Views from Industry (Unpacking Drug Value) | Kaiser Permanente


>>MURRAY ROSS: So, for those of you just
tuning in on the live stream, I’m Murray Ross, President and CEO of America’s Health Insurance
Plans, and Stephen J. Ubl, President and CEO of the Pharmaceutical Research and Manufacturers
of America, here today to participate in a moderated conversation about drug value with
Julie Rovner at Kaiser Health News. I’ll give you a little bit of information, introduce
Julie before I hand it over to her. Um, Julie Rovner is Chief Washington Correspondent for
Kaiser Health News and host of the all‑women panelist podcast, KHN’s What The Health, and,
Julie, I think I am probably, like, one of your, um, launch listener number six or something
like that, behind a few relatives, but that’s a great podcast, and I commend it to folks.
Um, prior to joining Kaiser Health News in 2014, she spent 15 years as health policy correspondent
for NPR, specializing in the politics of healthcare. Rovner served as NPR’s lead correspondent,
covering the passage and implementation of the Patient Protection and Affordable Care
Act of 2010, better known now as ACA. A noted expert on health policy issues, Julie’s
the author of a critically‑praised reference book, Healthcare Politics, and also Policy
A to Z and was awarded the Everett McKinley Dirksen Award for distinguished reporting
of Congress for her coverage of the passage of the Medicare Prescription Drug Law and
its aftermath. Um, I’m very pleased that you’ve agreed to handle this next session here with,
um, some very, um, high‑profile and tough customers, so, um, thank you, Julie, and welcome
to Matt and to Steve.>>JULIE ROVNER: Thank you, and good afternoon,
and thank you, Murray, for that kind introduction. Um, for those of you who don’t already know,
Kaiser Health News is not affiliated in any way with Kaiser Permanente. We are an editorially
independent project of the Kaiser Family Foundation, which is also not affiliated with Kaiser Permanente.
As an ex‑editor used to say, we share a common ancestor, the industrialist, Henry
J. Kaiser, from way back when. Um, so with that taken care of, let us get to our discussion.
I am very excited to be joined here on the stage by the heads of two organizations who
are key to a lot of the health debate happening in Washington in 2019. First, to my immediate
left, we have Matt Eyles, President and CEO of America’s Health Insurance Plans. Matt
joined AHIP in 2015, became its head in 2018. He previously worked at a number of insurance
and other health organizations, as well as at the congressional budget office. And then
to Matt’s left is Steve Ubl, who’s President and CEO of the Pharmaceutical Research and
Manufacturers of America. Steve came to PRMA in 2018 from Adva med, the medical device
maker association, which he ran for the ten years prior to that. So, we’re going to let
each of our guests give a brief opening statement, then the three of us will have a discussion,
and in about a half an hour, I will open it up to audience questions, so you in the audience
here, please be thinking. Um, Matt, why don’t you start us off?
>>MATT EYLES: Great. Thank you, Julie. It’s great to be here, and I’m sorry I missed the
earlier part of the sessions, um, but I think it’s so important to have the conversation
that we’re having today about value, and when I talk about value in thinking about the pharmaceutical
industry, I usually start with, um, a little quip that maybe some of you have heard before,
that I approach this as a recovering pharmaceutical executive, um, as someone who worked in the
industry for about 12 years, at some really great companies, Lily and Wiath, Wiath was
bought by Pfizer, um, so I think I have a little bit of a unique perspective, recognizing
that the world is different today than when I operated, um, in the pharmaceutical industry.
Um, and when I think about the pharmaceutical industry, I think we have to be impressed
with the cures and the treatments that we see that are being developed, right? I think,
you know, back, um, you know, two decades ago, it was about blockbusters, um, and drugs
to treat, um, you know, chronic diseases for, um, various conditions, and what we’ve seen
is a real evolution of the industry to be much more targeted and focused on rare diseases,
um, on, um, conditions on trying to find cures, and I think that’s really admirable. Um, where
I think we probably have seen the biggest change over time is in terms of, um, issues
related to pricing practices, um, how intellectual property is being protected, and all of these
factor into how value gets computed. I think, you know, two decades ago, again, I don’t
know that any one of us could really have imagined a Luxturna or a Zolgensma, and we
also probably couldn’t have imagined the price of, you know, upwards of a million dollars
for Luxturna and 2.1 million for Zolgensma, and they’re extreme examples, right, and it’s
important to remember that we need to look across the continuum of all therapies and
try and figure out how do we get to, um, to value.
Um, from, I’d say the AHIP perspective, a couple of points. Um, first, we want to have
a better understanding about what goes into a drug’s price, because that’s really informative,
to think about how, um, we are paying for value. Um, we know that there are a lot of
treatments, um, that never make their way to market, but we also know that a lot of
those that do get to market now are increasingly being developed with smaller and smaller patient,
um, panel sizes, and, perhaps, with, perhaps, hopefully, with lower research and development
costs, and, maybe, that could translate into, um, a different pricing model longer‑term.
Second is being able to measure outcomes. This is complicated, I know that there were
various different panels, but when you translate medicine from going to the clinical trials
into the real world, people who have multiple chronic conditions that don’t necessarily,
um, meet the profile of people that were in the clinical trial, what does that really
mean for outcomes and how they perform in the real world? Third, um, we need to develop,
I think, a reasonable payment structure. Um, by and large, I’ll just say it outright, right,
we’re not a fan of the drug mortgage concept. We need to think about, you know, how we’re
going to make these high‑cost drugs, um, which are potentially transformative and potentially
curative, right, it remains to be seen, whether the cures are actually durable, just given
how new they are, um, but to come up with, um, new payment models to think about that,
and then, finally, um, getting the incentives right, um, paying for value and making sure
that, to the extent that there are regulatory barriers in the way to doing that, um, we
address them. Some of them would require statutory congressional action, we all know how easy
it is to get something done in Congress these days, so, um, that’s something we need to
be mindful of. Final comment is, um, you know, encouraged
by some of the innovations that are happening out there and the relationships between health
plans and pharmaceutical manufacturers in terms of how we think about the future. You
know, a number of AHIP member companies have been engaged in value‑based contracting
arrangements, trying to find ways to make that work more effectively, and you probably
all saw the, um, Wall Street Journal article, um, the other week about some innovative models
from other companies that are trying to figure out ways to pay for these really, um, expensive,
but potentially transformative drugs. So, I think we can all say, you know, we agree
that we want to find a solution to these problems, and that we want to find a way to ensure that
all patients have access to affordable healthcare, including prescription drugs, um, that help
them achieve their optimal health. So, I’ll stop there.
>>JULIE ROVNER: Steve?>>STEPHEN UBL: Well, thanks, Julie, and thanks,
Murray, for inviting me to join the discussion today. I agree with an awful lot, alarmingly
lot of what Matt had to say. I’ll try to keep my comments brief, so that we can get into
the interactive part of the discussion, but I start from the premise that what really
drives healthcare spending is patients with chronic disease, oftentimes, multiple chronic
diseases, and as Matt said, um, the good news is that our industry, um, and the innovation
coming out of our industry right now is poised to make, really, an incredible impact on,
um, human health, on public health, and you think about things like immunotherapies and
car T, you know, harnessing the body’s immune system to fight cancer, you know, we’re seeing
great late‑stage data on sickle cell, um, hemophilia, you know, Matt mentioned some
of the gene therapies focused on SMA and reversing blindness in kids, I mean, these are scientific
advances that would have been referred to as science fiction, you know, just a few years
ago. Um, and we understand, as an industry, that if patients can’t access or afford these
breakthroughs, they’re meaningless, and I want to assure you that, um, our industry
is committed to making needed improvements in the system. We’re not for the status quo,
we think there’s a lot of common ground, and, hopefully, we’ll talk about that, um, today.
I think we do believe that, largely, the competitive marketplace is working to constrain costs.
You know, Matt’s members are actually really good negotiators. They’re heavily consolidated
today. Now, there’s relatively few health plans,
there’s three PBMs that control a major percent of the market, they’ve got lots of tools to
either not cover medicine or to place it on a formulary, they use their leverage very
effectively, and as a result, actually, drug spending, um, is growing at record lows. So,
you know, last year, net prices after rebates and discounts negotiated between our members
and Matt’s members, um, were 0.3 percent. You know, one PBM just released data on last
year, their total drug spending, not prices, but spending went up by 0.4 percent. So,
these are historic lows, um, and we had something like 170 billion in rebates negotiated between
our respective members. The problem, as we see it, is that patients aren’t really feeling
the benefits of that robust marketplace competition. Um, so, if you look at the way most health
plans configure their benefits today, they expose patients to a higher degree of their
drug costs than their healthcare costs, their other healthcare costs. So, I came out of
the device industry, get your hip or knee replaced, you go to the hospital, you pay
a relatively small amount in your hospital deductible, and you’re on your way. You know,
for drug costs, just in percentage terms, plans expose patients to about 16 percent
of their drug costs compared to about 3 percent of their overall healthcare costs. We know
that the issue with rebates, that plans are not sharing rebates with patients at the point
of sale, although that’s changing, to some degree, and we’ve seen, um, co‑pays and
deductibles in cost‑sharing grow three to four times faster than underlying medical
costs. I do think there are a range of, um, pragmatic proposals, um, that are aimed at
lowering patient out‑of‑pocket cost for medicines, and we’re eager to work with Matt,
his members, and other stakeholders towards that end, and, hopefully, we’ll have time
today to explore some of those.>>JULIE ROVNER: All right, well, thank you
both. Um, let’s just dive right in. There’s been a lot of finger‑pointing about the
cost of prescription drugs. We’ve seen a little bit of it already here today. Um, how much
blame do you think your industry deserves? And what are you doing to get past it? Why
don’t you start, Matt?>>MATT EYLES: Sure. I mean, when it comes
to drug pricing, let’s just be perfectly clear, how prices are set and when prices increase,
right? The manufacturer is the one that sets the list price, right? No one else controls
it, um, right, and if they would like to set lower list prices, I think all of us would
welcome that. At the same time, the manufacturer also makes the exclusive decision on when
to change the list price, and, you know, what we’ve seen historically is that manufacturers,
you know, increase, you know, at least once, sometimes, a couple times a year, um, typically
at rates that have exceeded, um, the rate of general inflation, medical inflation, or
other measures, right? And, so, like, what’s going on here? I think, um, you know, a lot
of it has to do, at some level, with respect to the negotiations that Steve has, um, mentioned,
that, you know, plans and PBM partners are being effective in terms of limiting, um,
limiting net price increases, and for those manufacturers who, based on their product
portfolio, um, have, um, products, really, that there’s a fair amount of utilization
outside of the preferred formulary structure, right, they get to realize 100 percent of
that list price, right? So, while the net price might be low for a
fair number, the list price is being paid by a lot. Um, I think, um, you know, we need
to look at where is there competition, when there’s competition, it can be effective.
I think as we think about the future and paying for value, as we’re talking about drugs that
are more, um, targeted towards rare diseases, ultra‑orphan populations, we are not likely
to see the level of competition that you see in therapeutic classes, like diabetes or insulins,
right, and what are the implications for how we need to think about sort of prices long‑term.
I know our industry has said, you know what, we’re not wedded to prescription drug rebates,
we put out a statement with our board back in June, July of, um, 2018, basically saying
we’re open to alternatives, but we need to get to a lower price, a lower net price, and
just walking away from competitive market‑based tools at this point in time without an alternative
is not going to be a workable solution, but I think it, you know, again, thinking about
the future in terms of how we’re going to pay for these drugs, um, again, I’m, I want
to be optimistic, but I’m also realistic to know when you don’t have competition, um,
you’re essentially just going to be a price‑taker, and that’s what we see in a lot of these,
you know, very rare, ultra‑orphan drugs that are being developed.
>>JULIE ROVNER: Steve? I mean, you started out by saying we don’t just want to invent
these drugs, we want people to be able to get them.
>>STEPHEN UBL: Absolutely, and I would just say, again, at the outset, that, um, we do
have a competitive marketplace, but there are areas for improvement. I mean, Matt mentioned
this sort of gross to net bubble that has grown up, where list prices have grown, but,
actually, many companies in our industry are experiencing net, um, net prices on a negative
basis, and, so, we’ve got to figure out a way, you know, to puncture that gross to net
bubble, because what happens, the outrage is, you know, so, my son has type I diabetes,
I’m pretty close to the insulin market, um, patient that needs insulin goes to the pharmacy
counter, pays full list price, if they’re in a high‑deductible plan, and the health
plan is capturing a 50 to 70 percent discount. If that rebate or discount was passed through
to patients at the pharmacy counter, it would be dramatic, um, relief on the cost of that
medicine. Um, so, you know, we spend a lot of time actually in focus groups around the
country asking patients, um, you know, what their highest priorities are and what their
concerns are, and what we hear is that, you know, insurance just isn’t what it used to
be. You know, you got a lot of patients in high‑deductible plans, um, their top, what’s
at the top of the list, growing, um, co‑pays, you know, co‑insurance, um, deductibles,
and we need to find a way, again, um, it’s not as easy as Matt would have you believe
in terms of lowering the list price. You know, one of our member companies, Eli Lily, you
know, just released an authorized generic at 50 percent of the list price of insulin.
Do you know how many Part D plans or private insurers are covering the 50 percent off
version? Very, very few, because the system still prefers high price, high rebated medicines,
and until we get a handle on that, we’re not going to be able to provide relief to patients
at the pharmacy counter.>>MATT EYLES: I think that’s sort of a great
example though, Steve, which is, from a net perspective, it’s more expensive, right? So,
that’s the problem, when you have an authorized generic that comes out, yes, the list price
is lower, but at the end of the day, the net price is higher. If you, you know, work back
from, um, a vile of Humalog at 300 or so a vile, and it’s a 60 or 70 percent rebate,
right, net to the payer at the end of the day would be 120, right? And, so, yeah, it
sounds nice, that Lily’s offering an authorized generic at half the list price, but the cost
overall is higher, right? So, is that really the type of, sort of system that we want to
have? I think at the end of the day, we want to make sure that people, you know, that we’re
getting the lowest net cost, net price product, and there are things, I think, that we can
probably discuss and work on with respect to, you know, copayments and others that,
you know, might get us a little bit in that direction.
>>STEPHEN UBL: You know, I just think we need to get to, insurance has sort of become
inverted, you know, it should be the healthy people subsidizing the sick, and instead,
what we have today increasingly is patients with multiple chronic conditions on one or
more medicines, they’re paying a disproportionate, in my view, share of the cost of that medicine,
so, in a way, the sick are subsidizing the healthy, and, again, until we get at some
of these misaligned incentives in the system, I’ll give you another one, just about every
actor in the supply chain is paid based on the list price of the medicine, not just Matt’s
members, PBM’s, wholesalers and distributers, pharmacies, at some level, it’s perhaps not
a surprise that there’s been a hydraulic effect on list prices. So, we’ve argued delink the
way supply chain entities are paid. They shouldn’t be paid based on the list price of the medicine,
they should be paid based on the value of the services they’re providing. I do think,
you know, to be positive, and I know you’re going to get there in terms of common ground,
but Matt’s mentioned, you know, value‑based approaches, you know, I think our members
are willing to put their money where their mouth is. Instead of sort of big, dumb, you
know, volume‑based rebates, um, we should be in good‑faith negotiations with health
plans around what are the outcomes that patients are actually achieving when they’re taking
the medicine and using the new technology and tools that are available to gather realtime
evidence about actual performance in the marketplace, and I do think it’s one of those areas that’s
a win‑win‑win. It’s a win for patients, because they tend to have lower cost‑sharing
in these value‑based arrangements, health plans get more visibility on actual performance
outside of clinical trials, our members have a seat at the table, right, it’s not, again,
a big, dumb rebate, it’s basically saying we know the performance attributes of our
product, we don’t get disintermediated, we get to negotiate, you know, if the product
works, we get reimbursed, if it doesn’t, we don’t.
>>JULIE ROVNER: I was going to say, what happens to the companies who are making the
drugs that, maybe, don’t do so well on that value proposition?
>>STEPHEN UBL: I think that, um, you know, our companies are willing to, again, put their
money where their mouth is and go at risk to a greater degree than they have historically,
and, you know, perhaps optimistically for all of us, where the science is going, you
know, it used to be one drug, one price, one broad patient population, where the science
is going is we know more about the genetic response to a particular medicine, it means
there’s going to be smaller patient populations, but lower risk in terms of bringing the product
to market, but also, lower costs. We’re not going to have, again, we’re not going to have
a scatter shot approach, um, we’re going to have a much more targeted approach, which
should save resources for everyone.>>JULIE ROVNER: So, you’ve both addressed
this broadly, but I want to, Peter Bach sort of brought a definition of value this morning,
I don’t know if you both saw it, which was a very sort of mathematical equation in one
sentence. I want to know, sort of in a couple of sentences, if you need to, how do you define,
how do you see value when it comes to prescription drugs?
>>MATT EYLES: I mean, I think it’s cost, right, relative to performance, right? I mean,
we all have great examples, you know, in the real world of, um, items and services outside
of the, you know, healthcare sector, right, where a price or a, you know, cost of a product
is, you know, related to a quality and an outcome, um, and, right, whether it’s in technology,
you know, automotives, you know, others, right, that you’re willing to pay, you know, more
for things that you think deliver higher quality, higher value. Um, you know, I think where
we’ve struggled, um, in healthcare, right, is to really, um, define that well, and a
lot of your perspective, um, really, it’s sort of the old adage, like, where you stand
on an issue depends on where you sit. If you are, you know, taking risk, um, you have one
perspective, perhaps, than if you’re not, right? I mean, if you’re not taking risk,
right, just keep, you know, plucking things out and, you know, trying to maximize volume
and, um, revenues, that’s one thing. If you’re on the hook for having to take on, you know,
risk for performance, outcomes, and cost, right, it’s a different perspective, and,
so, you know, I think healthcare has been slower, maybe, to evolve in that way. I’d
say the relationships between health insurers and health providers has been more sophisticated
and advanced. We’re glad that, you know, pharmaceutical manufacturers are coming to the table now
and joining the party, right, because when you think about the relationships on the plan
provider side, I mean, there have been, um, very sophisticated, you know, risk‑based,
value‑based arrangements for quite awhile, and, um, good that it’s extending into the
pharmaceutical sector.>>JULIE ROVNER: What’s your core belief of
what value is? Because it’s obviously a word that’s thrown around an awful lot in this
debate.>>STEPHEN UBL: Yeah, I mean, in many respects,
it doesn’t matter what my view of value is, what really matters is how does the patient,
um, experience value, and I think where we run into trouble a lot of times, you know,
people talk about health technology assessment and defining value, as if there’s this magic
box that we can put a series of inputs into and get to a magic, you know, price or number
that reflects value, and the fallacy with that is just that, um, individual patients,
you know, view value differently. You know, what Matt looks at value might be looking
at what the short‑term costs are for a plan in return for costs that are offset, hospitalization,
for example, or other downstream costs, um, but what a patient might look at, you know,
I think about the, um, muscular dystrophy example, where, you know, if you have a rigid
quality base model, where you’re focused on longevity gains, most parents and most patients
are not focused on that, they’re focused on can I avoid an emergency room visit, or can
my kid use an adaptive device effectively, and, unfortunately, we’re still at the nascent
stages of defining those dimensions of value. It’s not that we’re going to get rid of qualities,
qualities will always play a role in this discussion, but we have to get to a multifactorial,
patient‑centered definition of value. Otherwise, we’ll continue to have this back and forth,
where we’re going to argue plans, payers, academics, and others. We need to get to a
place where methodologically, there’s some agreement that we’ve captured of these dimensions
of value, so that there’s buy‑in and participation in the process.
>>JULIE ROVNER: Do you want to respond?>>MATT EYLES: Where I think the frustration
has arisen is really around a notion that with some of the pricing that’s occurred out
there in the market, that it feels as if manufacturers are trying to capture every single direct
and indirect medical, social, and other sort of cost offset when they’re talking about
value, um, and setting prices out there, until we get to some more, um, to Steve’s point,
some common definitions, and I’m looking at Sarah out here, because I know she thinks
about this every day, a lot of our members do too, right, I think that that’s, I think
that’s where we’re heading. We need to get there more quickly, um, and we cannot be afraid
to talk about cost in this equation, right, and I think, you know, one, I’d say difference
in terms of where we are with respect to the debate, right, a decade ago, when the ACA
was being talked about, right, people were saying, like, no, you can’t talk about cost.
I think we’ve generally evolved, or I’d like to think we’ve evolved as a country, saying,
no, we do actually have to talk about cost at some level, and, so, hopefully, we can
get to some of those value assessments more quickly that involve both the direct, um,
offsets, but then other things, like patient preferences. I think we’re not seeing yet
how those patient preferences are actually being captured quantitatively. Um, I know
that there’s efforts through FDA, right, but we need to really find a way, because until
we have data, we’re not really going to be able to assess what those patient preferences
mean from a price and value perspective.>>JULIE ROVNER: Well, you’ve led very well
into my next question, which is that, obviously, the public doesn’t think that the value proposition
is being served very well at the moment, and they are complaining to members of Congress,
who also don’t seem to believe that the value proposition is being served very well. So,
we have an awful lot of proposals that are kicking around on Capitol Hill, including
some we haven’t actually seen yet, but should soon, like from House Speaker Nancy Pelosi.
I would like each of you to tell me which of those you would most like to see become
law and which of those are giving you nightmares at the possibility that they might become
law. Steve, go ahead.>>STEPHEN UBL: Well, maybe starting in reverse
order, you know, I would think there’s common ground with Matt and his members on, um, the
Pelosi proposal. I mean, I would think that we would agree that a competitive marketplace,
um, you know, with the benefits that we’ve described today, outweigh giving the government
sweeping authority to set price. I mean, our view is there’s been a clinical trial ‑‑
>>JULIE ROVNER: The Pelosi, at least as we’ve heard of it, it would only set price for drugs
for which there’s no competition.>>STEPHEN UBL: Well, I think, you know, details
remain to be seen, but references to 250 medicines, this is not a modest proposal by
any stretch, and, again, if you look at countries that have moved in this direction, um, many
of us have experience in interacting with, um, health ministers in these countries, the
reality is that patients have markedly less access. You know, if you have a tough diagnosis,
um, there’s still only one place you want to be, here, because we have the best doctors,
the best hospitals, and the best access to cutting‑edge treatments. Um, in terms of,
um, you know, what we’d like to see, you know, I think we’re heartened that there is growing
momentum in the Congress on a bipartisan basis for a set of reforms that, in our view, would
actually solve the problem, that is they would reduce what patients ultimately pay at the
pharmacy counter. So, if you look at, um, the finance committee, there’s an out‑of‑pocket
cap in Medicare Part D of $3,100, that would help a small, but important, um, share of
members. Um, you know, also in the finance committee markup, there is one of the few
moments of bipartisanship, where we had Sharon Brown on the one hand and Pat Toomey on the
other, arguing that we should have rebates shared with patients at the point of sale.
Um, we can, you know, smooth the cost for patients across the year instead of forcing
them to pay all of their cost‑sharing at the beginning of the year. You could lower
cost‑sharing outright, from 25 percent in Medicare to 20 percent, where in other
parts of Medicare, that is the percentage contribution that is expected from patients.
So, there’s a whole set of policies that we think would actually solve the problem and
that have some, um, level of momentum. What we don’t want to see is, you know, a bill,
frankly, the finance committee bill as it currently exists takes $130 billion out of
the industry and doesn’t solve the problem. So, we understand that we’re going to have
to make a contribution to this effort, but let’s make sure, as we work through this debate,
that we’re actually solving the problem. You know, you talk about the price control in
Medicare Part D and the finance committee bill, where there’s a penalty if a company
raises a price, um, beyond inflation, that’s essentially a rebate mechanism that creates
a rebate stream to the government. Again, we’re trying to solve that in the case of
sharing rebates with patients at the point of sale, let’s not re‑create the problem
that we’re trying to solve by creating another one. I hope that’s helpful.
>>MATT EYLES: So, the way that we look at the proposals are really through three specific
sort of prisms. The first is are patients/beneficiaries going to be better off, right? Are they going
to have lower cost‑sharing and out‑of‑pocket cap? Are they going to be made better off?
The second is are taxpayers going to be better off, right? So, is the federal government
going to spend less money, and that’s important for a number of reasons, affordability, but
also, a lot of it has a proxy then in terms of how it ties to beneficiary or consumer
premiums, right? So, the way that subsidies are structured, etc., right, if premiums are
lower, the taxpayers will pay less, and then the final, um, piece is really in terms of
making sure that pharmaceutical manufacturers are, and I welcome the comment from Steve,
making a meaningful contribution to helping to offset the cost of whatever the legislation
is. Um, we’ve said, for example, with the finance committee package, that we’re willing
to take on, you know, greater liability than what is structured under the current Part
D benefit, but there needs to be, you know, significant, maybe equal liability by pharmaceutical
manufacturers under Part D. So, those are the three areas that we’re looking through,
and when you think about the, something like the inflation penalty, I think it’s really
a reflection of, really, just a lack of, um, trust around pricing‑related practices,
um, and trying to make sure that there is ‑‑>>JULIE ROVNER: So, are you for it or against
it?>>MATT EYLES: We’re willing to live with
it, if that’s what it takes to get these other pieces done, but I think, you know, if we’re
going to get, I mean, can we do it? Is there enough time to get something big done? I don’t
know, right? I mean, I’d like to think that there’s a lot of interest, given what we’ve
heard from, you know, the Speaker’s office and what we’ve heard from the Senate and the
Administration, certainly, but, um, you know, I guess it’ll be an interesting couple of
weeks and months ahead of us.>>JULIE ROVNER: What absolutely should Congress
not do?>>MATT EYLES: What should absolutely Congress
not do? Wow. I don’t want to get on to different topics, so.
(Laughing.)>>JULIE ROVNER: I meant in the drug space.
>>MATT EYLES: Um, you know, I mean, I think, um, really, anything that would tie the hands
more of, um, plans and others who are able to negotiate lower prices, anything that would
not enhance the ability to use market‑based tools to get to lower prices, you know, should
not be included.>>JULIE ROVNER: So, I think we’ve been sort
of nibbling around this a little bit, but I promised I would ask, are there areas of
common ground, where you all agree as competing industries, um, that could address this problem?
Obviously, it is a big issue currently, and for the presidential campaign, so, obviously,
going forward.>>STEPHEN UBL: Well, we’ve touched on a few.
I do think, um, there’s good dialogue between our respective sectors on value‑based models
and how to address some of the legitimate issues that arise and the complexities that
arise in those arrangements. Um, you know, I do think, um, we have a collective role
in defending the market, the private market approach in Medicare. I mean, the irony with
the Pelosi proposal is that there already is negotiation in Medicare, um, and I remember
when Part D was introduced, I wasn’t in the sector at the time, but there were efforts,
and you’ll recall this, Julie, to hard‑wire in the statute what the premium would be.
Thank God, we didn’t do that, because guess what? The premium’s a hell of a lot lower
had it been, if they’d done that, and the reason is because it’s a competitive model
that’s worked. You know, premiums are down, but patient satisfaction is up, the average
discount or rebate between our respective members is around 30 percent, and, so, you
know, I hope there’s room for us to work together to defend the competitive marketplace. A couple
areas we haven’t touched on, which I also think are fruitful ground, as I’m sure that
Matt would agree that provider consolidation, hospital markups, there are other things in
the system, um, that increase both patient costs, as well as system costs, where I think
there’s probably common ground.>>MATT EYLES: I would agree on those points.
Yeah.>>JULIE ROVNER: Anything else?
>>MATT EYLES: Um, I think Steve touched on the, we talked about an out‑of‑pocket,
you know, limit, if it’s structured the right way, I think protecting patients, um, and
the value‑based, you know, um, contracting arrangements, advancing them or eliminating
barriers that exist to them, whether it be the, you know, the best price or other, um,
issues that sort of limit, um, the ability of those to move forward, I think would be
ways that we would definitely agree. I think it’s really important to focus on, right,
on when we have a competitive market and when we don’t in certain instances, and that’s,
I think, the, when we are, when we have, um, competition, it works well, when we don’t
have competition, I think those are the types of areas that we need to make sure that we
address, and advancing things like, you know, biosimilars and other ways to create additional,
um, sort of head room within the system that we have today.
>>JULIE ROVNER: I have one more question, and then we’re going to turn it over to the
audience for their questions, and it’s actually about quality, um, literal quality. Hospital
drug buyers have told colleagues they wish there was more transparency about where drugs
are made, so that they can buy drugs made at facilities with the best inspection records.
Um, does AHIP have a position on this sort of, um, quality transparency? And how could
PRMA help solve this problem?>>MATT EYLES: Um, no, we haven’t really focused
on that. I think, generally, our perspective has been if drugs are manufactured in FDA
facilities, FDA‑approved facilities, then they should be of adequate quality, but we
haven’t really focused specifically on that.>>STEPHEN UBL: Yeah, I mean, our space is
a heavily regulated space, and to my knowledge, there isn’t a quality issue within at least
the branded side.>>JULIE ROVNER: I would say, yeah, it’s more
on the generic side, but there have been some ‑‑>>MATT EYLES: Where’s Chip?
(Laughing.)>>STEPHEN UBL: Yeah, you know, I do think
it, um, it does point to concerns that we have, um, with, um, importation schemes. You
know, I think policymakers have taken great, um, strides, you know, to protect the U.S.
drug supply and, um, in recent years, have really focused on that closed system, and
importation schemes can really threaten, um, that through, um, counterfeit medicines and
so forth, and as a practical matter, it really is a work‑around. If you look at foreign
reference pricing or importation or government setting the price, there really, the derivation
of the same proposal, and, again, we think there are much better ways to, um, to address
drug costs, holistically, in a way that really reduce patient out‑of‑pocket costs.
>>MATT EYLES: Yeah, and we ever not been supportive of the importation side, I mean,
mostly, because we don’t think it’s really workable. I don’t think ‑‑
>>JULIE ROVNER: You mean the entirety of the United States can’t go to Canada and get
its drugs? (Laughing.)
>>MATT EYLES: Well, we could try, and I’m going way back now to early 2000s, when importation
was first passed and people thought it was a real threat, um, you know, manufacturers
have very sophisticated supply chain mechanisms, they know how much product, um, needs to be
delivered in Canada or the UK or others, and I don’t think that they’re really going to
supply enough to be able to come back, and, also, at a pharmacy level, right, I mean,
are you going to have the U.S. priced product, you know, on this counter and the ex‑U.S.
product on another counter, and how are you going to manage all of that? So, I mean, it’s
really about getting to a lower price.>>JULIE ROVNER: All right, we have time for
just a couple of questions. I see people already lined up. Just a reminder to use the mics,
because we are streaming, and can you make them brief? Because we’re running out of time.
>>SPEAKER: Lori Lucas with the Employee Benefit Research Institute. Um, Matt, you alluded
to this a little bit, but I wanted to ask, um, what can employers be doing, what should
their role be in all of this and, um, like, forming things like the Health Transformation
Alliance?>>MATT EYLES: So, employers, right, providing
coverage to 180 million Americans or so, right, play a critically important role. I
know that there’s been a lot of focus on ways to look at items like specialty drugs and
specialty drug spending, I think working with, um, you know, other parts of the healthcare
system, really, to advance this notion around value, right, and paying for value. Um, you
know, most employers are very sophisticated purchasers, when they’re looking at items
outside of healthcare, but some are very sophisticated in the healthcare space, and helping to move
the rest of the system to pay for value is, would, I think, be a good start.
>>STEPHEN UBL: I would agree with Matt on the direction of, um, moving towards value,
but I think we need to have a more candid conversation with employers about the nature
of insurance. You know, I made this point earlier, about how we’re evolving to a system
where, you know, the, um, instead of the healthy subsidizing the sick, it’s the reverse, and
in the employers that I’ve spoken to, who, oftentimes, meet with their PBM or plan, the
nature of the conversation goes something like this; your drug costs were X last year,
we will keep them at X, end of the conversation, and we need to have a much broader conversation
about some of the incentives in the system, that even if your drug costs are being held
harmless year over year, may be disadvantaging patients, may be disadvantaging employers,
because the patients are not adherent or, again, these changes particularly aimed at
chronic conditions, which they’re paying for in other ways.
>>JULIE ROVNER: All right. The second microphone back there.
>>SPEAKER: Dana Brown from the Democracy Collaborative. I’m wondering how you think
we can begin to work together to look at value to society as a whole rather than value to
one patient or one insurer or one employer. Um, I’m really glad that you brought up insulin,
because, for instance, the American Diabetes Association calculated in 2017 that as a
country, on a whole, we spend almost $15 billion on insulin, and diabetes costs us about $90 billion
just in reduced productivity in terms of increased incidences of disability, um, and absenteeism.
So, how do we start to look at what the value is to society as a whole of keeping people
in the workforce, in helping them manage disease in the first place, rather than treating complications
once they arise because they can’t afford their medication?
>>STEPHEN UBL: It’s a great point, and, um, again, as we think about value and the dimensions
of value, I think we do have to do a better job of capturing those, um, sort of off‑ledger
savings, if you will, both system savings, um, but economy‑wide savings. You know,
I think about things like, you know, again, my son has type I diabetes, what is the cost
of my wife having to go to school to pick our son up early, because he or she is not
feeling well? You know, time and range, you know, we have to get into a more, I think,
sophisticated conversation about value that tries to capture those off‑ledger, um, aspects
of value.>>MATT EYLES: And I think it really, I mean,
you’re talking about the holy grail of value, I think, right, in terms of trying to, um,
identify, you know, from a societal perspective, um, it’s complicated, but we have to try,
um, right? I worked for a number of different CEOs that basically have said, right, if you
don’t measure it, right, you’re never going to change behavior, so we have to make some
efforts around even starting to measure some of those things, um, that we haven’t really,
at a societal level, and figuring out how we can make things better.
>>JULIE ROVNER: Up here.>>SPEAKER: Hi. I’m a health policy reporter
with Bloomberg Law. Steve, you had talked a little bit about your thoughts on the Speaker’s
proposal, but Matt, you didn’t really address that one. Can you talk a little bit about
what you think about it?>>MATT EYLES: Yeah, you know, I don’t want
to say too much, because, to Steve’s point, the devil is in the details, right? And I
know we’ve seen some of the drafts and, you know, we think it’s important to focus on
some of the market failures that we see out there, but, I mean, until we actually see
what’s in it and is it going to apply to the entire competitive marketplace, is it going
to be Medicare‑based, I think it’s a little premature to get too far out there. I think
we’re encouraged, you know, by a lot of the concepts, but there’s so much important detail,
when we see it, we’ll definitely be ready to comment on it.
>>STEPHEN UBL: What about just in principle, the government negotiating price? I mean,
I guess I’m a little bit underwhelmed by the response.
>>MATT EYLES: And I think we want to see how it’s going to play out with respect to
areas where there is no competition, right? I think that’s, and what are the definitions
around how, you know, is it 250 drugs? How is it going to work with that? I mean, yes,
we want the competitive market to work, I will go ahead and say that is how our members
want it to work, but until we see, right, in those areas where there is no competition
and how are we going to make sure that we get some competition, you know, I don’t want
to go too far out there until we actually see what it says.
>>SPEAKER: I mean, it does say, like, it’s the 250 most expensive drugs that don’t have
two or more, um, generics, biologics, or biosimilar competitors, so it does specify that.
>>MATT EYLES: No, I know, but again, when we actually see what it looks like and how
it will impact the competitive or the commercial market versus the Medicare market and we actually
see it, I mean, I think we’re encouraged that we know we need to take on drugs that don’t
have competition, um, and that’s what we’re waiting to see, is how detailed it is.
>>STEPHEN UBL: Can I just make a point about the competition point? I mean, branded competition
is coming sooner than it ever has. I mean, again, if you look at the Hepatitis C medicines,
you know, the sky was going to fall, even though, by the way, ICER said it was cost
effective, even at the price it came out at. Not withstanding that, the reality is you
now have multiple manufacturers that came months after the initial product was on the
market, not after some period of patent exclusivity, and drove prices down by 60 percent. So,
do we need the government to set in and set price? You know, again, I would have hoped
for a more clear‑cut sort of response, that that’s not the direction we want to go.
>>JULIE ROVNER: All right, let’s sneak in one more, because we’re just about out of
time. John?>>SPEAKER: I’ve got a question for, um, both
Matt and Steve. Um, the whole discussion around value seems to focus on launch prices, but
it seems to me, if we look at it more broadly, um, benefit design is part of value, because
what is an affordable drug, if people can’t afford the co‑pay? And then, likewise, um,
a lot of the economic burden comes from year‑to‑year price increases, and that’s not usually addressed
when we talk about value, and it’s unclear to me what the case is. If we have a value
that’s corresponding to the launch price, then what justifies the continued price increases?
So, if you could just address those briefly.>>MATT EYLES: I think it’s a good question,
John. (Laughing.)
>>MATT EYLES: I mean, that’s when, I think one of our biggest problems, you know, year
after year is seeing price increases on, you know, products that have been on the market
for a very long time, you know, not to pick on one specifically, Humira, right, but we’ve
seen, year after year, and I was just looking at this, you know, earlier today, um, you
know, average price increase is 7 or 8 percent, almost 9 percent, and in one of the years
out of the last four, they pushed through two price increases that totaled about 18 percent.
So, you know, there’s not really a good, I mean, and especially in a value‑based world,
I don’t really think that there’s a good rationale for it.
>>STEPHEN UBL: Yeah, again, I feel compelled to interject that, um, again, if you look
at what’s happening on a net price basis, you know, many companies experiencing net
negative pricing, and I mentioned the data before, about 0.3 percent last year in terms
of net price increase and overall spending growing by 0.4 percent. There are, by the
way, reasons for, um, some price increases. You mentioned Humira, the reality is it’s
about nine different drugs at this point, because it’s had to go through various clinical
trials to grow, um, indications, um, and so forth, and, you know, if you look at, on the
plan side, again, you mentioned cost‑sharing, co‑pays, cost‑sharing, deductibles are
growing at about 3 to 4 X what underlying medical costs are growing at, so I think we
need to step back and look at it holistically. Look, there have been companies, you know,
I’m not going to defend every bad actor in the industry, but on balance, the competitive
marketplace, in our view, is working, and I would also point out that unlike anything
else in healthcare, medicine is the only thing where the price goes down. After the patent
expires, the price goes down by 80 percent. You know, if you want to look at by‑pass
surgery, it’s $100,000 today, it’s going to be $150,000 five years from now. You look
at Lipator, it’s pennies on the day, and not just for this generation, but for every future
generation. So, I think you have to look at it in context.
>>SPEAKER: Yeah, my main point here though is the value discussion needs to be broader
than just launch prices, and I think you have to think about benefit design, we ought to
think about year‑to‑year increases, if we’re really going to get serious about value.
>>JULIE ROVNER: And I think on that note, we’re out of time. Thank you both for coming.
This was great, and I’d love to do it again soon.
(Applause.)