Healthcare Reform Stakeholders Summit, Spring 2015 - Episode 14

Risk in Pharmaceutical Budgeting

Advances in technology, including specialty drugs like Sovaldi, worry managed care executives in that they cannot accurately predict what the financial ramifications of those new interventions will be. “In the early days of designing bundle payment programs, this issue came to the forefront because you were looking at historical past in order to project a budget and create the financial risk around that defined episode,” states Francois de Brantes, MS, MBA, executive director of the Healthcare Incentives Improvement Institute. “But then so you take an episode like hepatitis C and if the past were to be used as the budget for the future, every single physician managing a patient with hepatitis C would go bankrupt or would deny the proven treatment that actually cures the problem.”

He believes that a different approach is being taken that at first ignores the effect of particular treatment on the pre-calculated budget, taking a nonrestrictive approach that awaits information on proven effectiveness of the treatment. Interestingly, Mr. de Brantes advocates the same approach for drugs that may result in large cost savings, not cost increases.

Drug costs are also going to be a challenge for every delivery system, including physicians, says Arthur Vercillo, MD, FACS, regional president, Excellus Blue Cross Blue Shield. However, diseases that were previously considered terminal or greatly debilitating can now be managed, he emphasizes. This is a challenge not only for health plans but for society, he believes, and asks, “What cost is society willing to pay for those things?” In addition, some generic medications today cost more than the branded versions, and medication prices may be increased multiple times each year, he says. “Don’t forget that right now there are 200 to 300 medications in phase 2 and phase 3 development that will cost on average $50,000 when marketed. Whereas medications used to be about 15% of the premium dollar, now it’s closer to 20% and will go up,” he says. Instead, we’re trying to keep the curve from rising so fast.

The United States is the only country that does not regulate drug prices, Mr. de Brantes comments. What is the point of trying to manage affordability, he asked, if it is wasted because the political willingness to put a ceiling on prices for certain treatments is missing?