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Avalere Health | An Inovalon Company
202.207.1300
Page 1
Policy Change /
Election Impact on Coverage
Drug Pricing Policy
Access to Care /
Commercial Benefit Design
Biosimilar Competition
Digital Health
A focus on the consumer is also a major facet of the environment that deserves attention. Digital health
technology will increasingly place the consumer at the center of decision making and change the way
patients access healthcare offering potential for engagement and strategic positioning. At the same
time, lower-cost insurance benefit designs (pioneered in exchange markets) with higher out-of-pocket
costs, more limited access to drugs, and narrower provider networks will continue to spread.
As you navigate this new environment, we look forward to working with you to leverage
Avaleres unique insights and data to devise creative solutions.
Page 2
Page 3
Expert
Perspective
Impact
Health Plans /
ACA repeal will create broad disruption in the
individual market, and health plans will need to
redesign products to compete under new market
rules. In Medicaid, managed care is widely used
in most states, and health plans may experience
downward pressure on their payments from states
if block grants or other caps are implemented.
Providers /
Providers, particularly hospitals, have benefited
from ACA coverage expansions with a reduction
in uncompensated care and higher treatment
volumes. Changes in coverage or payment
rates without corresponding reductions in ACA
payment cuts could pose significant risk.
Consumers /
The majority of Americans receive care via
employer coverage, which is largely unaffected
by the ACA. Those currently enrolled in
exchanges or Medicaid may experience a
significant impact, though changes are unlikely
to take effect before 2019.
Caroline Pearson
Page 4
Page 5
Expert
Perspective
Q: Are there persistent risks for drug makers in this policy environment?
A: Congress and the new administration may feel pressure to act on drug prices in
2017, but they are likely to gravitate toward policies that promote competition, such as
accelerating drug approvals for therapeutic areas with limited treatment options. As the
year progresses, lawmakers may need pay-fors to achieve other policy goals without
increasing the deficit, and could look to the biopharmaceutical sector as a source of
offsets. Finally, state action on transparency is likely to continue.
Q: How are companies voluntarily addressing concerns over prices?
A: Pharmaceutical companies are organizing internally to align with a value strategy that
will guide everything from government affairs engagement to go/no-go decisions about
product. For some products, they are also rethinking rebate arrangements with health
plans to pursue outcomes-based contracts. A few companies have released public
statements including commitments to limit price growth to single digits.
Q: What should companies do now to position for the future?
A: The election focus on drug prices was driven by public concern. That scrutiny will not
go away, and industry should use the opportunity to propose meaningful solutions that
support long-term innovation.
Impact
Manufacturers /
Drug companies need to continue preparing
to defend against offsets and state-level
transparency initiatives that could harm product
development and profitability. Companies may
want to recommend reasoned policies supporting
transparency, outcomes-based contracts, and
improvements to FDA approval processes.
Health Plans /
Health plans continue to focus on managing
costs, including drug spending, particularly
as the specialty drug pipeline is anticipated
to grow. Payers are beginning to engage in
various strategies, including outcomes-based
contracting, and may support policies that
allow deeper rebates and encourage more price
transparency in the market.
Consumers /
Consumers will continue to be exposed to drug
costs, particularly if benefit designs become
less generous as part of ACA reforms. This will
continue to put pressure on health plans and
manufacturers.
Elizabeth Carpenter
Page 6
Page 7
Expert
Perspective
Q: How much impact have early value-based models had on cost?
A: Although we have seen relatively modest overall impact of the new APMs in terms of
bending the cost curve, those results mask variation across providers. We are actually
seeing a big impact for those providers that are prepared to bear risk and a small impact
for those playing catch up.
Q: What tools do providers need as they prepare to face more APMs?
A: New ACO service providers are emerging to support providers with a combination of
technology, data infrastructure, and ancillary care management services. These entities
help fill existing gaps in provider capabilities, including data reporting internally via
performance dashboards and externally to payers.
Q: How are providers using data to inform care delivery?
A: They are focused on using data to identify high-risk patients, determine individual
care needs, and deliver services differently. Those data capabilities can also extend
human resources via care management support services aligned to varying levels of
patient need.
Impact
Providers /
Value-based payment shifts responsibility for
cost management and quality improvement
to providers, which must change the way they
deliver care to improve results. Providers will
increasingly seek support from third-party
vendors to supply real-time data and strategies
that improve care delivery.
Health Plans /
Adoption of value-based purchasing in public
programs reinforces similar activities being
pursued by private health plans and can effect
greater change in provider behavior. However, the
proliferation of discrete value-based payments
with different incentives and quality measures
brings the risk of creating provider confusion.
Consumers /
Consumers will need to evaluate how patient
priorities are measured and rewarded in
value-based payments, including whether the
outcomes used as a basis for provider payment
are meaningful to patients.
Josh Seidman
Page 8
QCDR Approach
Page 9
Expert
Perspective
Impact
Providers /
The administrative burden of quality measure
reporting is a concern for providers. However,
QCDRs are becoming a preferred reporting option
in the short run, as they give providers greater
flexibility to report on measures that may be more
relevant to their practices. Still, the proliferation
of measures without harmonization may create
an overwhelming reporting burden for providers
as well as for the federal government, which
will need to aggregate the data to determine
benchmarks.
Consumers /
Consumers can benefit from the development
of more measures that increasingly focus on
outcomes rather than process particularly
measures that address priority areas, such as
functional status, quality of life, and shared
decision making.
Manufacturers /
Quality measures can impact a products uptake
and utilization. QCDRs shift power to specialty
societies to define quality and determine whether
and how the use of drugs and devices is included
in the measures.
Kristi Mitchell
Page 10
LTACH:
Long-Term Acute
Care Hospital
IRF:
Inpatient
Rehabilitation
Facility
SNF:
Skilled Nursing
Facility
No PAC:
Post-Acute Care
Page 11
Expert
Perspective
Impact
Providers /
Hospitals will look to collaborate with postacute care providers that can help them manage
changes in payment policies at a low cost while
delivering the best outcomes. By investing in
wraparound care management services that
reduce readmissions, post-acute care providers
can make themselves effective partners to
hospitals participating in bundled payment
programs.
Consumers /
Matching patients to the optimal level of care
after hospital discharge can help minimize
complications and provide the necessary level of
supportive services. In some cases, discharging
patients to the home, rather than an institutional
setting, may be a more appropriate option.
Health Plans /
Payers increasingly understand that by actively
managing post-acute care and discharge
decisions, they can reduce costs while
maintaining or improving quality.
Erica Breese
Page 12
Page 13
Expert
Perspective
Impact
Manufacturers /
Outcomes-based contracts give manufacturers
the opportunity to engage health plans with
a real-world, data-driven approach toward
reimbursement that ties the drug price to product
performance and improved results for patients.
Health Plans /
Health plans report that many outcomes-based
contracts have not yet produced significant
financial savings. Even if the contracts do not
meet their economic goals in a first iteration,
many health plans view them as a bridge
for more constructive engagement with
manufacturers on cost containment, effective
care, and joint accountability for the achievement
of the best possible outcomes for patients.
Providers & Consumers /
Many contracts include additional support for
providers to identify patient populations who will
benefit the most from treatment as well as tools
to help increase compliance and adherence to
treatment plans.
Kathy Hughes
Page 14
Stakeholders Recommend
Refinements to Value Frameworks
Across each of the value frameworks, stakeholders have recommended
improvements that seek to address perceived gaps to the traditional approach.
Page 15
Expert
Perspective
Q: Do you anticipate that winners and losers will emerge among the
multiple value frameworks?
A: Yes, a main determinant of the winners and losers will be the extent to which the
frameworks are adopted by the public sector. While ICER has made inroads here,
provider efforts should not be underestimated. Its a short road to adding a value element
to what they are doing today. I can envision different winners emerging for different
disease categories.
Q: How do you see responses to value frameworks shifting?
A: Anecdotally, payers welcome the movement, but they have yet to embrace any
single value framework and we dont see that changing dramatically. But I do see
manufacturers looking more critically at the data they have and the statements they
make in relation to the value of their products.
Q: How do you expect value frameworks to evolve?
A: There will be greater focus on reducing barriers to patients being able to participate
in these efforts and on integrating patient-desired outcomes. Avaleres collaboration
with FasterCures to develop a Patient-Perspective Value Framework is illustrative of the
evolution toward greater patient involvement in how value is defined. I also think there is
room for better integration into the broader, health-system-wide approach to value.
Impact
Manufacturers /
Manufacturers risk having less control over
how the value of their products is defined.
Manufacturers will need to embrace a holistic,
organizational approach to defining and
articulating the value of their products and
developing the supporting data.
Health Plans /
Health plans already have well-established
systems for assessing product value for the
purpose of coverage and contracting decisions.
The frameworks may influence payer coverage
decisions, but they are not likely to replace
existing health plan processes.
Consumers /
Patients have criticized early value frameworks for
excluding patient-generated data and the patient
voice within the assessment process. Those
developing the next generation of frameworks
seek to address this criticism.
Claire Sheahan
Page 16
Page 17
Expert
Perspective
Q: How do employee needs change in response to evolving benefits?
A: As consumers are increasingly responsible for picking health plans that best meet
their needs, they will demand better shopping tools that enable them to estimate their
out-of-pocket costs under various coverage options. They also need data on provider
costs and quality to guide where they seek care as well as clinical support tools that
can inform decisions about appropriate use of healthcare services.
Q: How are drug benefits changing specifically?
A: Like other payers, in response to specialty drug costs, employers have become
more aggressive in managing pharmacy benefits, including creating specialty tiers,
increasing the use of coinsurance and drug deductibles, and adding prior authorization
requirements.
Q: How do policy changes impact the generosity of employer benefits?
A: The Cadillac tax would have imposed penalties on very generous plans, resulting in
a reduction of benefits. While the Cadillac tax may be repealed along with other parts
of the ACA, proposals to modify the tax exemption for employer benefits would have a
similar impact on generosity of coverage. Regardless of policy changes, employers will
continue to evolve benefits in response to cost pressure.
Impact
Consumers /
Changes in employer benefits will impact most
consumers, since employers are the primary
source of coverage in the U.S. Employees
should expect to pay for a growing portion of
their healthcare out of pocket and may want to
be more active in choosing when and where
to seek care.
Health Plans /
Health plans will begin to use the narrower
networks and formularies they developed for the
exchanges. Employers will expect health plans
to demonstrate how cost savings and quality
improvement can be achieved under these more
efficient products.
Manufacturers /
Drug benefits are rapidly narrowing in employer
health plans, which may limit patient access and
reduce medication adherence. Manufacturers
will need to consider a range of strategies
to position for success, including innovative
contracting approaches and potentially increased
patient assistance.
Kelly Brantley
Page 18
Page 19
Expert
Perspective
Q: What changes are needed to expand biosimilar access for patients?
A: For products to achieve market share, payers must respond to the launch of biosimilars
with coverage decisions and formulary placement that promote access to these products
and align financial incentives for use with providers and patients. Physicians need broad
education about the regulatory and scientific basis for biosimilar approval to make them
comfortable with prescribing biosimilars. FDA also plays a role in reviewing applications in
a timely manner and processing the approval backlog for biosimilar candidates, especially
those with action dates that are a year past due. Lastly, ongoing patent litigation threatens
to delay several product launches indefinitely.
Q: Will biosimilars actually reduce healthcare costs?
A: With only one entrant established in the marketplace, the current savings will be
modest. Greater potential for savings will exist when multiple biosimilars for the same
product or class begin competing with one another. Innovator products may also
reduce prices in response to biosimilar launches. Over time, payers may become more
aggressive in preferring some biosimilars over innovator products. Meanwhile, growing
real-world experience with biosimilars from Europe may further assure patients and
providers about the safety and efficacy of biosimilars.
Impact
Manufacturers /
Manufacturers should prepare for more
challenging negotiations as competition
increases and health plans look for deeper price
concessions in exchange for coverage in classes
with biosimilar competition. Some health plans
are likely to broaden access by covering all
products, while others may be more apt to prefer
a subset of products.
Health Plans /
Biosimilars give health plans negotiating leverage
with manufacturers of innovator products and
could offer a way to moderate drug spending
while increasing access.
Providers & Consumers /
Providers should monitor coverage changes
for biologics and biosimilars. Providers may be
more likely to start new patients on a biosimilar
rather than switching patients who are already
using the innovator product. Consumers may
not experience any reduction in costs from
biosimilars, depending on their benefits, and
some Medicare beneficiaries stand to pay more.
Page 20
Innovations like web-based coaching, cloud-based selfmanagement programs, real-time monitoring, and online urgent
care clinics are transforming how care is delivered and how
patients engage with the healthcare system. In a period of
continued cost and reimbursement pressures, organizations that
effectively incorporate digital health into their approach to care
will be able to drive margin expansion and improve patient care.
Page 21
Expert
Perspective
Q: How is digital health changing how healthcare organizations operate?
A: Digital health is disrupting traditional business models. Companies are implementing
broad organizational changes that embrace innovation with solutions that begin outside
the traditional healthcare environment.
Q: In which areas do you see innovation focusing in the future?
A: Healthcare organizations need patients to view them as trusted partners. They must
be responsive to patients desires to have more control over their own care and in a
way that is convenient for them. Technological innovations will also focus on supporting
team-based care, expanding traditional definitions of a care team, and advancing
cross-organizational learning and coordination at the provider level.
Q: What are some of the barriers to the adoption of digital health tools?
A: Digital health tools must be built based on a strong understanding of the end
users needs; otherwise, they will not be successful. To date, lack of financial
incentives for providers to use digital health tools has been an obstacle to more
widespread adoption. As we align the consumer need with payers and providers,
engagement will continue to rise.
Impact
Consumers /
Digital health tools put patients in the drivers
seat. Innovators in digital health will look to
patients to gain a stronger understanding of their
needs and pain points to develop solutions that
are engaging and sustainable.
Providers /
Health systems must define themselves beyond
the clinical services provided; they must take on
a new view of services and products that engage
patients early and maintain that connection
following a more traditional visit or hospital stay.
Health Plans & Manufacturers /
Digital health offers mechanisms to activate
individuals apart from their clinical events and
engage patients in new environments. This
creates opportunities to improve care via better
medication adherence and ongoing health
management in a lower-cost, more efficient
mode of delivery.
Katherine Steinberg
Page 22
About Us
Avalere is a vibrant community of innovative thinkers dedicated to solving the
challenges of the healthcare system. We deliver a comprehensive perspective,
compelling substance, and creative solutions to help you make better business
decisions. As an Inovalon company, we prize insights and strategies driven
by robust data to achieve meaningful results. For more information, please
contact info@avalere.com.
Avalere Health
An Inovalon Company
1350 Connecticut Ave., NW
Suite 900
Washington, DC 20036
202.207.1300 | Fax 202.467.4455
avalere.com