If we think that the problem in US healthcare is the prices, then those prices will come down when the sellers have a credible reason to think that those prices are costing them profits and sales. And that means buyers need to be able to credibly threaten to at least say “No, not at that price….”
CVS is a major pharmacy benefit manager. It negotiates with insurers and drug manufacturers to get the insurers lower net prices. It is offering insurers a new option for next year:
CVS Caremark is initiating a program that allows clients to exclude any drug launched at a price of greater than $100,000 per QALY from their plan. The QALY ratio is determined based on publicly available analyses from the Institute for Clinical and Economic Review (ICER), an organization skilled in the development of comparative effectiveness analyses. Medications deemed “breakthrough” therapies by the U.S. Food and Drug Administrationwill be excluded from this program, which will focus on expensive, “me-too” medications that are not cost effective, helping put pressure on manufacturers to reduce launch prices to a reasonable level.
CMS announced it would allow Medicare Advantage plans to use step therapy/try until failure policies for some drugs. Rachel Sachs in Health Affairs has a good analysis:
The introduction of step therapy into MA plans has the potential to lower drug prices in those plans. In short, if the insurer has the ability to prefer one drug over others for the treatment of a particular condition and to require patients to begin on that drug, manufacturers may compete for their drug to obtain that preferred status. CMS’ announcement also permits MA plans that administer Part D plans to cross-manage across those plans, using a Part D drug as the “preferred” drug for purposes of Part B negotiation. CMS seems to be more optimistic about the scale of the potential savings than are analysts in the field, but providing MA plans with more leverage against pharmaceutical companies will likely reduce prices, although perhaps more so in some therapeutic areas than others.
Both of these are systems to say “No, not at that price….”
They both contain credible walk-away threats. They should be able to get at least incrementally lower prices for at least some treatment categories. But the way that those prices are lowered is by removing some consumer facing choice. That is the trade-off.
Derelict
And that means buyers need to be able to credibly threaten to at least say “No, not at that price….”
The only problem with this is that the other side of pricing in this situation is life and health. You have a disease that’s treatable but fatal if not treated. I have the treatment. How much are you willing to pay to stay alive?
It’s that asymmetry that makes using market forces impossible when it comes to healthcare.
Lapassionara
“Step therapy” sucks for some conditions, most notably high blood pressure. I was forced into ST when my Medicare D provider would not pay for the medication that had successfully lowered my BP to the target range. I went into hypertension, which can have all sorts of negative health effects. I can see ST being ok for some conditions, but not HBP.
Lounger
David, I follow you on Twitter and I saw that you retweeted something about this. A couple of questions if you have time:
1. Aren’t measures like this used in some European countries?
2. The person you retweeted mentioned that patient advocates hate QALY. Can you explain briefly?
As always, thanks for your posts.
Mel
@Derelict: Absolutely!
AnonPhenom
So, a 2 tiered (at least) healthcare system based on ability (‘willingness’) to pay.
#HowveryfuckingAmerican.
Bill K
@Derelict: I second this. Can you put a price on stopping the suffering of yourself or a loved one? Healthcare is not a free market and should not be treated as one.
dr. bloor
“Step therapy.” I’m so old I remember when insurance companies swore up and down that they absolutely WERE NOT practicing medicine.
Frank Wilhoit
@Bill K: Say what you mean. Healthcare is a market and (like any market) has its own distinctive components of elastic and inelastic demand. The analysis of those components is complicated — one had almost said, defeated — by the fact that decisionmaking by healthcare consumers is pervasively irrational and that the irrationality comes in many flavors cutting in different directions. The necessary approach is pragmatic and micro.
If you are trying to say that the incentives of healthcare providers, like those of all businesses, are predominantly perverse, then say that.
If you are trying to say that all demand for healthcare ought to be taken as inelastic on ethical grounds, then if you think that all the way through, you will find it strongly problematic. In fact, that attitude is one of the factors that got us where we are. The drugmakers who price crucial treatments out of reach are exploiting precisely the attitude that you articulate. The problem with that attitude is not that it is purely wrong, but that it is held tacitly.
Wanderer
Presently some insurance plans allow exceptions to the selected first drug therapy. If you have taken the drug previously and failed ask for the exception protocol and you will be told the proper hoops to jump through.Anyone established on a medication can ask for the exception protocol. It is worth the time and trouble to avoid treatment complications. If this option is included in the “first step” language it will lessen treatment interruptions and complications as happened to @Lapassionara. The optimist in me hopes, the cynic doubts.
different-church-lady
@Derelict: Exactly. If the choice is between paying any amount or either living in sickness or dying, then “what the market will bear” no longer works as an economic regulator.
This is why the private health insurance industry needs to be destroyed. It treats healthcare like a consumer good, but the consumers can’t play the game.
tobie
@Bill K: I don’t think there is any healthcare system in the world that doesn’t factor in the cost of treatment versus outcomes when deciding what therapies to approve. A good friend of mine availed himself of every treatment under the sun for pancreatic cancer in the US since his family wanted it and his insurance covered it. At some point, he decided he would like to return to his native UK. The NHS refused to authorize anything but palliative care since the costs outweighed the benefits. It was painful for his family to hear this but it was probably the right call. I can’t think of a single healthcare system that doesn’t consider price.
different-church-lady
@Frank Wilhoit:
Oh, gee, let’s break down why this is:
* The “consumers” don’t know what’s wrong, so they can’t make good decisions.
* The experts frequently don’t know either, and try to hide it, when they’re not giving outright bad advice or just winging it.
* Nobody know ahead of time how much the product will cost.
* Nobody knows ahead of time if the insurance company will say yes or no.
* Nobody in the customer service chain knows what the fuck is going on, and a lot of them seem not to care.
* The consumers are stressed and/or incapacitated.
Imagine going to buy a car. You have to go to a consultant who says “You need a Ford Focus”. You’re not allowed to buy the thing yourself, and nobody can tell you if the car-purchasing company you’ve been paying for the last 8 years will pay for the thing. Nor can they tell you how much it will cost, and how much of that cost you’ll have to bear directly — perhaps all of it, who knows? (You certainly won’t until months later.) Maybe the car-buying company will say, “No, you need a used Chevy Nova.” In the end the car might work or it might not.
Yeah. Then car buying would also be “pervasively irrational”.
tobie
@different-church-lady: Someone always makes a decision about price versus effectiveness of treatment in any healthcare system. The US actually sucks at this, which is one of the reasons why healthcare costs are so high. National healthcare systems like the UK’s NHS and medicare-type systems like France’s and Canada’s healthcare programs will not allow expensive treatments they (as in a national governing board) deem ineffective. I don’t know where this myth arose that you can get any treatment for free in European healthcare systems. It’s simply not true.
WereBear
Price is a distorting factor when it does not come with any of the implied better quality.
The same procedure that is lifesaving with proper use is a complete waste and comes with considerable risk in another situation. We do not discriminate enough between them, even though we can. It boils down to patients with insurance getting it and those who don’t, don’t; regardless of what is good treatment.
This shouldn’t be about “markets” when no one has as much control or choice over what they buy as a consumer debating iPhone vs Android. We should be relying on science, not “what traffic a bridge will bear.”
tobie
@WereBear: I agree with everything you say. We should be relying on science to determine what are the best treatment options for different ailments. I thought that’s what CVS Caremark was saying it wanted to do in its price negotiations with drugmakers:
The right freaked out when a provision for an advisory panel regarding treatments was included in the ACA. Now the left seems to be doing the same, even though single-payer systems the world over have governing boards that determine approved treatments based on “comparative effectveness analyses.”
Karla
@Wanderer: Yes, I’ve seen prior authorizations for bypassing the step therapy requirement with patients already established on a therapy. I’ve also seen prior authorizations denied for reasons that were unclear to me.
One thing I’d really like to see is more transparency about PBMs’ formularies and their tiers, with regular proactive sharing of that information with prescribers. It wastes a lot of time for a patient to only learn that a therapy isn’t on a favored list after they’ve already left the appointment with their prescriber.
Lapassionara
@Wanderer: I tried jumping thru hoops. Letter from my doctor was ignored. As was my age, and the fact that I had tried other medications ten years before. As was the fact that my cardiologist had diagnosed me with a (fortunately benign) heart condition caused by chronic but not horribly high blood pressure, for which he prescribed medication that was covered under med D. As was the fact that the drug I needed was listed on their formulary. What a nightmare.
MomSense
What would be different in a Medicare4All construct?
RobertATL
It seems to me that this is going to run straight into the US’s fragmented health care market. That is – with a unified decision maker/source creating a uniform approach as well as portability then a step approach isn’t unreasonable. The problem is if you, or in many cases your employer, switches insurance companies. There are quite a few cases where people have been pushed to “start again” on the first step, after previously going through it.
You don’t have to have single payer; a tightly regulated system could also ensure that there is uniform steps and that people don’t have to start over. Also even with private insures a single master list on this stuff would force the sellers into negotiating rather than simply ignoring that part of the market and aggressively pushing to sell to another part.
BruceJ
There, ftfy.
We are not ‘consumers’ in this business. We’re merely the truly annoying part they cannot get rid of fast enough to increase their profits. This is code for “Hey you’re too expensive to keep alive. Please go fuck off and die quietly somewhere!”
WereBear
@Lapassionara: Every hoop they require probably has people who just give up: profit!
Uncle Cosmo
@Lapassionara: Many years ago I was taking Prozac for chronic depression when all of a sudden the price skyrocketed. Turned out my employer-based health plan had changed its preferred SSRI drug to Zoloft & would no longer subsidize others. My shrink switched me onto it. I called him back a couple of weeks later: I’m starting to seriously contemplate suicide – get me TF off this shit! (FTR a non-uncommon side effect of Z.) He fought the good fight for me with the insurer & soon Vitamin P was restored to the formulary for me. But it was unpleasant..
Litlebritdifrnt
As I have said here previously my main motivation for moving back to the UK was my health problems. I had no health insurance (I used to have through work but it got so expensive my boss could no longer afford it). Our financial situation was such that when the doctor would no longer refill my blood pressure medication until I had blood tests I was stuck, it cost me $95 just to see the doctor, I didn’t have the additional money for the blood tests. I didn’t see a doctor until I was on my last legs for years. When I moved back here the NHS was more concerned about diagnostics and prevention. My initial consultation with my doctor resulted in a flurry of tests, mammogram, pap smear, EKG, blood tests, x-rays, ultrasounds, you name it, they gave me a full MOT. Turns out that my main problem was stress and a wonky heart, the blood pressure was a symptom of that. The stress of not knowing how to afford medical treatment exacerbated everything. The more I worried about my blood pressure, the more it increased, which put more pressure on the wonky heart. That is what the US medical system does not take into account is that if people can’t afford preventative care, then they just get sicker. The insurance companies end up paying MORE because people’s problems get worse. I recently saw a tweet that said the majority of GoFundMe appeals currently ongoing are about raising money for medical bills. That is disgraceful and should not be happening in a country as rich as the US.
Martin
That’s right. The free market works very well, however, a free market is relatively rare in the US. It has the following conditions:
1) Suppliers can freely enter the market – no governmental gatekeepers. That doesn’t preclude regulation, but that regulation cannot be crafted to favor certain entrants (see NYC taxi medallions vs Uber).
2) Suppliers can freely leave the market. The problem with the bailouts was that it pretended we had a free market while admitting that we didn’t. Can Blue Cross Blue Shield of Iowa leave their market? No way in hell. There’d be nothing left. So the state has no choice but to take steps to keep Wellmark in business, even if that would keep other entrants out.
3) Suppliers can to a reasonable degree choose the markets they serve. No, they can’t refuse service to black people, but they can choose to serve one city over another or the high end of a market over the low end. That of course is a function of whether there are other businesses able to step in and serve the unserved markets.
And then the reverse:
4) Consumers can freely enter the market. That is, we can ethically say no to a purchase. We cannot ethically say no to healthcare. If I don’t take my kid to the doctor when they’re sick, the state will take my kid away from me. ACA does violate this rule, but then so does the conventional healthcare system, so objecting to the former while ignoring the latter seriously misses the point.
5) Consumers can freely leave the market. That a product once purchased does not require an ongoing cost. This is why contracts you can’t cancel, or which have excessive cancellation costs are problematic.
6) Consumers can reasonably choose the suppliers they buy from. This is what ACA seeks to preserve given that 4) is already a lost cause. Can I decide which ambulance takes me to the hospital of my choice? No. Can I choose an iPhone over a Galaxy? Yes.
When all 6 conditions are met, we have a free market. Healthcare isn’t even close at any level, nor are a lot of the things conservatives crow about when they say ‘free market’.
Litlebritdifrnt
@Martin: My husband was misdiagnosed with a heart attack at a regional hospital. He was airlifted to a cardiac center up the road. He had no choice, they didn’t ask him. It happened. We were left with a bill of $33,000 for the airlift because my husband’s very good State Employees health insurance didn’t cover the air lift. He got to the cardiac center and they said that he had not had a heart attack. Between us we amassed almost $100,000 in medical bills. My husband with insurance, me without. That hung around our necks our entire life, we couldn’t refi the mortgage for a better rate from the 10% we had when rates were 3% everywhere else because our credit record showed those 100K in unpaid medical bills. We were screwed.
Lapassionara
@Uncle Cosmo: how awful!
Why are drug prices so bizarre? Now even generics are costly.
Zelma
Why are drug prices so bizarre? Price gouging and profiteering. See the above posts on why patients are not and cannot be “consumers.”
NJDave
@Lapassionara: Because the generics companies realized they could make more money if there were fewer of them. The last ten years (or so) have seen a flood of generic manufacturers buying each other until there are just a few majors left. Funny enough, they don’t all make all drugs! And wherever they are the sole supplier, they raise prices. Now that *should* bring new producers into that market. But it doesn’t. Hmm.
artem1s
Interesting. Our company dropped CVS drug plan this year in favor of a mail order outfit. Mostly for better pricing on long term maintenance prescriptions. I wonder if this is why we dropped them.