Published on March 4, 2014
Affordable Care Act: Implications for the Pharmaceutical Industry February 2014 Kirsten Axelsen, Vice President Worldwide Policy Pfizer firstname.lastname@example.org
Affordable Care Act: Does and Doesn’t Does Doesn’t Reduce the number of uninsured Provide universal coverage Expand coverage in private plans and Medicaid Operate a government run public plan Raise taxes and fees to pay for expanding coverage Set prices directly Experiments with how the health Lower the cost of healthcare care system is organized Encourage prevention through grants and reimbursement Increase the number of primary care physicians Fund research on comparative effectiveness Set formulary directly Expand access to medicines Create a financial windfall for pharmaceutical companies 2
Goals of The Affordable Care Act, Implications Expand Coverage • Minimal near term for pharma Improve Quality • Depends on what is measured and reimbursed Reduce Cost • Depends on balance of cost vs. quality & value 3
Healthcare Marketplace Evolution Payer Provider Consumer • New people getting covered • Oversight of rates • Focus on quality & outcomes • Requirement to use technology • Increased exposure to cost • More choices 4
Key drivers Enrollment in Insurance Coverage • Health plans leverage • Risk pool Commercial benefit erosion • Spillover of restrictive benefits • Employers continue or drop coverage Delivery/payment reform • Cost vs. quality 5
Key drivers Enrollment in Insurance Coverage • Health plans leverage • Risk pool Commercial benefit erosion • Spillover of restrictive benefits • Employers continue or drop coverage Delivery/payment reform • Cost vs. quality 6
Benefit Design Parameters For Exchanges, Small and Individual Group Markets Deductible Limits Out of Pocket Limits Actuarial Value Essential Health Benefits 7
Health Plans Leverage Tools to Constrain Costs Networks Access restricted certain physicians and hospitals Formulary Utilization management and tight controls Cost-Sharing High patient responsibility, particularly for specialty 8
Tools are Available to Help Use Exchanges Calculator Tool Available Link to Formulary/ Formulary Tool Available Link to Provider Network Tool Available FFE ü ü ü California ü Colorado ü ü ü Connecticut ü ü ü DC ü Hawaii ü Kentucky ü Exchange ü ü ü ü Maryland ü ü Massachusetts ü ü ü ü ü ü ü ü Minnesota ü Nevada New York ü Oregon Rhode Island ü Vermont ü Washington ü Source: Avalere State Reform Insights, December 16, 2013. ü ü ü
On Average, Silver Deductibles are More Than $2,500 Average Deductibles by Metal Level $5,000 $4,500 $4,343 Medical Deductible $4,000 $3,500 $3,000 $2,567 $2,500 $2,000 $1,500 $932 Avg. Employer-Sponsored Plan Deductible = $1,135* $1,000 $500 $167 $Bronze N=175 Silver N=207 Gold N=160 Platinum N=61 Source: Avalere PlanScape, updated November 1, 2013. Avalere collected plan information from both federally-facilitated and state-based exchanges. Average deductibles represent the medical-only deductible for plans with separate medical and drug deductibles and the total deductible for those plans with integrated deductibles. *Among covered workers with a general annual deductible, the average deductible amount for single coverage is $1,135. Source: Kaiser Family Foundation Employer Health Benefits 2013 Annual Survey.
State Standardized Benefit Designs Tier 4 Inpatient Specialist OOP Max for Drugs2 Standard Silver Tier 3 CT Tier 2 Silver Coinsurance3 Tier 1 CA Drug Deductible Silver Copay3 Overall Deductible State Plan Type Drug Formulary Emergency Room Primary Care Physician Benefit Cost-Sharing Parameters1 Medical: $2,000 $2504 $19 $50 $70 20% 20% $250 $45 $65 N/A $2504 $19 $50 $70 20% 20% $250 $45 $65 N/A $400 $10 $25 $40 40% $5005 $150 $30 $45 N/A Medical: $2,000 Medical: $3,000 MA6 Silver $2,000 N/A $20 $40 $70 N/A $1,000 $350 $30 $50 N/A NY6 Silver $2,000 N/A $10 $35 $70 N/A $1,500 $150 $30 $50 N/A $0 $15 $50 50% 50% 30% 30% $35 $70 N/A $1004 $12 $50 50% N/A 40% $250 $20 $40 $1,250 $1,2507 $10 $40 50% N/A 20% 20% 10% 20% $1,250 OR VT Silver Silver Silver- HDHP Medical: $2,500 Medical: $1,900 $1,550 Source: State Reform Insights, September 16, 2013 1. Benefit cost-sharing parameters are specific to individuals. Deductibles and OOP max may be higher for family coverage. 2. All exchange plans must comply with the annual limitation on OOP maximums for medical and drug benefits ($6,350 in 2014). 3. California’s silver copay and coinsurance plan designs vary in cost sharing for advanced imaging and home health care services as well as in the accumulation of certain cost sharing towards the deductible. 4. For brand drugs only. 5. Per day to a maximum of $2,000 per admission. 6. Drug formulary tiers 1-3 cost-sharing parameters vary for mail-order pharmacies. 7. Integrated with overall deductible; of the overall deductible, up to $1,250 of drug spending may count as the drug deductible. 11
To Date, 26 States & DC Plan to Expand Medicaid Eligibility in 2014 State Commitment to Expand Medicaid Eligibility in 2014 WA ME MT ND VT NH MA CT MN OR ID WI SD NY MI** WY PA* IA* NE IL IN*** WV UT* CA CO KS MO OK NM NC SC AR* MS TX AK VA DE MD DC KY TN* AZ NJ OH NV RI AL Will Expand (26 + DC) GA Leaning Yes (1) Leaning No (2) LA FL Will Not Expand (21) HI Source: Avalere State Reform Insights, Updated January 23, 2014 *Denotes states pursuing premium assistance models using exchange plans for part of their expansion populations: AR and IA have received waiver approval; PA released a draft waiver for a plan using premium assistance that would likely not take effect until mid/late 2014;TN’s governor continues to voice support for a premium assistance approach; if UT expands, it is likely to pursue a premium assistance approach **MI’s expansion will begin in April 2014 ***IN’s expansion would require CMS approval to leverage the state’s Healthy Indiana Program 12
Key drivers Enrollment in Insurance Coverage • Health plans leverage • Risk pool Commercial benefit erosion • Spillover of restrictive benefits • Employers continue or drop coverage Delivery/payment reform • Cost vs. quality 13
New Lives = New Market Pressures Benefit Design Less Generous More Generous Medicaid Commercial Exchange Individual / Catastrophic Lives Served by Market Today Anticipated Future Market Medicare part D not included, it is not an integrated health but a stand-alone drug benefit 14
Newly Insured Entering Markets With More Government Oversight and Subsidy EXPECTED COVERAGE NON ELDERLY (MILLIONS) 300 0 250 36 25 200 7 43 13 23 23 46 22 24 25 25 24 45 45 45 45 47 22 22 22 22 22 Government Responsible for Growing Share of the Marketplace Exchanges 150 158 157 100 Medicaid & CHIP 157 155 158 158 159 160 Non-Group Employer Uninsured 50 55 43 37 0 2013 31 31 30 30 31 2014 2015 2016 2017 2018 2019 2020 Source: Congressional Budget Office May 2013 Projection of Coverage Effects 15
Key drivers Enrollment in Insurance Coverage • Health plans leverage • Risk pool Commercial benefit erosion • Spillover of restrictive benefits • Employers continue or drop coverage Delivery/payment reform • Cost vs. quality 16
Healthcare System Challenges Impetus for Payment and Delivery Reform Siloed Payment Systems Lack of Care Coordination and Transition Management Poor Outcomes, Such as Re-hospitalizations Increased Costs 17
Care and Delivery Reforms Delivery Reform • Accountable Care Organizations Payment Reform • No payment for avoidable conditions • Quality Measures Encourage Innovation • Center for Medicare and Medicaid Innovation 18
Provider Marketplace Transformation Alignment Consolidation • Integrated delivery networks Payment and • Payment for quality Delivery Reform outcomes Provider Accountability • Physicians taking on risk 19
What is Next? 20
Health Expenditure Growth Continues Health Expenditure Relative to 2009 2.5 2.0 1.5 National Health Expenditure Out of Pocket 1.0 Private Insurance 0.5 Medicare 0.0 National Health Expenditure Projection, accessed October 2013 Center for Medicare and Medicaid Services 21
Statins Save Lives and Money Adapted from: Grabowski, David C., et al. (2012); Gotto Jr., AM., et. al. (2000)
Cancer Treatments Increase Life Expectancy Share of Life-Expectancy Gain Attributable to Improved Treatment vs. Improved Detection, 1980–2000* Asterisk (*) indicates Life Expectancy gains from 1990–2000 because 1980 data was not available for these conditions. Table adapted from: E. Sun et al. (May 2008) “The Determinants of Recent Gains in Cancer Survival: An Analysis of the Surveillance, Epidemiology, and End Results (SEER) Database,” Journal of Clinical Oncology.
Vaccines Avoid Costs to Treat Disease
Prescription Drug Spending Growth is Low Year over year change in spending 12% 10% 8% 6% 4% 2% Prescription Drugs Hospitals Physicians National Health Spending 0% -2% National Health Expenditures, accessed October 2013 Center for Medicare and Medicaid Services
Realize the Value of the Investment in the Coverage Expansion • Easily comparable benefits with clear information • Clearly defined exception and appeals processes • Limit excessive cost sharing for or exclusion of specialty treatments and providers • Broaden access to data, and link it • Payment for value rewards attributes important to patients 26
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