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Top 8 drug pricing disruptors going into 2019

Pitfalls and opportunities in the commercial healthcare market.

As the managed care market pursues vertical integration and diversification, DRG sees disruptive change ahead for the U.S. healthcare system. Scroll through the infographic below to learn more about 8 drug pricing disruptors we could see in 2019.

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Regulatory
instability

Having failed to overturn the ACA, the Trump administration’s moves to undermine it—and its proposed reforms to lower pharmacy prices—make longer-term planning risky.

  • a. Elimination of individual mandate penalties is expected to result in 3 million more uninsured in 2019.
  • b. Multiple Employer Welfare Arrangements cherry-pick the healthiest groups, leaving the regulated small-group market with a sicker risk pool.

New low-cost
plans available
for 2019

New cheaper health plans are on the market for employer groups and individuals—but buyers beware: coverage gaps can leave patients vulnerable. And these plans could draw healthy folks out of the market—raising prices for everyone else.

  • a. State-regulated “short-term” plans are medically underwritten—priced according to health status—and do not cover any pre-existing medical conditions.
  • b. Coverage limits and exclusions are common—including in-hospital care and prescription drugs—making the plans unreliable even as catastrophic coverage.
  • c. The plans are likely to attract healthy individuals who do not qualify for federal ACA subsidies. The exit of healthy members could unbalance a largely stable ACA market.
  • d. Consumers will find out too late that their plan excludes or sharply limits certain benefits.
  • e. Five states (NY, NJ, VT, MA, RI) do not currently license these plans, with other regulators assessing their impact.

Insurer-PBM
mergers

Are you ready for your clinic, your pharmacy and your health insurance to come from the same company? Cash-rich insurers and PBMs are pairing off through mergers to create better vertical integration and control over costs.

  • a. Overall cost-effectiveness
    • i. The insurer/PBM will promote pharmaceutical choices that are cost-effective overall rather than one that maximizes the drug invoice amount or the rebate amount.
    • ii. A drug that reduces hospital admissions and saves total health expenditures is more likely to be chosen and enjoy top formulary placement.
  • b. No bargaining friction
    • i. With no bargaining friction between the insurer and PBM, there’s one less layer of margin for the ultimate purchaser to pay.
    • ii. Carrier/PBMs can more easily document receipt of manufacturer rebates and offer a transparent credit toward payers’ premium cost or offer point-of-sale rebates to members.
  • c. Easier contracting
    • i. An integrated health plan/PBM may be more able to arrange capitation/bundled payment arrangements with providers and offer better clinical support.
    • ii. Combinations could more easily adopt indication-based pricing and outcomes-based contracts with pharmaceutical manufacturers.

Consumer-
focused
technology

Virtual healthcare can be as close as your Fitbit, your Apple watch, your phone, or a quick stop at the pharmacy—and it’s cheap. But is it good?

  • a. The NBGH 2019 Large Employer Survey found that virtual care, including telemedicine, showed the greatest growth.

Largest
employers
explore new
options

Big employers from Amazon to Walmart are exploring new ways to deliver healthcare to workers.

  • a. The nation’s largest employers are more willing to contract directly with providers to tame health costs, by passing traditional insurer-controlled managed care solutions.
  • b. The NBGH 2019 Large Employer Survey found fewer large employers offering only HDHP plans in 2019 (30%, down from 39% in 2018) and greater use of direct contracts with providers, onsite/near-site health clinics, and plans that use ACOs and HPNs.

Carriers push
providers
toward
downside risk

Doctors and hospitals are happy to get bonuses for practicing high-quality, cost-effective medicine—but are balking at insurers’ demands to share downside risk.

Employers find
downside in high
deductibles

New cheaper health plans are on the market for employer groups and individuals—but buyers beware: coverage gaps can leave patients vulnerable. And these plans could draw healthy folks out of the market—raising prices for everyone else.

Employer anger
over drug prices

Spiraling drug prices have stoked employer and consumer anger, and PBMs, drug manufacturers and insurers are deflecting blame for the opaque pricing system that fuels their profits.

  • a. Under pressure from major employers, Congress and the Trump administration are giving voice to payers’ frustration with ever-rising drug costs, the opaque pharmacy supply chain, its rebate-driven pricing system, and inflated list prices. With pharmaceutical rebates accounting for an estimated 30 percent to 35 percent of brand pharmacy spending, the system obscures true cost.

Leverage a big-picture view of national insurers’ corporate strategies, key markets and plan designs and gain forward-looking analysis so you can anticipate future changes and challenges.

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