doo, da-doo, da-doo, da-doo doodoo, doo, da-doo, da-doo, da-doo doodoo..." *). [* Apologies to the late and sorely missed Lou Reed.] 

Peter explains that “there are really two broad types of specialty pharmacy though: manufactured drugs that are one or perhaps two molecules, regardless of how they are manufactured or delivered; and compounding pharmacy drugs. Compounding accounts for a surprising amount of the specialty pharmacy cost increase, but because it uses drugs manufactured by others, it can be managed with through tough negotiations, the use of a single compounding pharmacy, strict adherence to medical guidelines, preauthorization, a closed formulary, and benefits design. That leaves us with the manufactured molecules that have the long term implications.”

Peter sees the trend accelerating cost-sharing, which in turn will accelerate legislative reform of cost-sharing, and even pricing. “We will bypass all but one of the short term implications related to the existing approaches to managing costs such as preauthorization, drug utilization review, step therapy, formulary control and the like, as well as the counter-measures used by the manufacturers. But one of the most common approaches is increased cost-sharing, and that's the one that could get us to another round of health reform. Increased cost-sharing for specialty pharmacy is not quite the same as upping the PCP office visit copay by $10. It now often includes separate deductibles and coinsurance being applied only to specialty pharmacy coverage, which for a lot of people is both good news and bad news. The good news is that cost-sharing goes away when they hit their annual out-of-pocket maximum, which may occur in the second month of coverage; the bad news is they are slowly going bankrupt because most people don't have $6,600.00 (2015 single) / $13,200.00 (2015 Family) of spare cash every year in their savings or under the couch cushions. This brings us to Health Reform II: The Next Act…..Multiple states are now considering "cap the copay" bills that would require state licensed insurers and HMOs to markedly limit cost-sharing; for example, one Oregon bill under consideration would cap cost-sharing at $100 per month.

Peter warns that “’Cap the copay’ and similar laws are like mowing the lawn to get rid of dandelions - it only appears to solve a problem that is actually growing. Specialty pharmacy costs, and really all healthcare costs related to pricing, in reality grow faster when richer coverage is required. Eventually those very real and ever-rising costs will force us as a society to once again grapple with national health policy about how we finance health care goods and services. Payers were first in the reform barrel. Pricing is likely to be next, though it may be confined to one sector, and specialty pharmacy or drug manufacturers overall seems to have raised its collective hand to be called on next.


Prescription Costs Returning to the Wild

By Clive Riddle, March 13, 2015

Numerous studies have been warning that prescription cost increases, domesticated and docile for some time now, have returned to the wild - resurging and rearing their unpleasant head.

During last fall, Evaluate published a new 18-page report , "Budget-busters: The Shift to High-Priced Innovator Drugs in the USA." that addresses the growth of high-end prescription drugs. Evaluate tells us that "the median price of the Top 100 drugs has skyrocketed from $1,260 in 2010 to $9,400 in 2014, representing a seven-fold increase," and that "the average patient population size served by a Top 100 drug in 2014 was 146,000 down from 690,000 in 2010. The number of treatments costing in excess of $100,000 per patient per year rose to seven in 2014 versus four in 2010."

When Segal released their 2015 Segal Health Plan Cost Trend Survey, they stated “Health benefit plan cost trend rates for 2015 are forecast to drop slightly for some coverage, but to increase substantially for prescription drug coverage...…The increase in the cost of prescription drug carve-out coverage for actives and retirees under age 65 is expected to jump to nearly 9 percent. Prescription drug trend for retirees age 65 and older is expected to rise to 7.5 percent, more than twice the rate of retiree medical cost trends. The projected specialty drug/biotech trend rate for 2015 is an exceptionally high 19.4 percent.”

A number of other studies cite similar concerns, and this week Express Scripts weighed in with their annual Drug Trend Report. They state “new hepatitis C therapies with high price tags and the exploitation of loopholes for compounded medications drove a 13.1 percent increase in U.S. drug spending in 2014 – a rate not seen in more than a decade.”

Here’s some key selections from Express Scripts findings:

“Hepatitis C and compounded medications are responsible for more than half of the increase in overall spending. Excluding those two therapy classes, 2014 drug trend (the year-over-year increase in per capita drug spending) was 6.4 percent.”

“Specialty medications – biologic and other high cost treatments for complex conditions, such as multiple sclerosis and cancer – accounted for more than 31 percent of total drug spending in 2014. As Express Scripts forecasted last year, specialty drug trend more than doubled in 2014, to 30.9 percent. Hepatitis C medications accounted for 45 percent of the total increase in specialty spend despite having the second lowest prescription volume among the top 10 specialty conditions. Medicare plans – required to follow Medicare Part D formulary guidelines – were the hardest hit, as their annual specialty drug spend increased 45.9 percent.”

“Spending on traditional classes of medications continues to rise as a result of compounded drugs, which emerged in the top 10 traditional therapy classes for the first time. Despite having the least number of prescriptions among the top 10 classes, compounded medications accounted for 35 percent of the increase in spending, the most of any traditional therapy class of drugs.”

“Drugmaker consolidation and drug shortages also led to increases in traditional drug trend, which rose to 6.4 percent in 2014. Diabetes remains the leading traditional therapy class for a fourth straight year based on total costs; Express Scripts expects double-digit increases in spend in this class over the next three years due to once-weekly oral and injectable drugs in the pipeline.  Cost for medications to treat pain increased 15.7 percent in 2014, due in part to new tamper-resistant formulations for opiates.”


How the Mighty Haven't Fallen

By Kim Bellard, February 17, 2015

I recently read an article that speculated on how even the mighty Google could fade into irrelevance faster than we might think.  It made me wonder why that kind of change doesn't seem to happen in health care.

The Google article, by Farhad Manjoo in The Wall Street Journal, cited one-time technology leaders like Wang and DEC, and pointed out that other long-time powerhouses such as Hewlett Packard and even Microsoft are furiously trying to reestablish themselves after decades of (relative) decline.  

Then there's health care.

Just out of curiosity, I looked at share of spending by type of service in the National Health Expenditures, from 1960 to 2013.  Here's what I found:

For all our many clinical and technological advances, the same three health sectors that dominated health care spending in 1960 still command virtually the same shares in 2013 -- over 60% of our overall spending.  They've "lost" less than 2% of share to other types of spending during those decades.  

It hasn't all been smooth sailing, of course.  Hospital spending reached almost 40% in the early 1980s, dipped below 30% in the early 21st century, and rebounded this decade.  The physician share has been steadier -- a peak of around 22% in the early 2000's, a low of 18.3% in 1978, but mostly stayed around 20%.  Prescription drugs spending, on the other hand, got to as low as 4.5% in 1981-82, reached a peak of 10.4% in 2006, and now seems to be on a slow decline.  But, all in all, the composition of Big 3 of the medical-industrial complex remains unchanged over a very long time.

It's as if the Big 3 U.S. auto manufacturers still maintained their 1960 dominance today, or the 3 TV broadcast networks still had their pre-cable/Internet share of viewers.  Both trios still have hefty market shares, still play key roles, but are nowhere near their historical dominance. New competitors emerged to give consumers more options, and took away significant shares of those markets.  

Unlike what has happened in health care.  

Hospitals, physicians, pharmaceuticals, and the health care industry generally have certainly evolved significantly in the past 50+ years, but it is more incremental evolution than the kind of "punctured equilibrium" Steve Jay Gould and others posit that result in rapid changes that overthrow species.  

I don't have anything against hospitals, doctors, or prescription drugs, at least not in principle.  It just doesn't feel like progress that we're not coming up with radically new care and delivery options that don't rely on them.  

Unlike most markets, health care isn't really driven by consumer demand.  A couple years ago, JAMA published a survey of physicians, in which  they blamed rising costs on pretty much everyone else but themselves, more than half even blaming patients.  A new study has cast doubt on the view that patient demand is driving unnecessary spending.   The saddest thing for me from the study was that only 8.7% of patient encounters included a patient demand.  We're a long, long way from informed patients taking responsibility for their own care, or their own health.

Having control over what constitutes the "practice of medicine" is certainly an effective way of forestalling new kinds of competitors.  That control has been placed in the hands of the providers practicing care, ostensibly to safeguard patients' interests,. but it's getting harder and harder to believe those interests are primary.  It seems more like protecting turf.  

A couple months ago I wrote a post that raised the question of whether, in a world where microbiome treatments, gene therapy, even nanobots may emerge as prevailing types of treatment, we'll even need physicians, at least in the same way we do now.  I received a number of comments that were aghast at the notion that we might not always need physicians to deliver our care.  I believe it is this kind of thinking that has allowed the Big 3 of health care to retain their dominance.  

If we can't even imagine a health care system that doesn't solely rely on the traditional sources of care, we'll certainly never achieve one.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting


The Convenience Truth

By Kim Bellard, December 17, 2014

The U.S. Mint reports that it now costs 1.7 cents to make a penny; nickels are slightly better, costing "only" 8 cents to make the 5 cent coin.  This is economics the way health care practices it.

According to Christopher Ingraham of the Washington Post, we could save $100 million annually by eliminating both coins.  Or we could change the metal composition to make them cheaper, but that would create havoc with vending machines.  So we just blithely chug along, mostly because we've always had them and the businesses that revolve around them don't want to change.

See how this is like health care?

What made me think about this was a recommendation from Britain's National Institute of Health and Care Excellence (NICE).   They now say that midwife-led birthing units are safest, and advised more women to consider them for low risk pregnancies.  They believe this could account for as many as 45% of live births.  Moreover, they think home births are just as safe as births in a hospital.  The Netherlands is considered the leader in home births, at a little under 25%.  The U.S. has 1.36% home births.

The literature -- often drawn on Netherland's data -- generally supports the NICE recommendation, but not everyone is convinced. It would be very easy to weigh all the factors, and conclude that even a relatively small increase in risk is not something you'd want to take for your own baby, and opt for the "traditional" OB/hospital delivery.

This is where the penny analogy starts to really apply.  These decisions on risk reduction are not without financial consequence.  A vaginal delivery with no complications averages about $10,000, whereas a birthing center costs under $2,500, according to Childbirth Connection.  I assume home delivery is less expensive.

In a piece for The New York Times, professor/physician Aaron Carroll notes that the ACA-created Patient Centered Outcomes Research Center is explicitly prohibited from considering cost effectiveness.  Its website says: "We don’t consider cost effectiveness to be an outcome of direct importance to patients."


In theory, value-based purchasing will help us address these decisions.  In practice, though, most of the value-based purchasing arrangements I am aware of -- and that certainly is not an exhaustive list -- reward providers whose outcomes are simply what we'd hope for, may penalize them slightly for disappointing results, and are indifferent about if the care could have safely been done elsewhere for less.

I'm beginning to think that trying to reshape our health care system through value-based purchasing, cost-effectiveness, or even greater transparency may not work.  The "killer app" may not prove to be any of those high-minded strategies but rather a much more basic one: convenience.

Indeed, one of the earliest urgent care chains attributes its inspiration to the example of McDonald's.  We are, after all, the nation that invented fast-food, decided even that wasn't fast enough and so invented drive-throughs, which we use for over half of our fast food.  We liked the convenience of them so much that we've extended the approach to banks, car washes, pharmacies, even weddings and  funeral homes.  The concept of drive-throughs itself is rapidly being supplemented and even superseded by mobile apps, allowing consumers not to even have to get in their car.

Health care cannot ignore these consumer demands for more convenience.

Walgreens' chief medical officer recently noted that: "The idea of convenience ... is really becoming a dominant theme in health care."  It's no coincidence that Walgreens has been investing in in-store clinics, has a 24/7 Pharmacy Chat option, and just rolled out a direct-to-consumer physician virtual visit app, similar to American Well's Amwell service.  Not to be topped, Kaiser is now offering EMT home visits, in addition to its array of in-office and virtual visit options.

Our traditional approaches to care delivery have revolved around convenience for the providers, not the consumers.  Many consumers, especially younger ones, find ridiculous the notion that they have to call for an appointment that may end up weeks away, go to an office or facility that may not be close, only to wait there with sick people, and perhaps be sent to some other office or facility for more services.  They'd rather get their care via their mobile devices and/or in their home, and the technology is increasingly allowing that for many health concerns.  

We've come to recognize that health care is one of the few industries where technology typically not only doesn't lower costs but usually adds to them.  Maybe, though, expecting providers whose revenue is at stake to focus on cost-effectiveness is asking too much of them.  Focusing on convenience shouldn't be.

Focusing on convenience is simply a way to make sure we're focusing on the consumer (AKA "patient").  Isn't that supposed to be the point?

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting