This article originally ran in the Deloitte Center for Health Solution’s Health Care Current. Click here to subscribe.
Remember the game of Risk? My older brother and his friends used to play it for days—much to my annoyance because I didn’t understand it and wasn’t allowed to play with them. Multiple players sit around a board game making strategic moves that are part diplomacy and part conquest. The game is based on some fairly simple rules, but it incorporates a lot of complex interactions. Setting and negotiating drug prices has always reminded me of a complicated board game where multiple players make strategic moves to reach the end of the game—and patients, much like me as a little sister, do not understand and can’t play the game.
Last month, the White House and the Secretary of Health and Human Services (HHS) released a “blueprint” to lower drug prices and to reduce out-of-pocket costs for consumers (see the May 22, 2018 Health Care Current). The report states that there are four major challenges facing our health care system today:
The administration is reviewing strategies to improve competition, achieve better negotiations, create incentives for lowering list prices, and achieve lower out-of-pocket costs for patients.
In essence, HHS wants to change the rules of the game that will affect the complex interactions among the mix of players in our health care market. And like any game, timing is everything. So, what are the moves, which players will feel the impact, and what can we expect when it comes to the timing of the moves?
Changing the game rules: How might players be affected?
The first powerful players in this updated game are the pharmaceutical and medical device manufacturers. Under existing law, HHS does not have the regulatory authority to negotiate directly with manufacturers to set drug prices. Thus, the significant proposals HHS has put forth include reforming Medicare Part D to give health plans and Part D plans more power when negotiating with manufacturers. This could include, for example, examining whether certain Medicare Part B drugs could be negotiated by Part D plans, and fostering value-based purchasing in federal programs (including indication-based pricing). HHS is driving toward a system where drugs and devices should be viewed holistically within the context of the total cost and value of treating conditions.
Given that we have multiple players in the game, the potential impact these new policies could have on pharmacy benefit managers (PBMs), health plans, hospitals, and pharmacy retailers will be just as interesting. Here’s how I see this playing out:
Blueprint outlines the short and long game
The blueprint looks first at immediate or short-term actions to be taken by HHS. It then offers other ideas that need feedback, or require legislation because certain actions go beyond the regulatory authority of HHS. The May release of the request for information on drug-pricing proposals included a 60-day comment period, which closes on July 16. This timeframe gives the administration a uniquely-timed opportunity to include some proposals in the roster of Medicare payment rules for 2019. The US Centers for Medicare and Medicaid Services (CMS) is slated to release the rules between August and November.
As I reflect on the possibility of regulators using various payment updates to change the game rules for drug pricing policies, it reinforces the potential to impact the complex interactions of health care players beyond drug makers and PBMs. Health systems, providers, health plans, and other stakeholders could see significant effects on their own businesses and might begin to make their own strategic moves, reminding me of how extremely interconnected and complicated this game of Risk is.
1 Department of Health and Human Services. American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, May 2018. https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf
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