Daily Archives: March 9, 2016

Coming Soon to Medicare: Drug Reimbursements linked to Patient Outcomes

Proposing sweeping changes to Medicare Part B drug reimbursement without thoughtful consideration and stakeholder input is not the right approach and puts Medicare patients who rely on these medicines at risk.” – Pharmaceutical Research and Manufacturers of America spokeswoman Allyson Funk.

Ms. Funk was responding to an announcement by the Obama administration indicating that it would pursue “value-based” pricing strategies for certain drugs covered by Medicare. This strategy would, in effect, reward manufacturers whose drugs produce better patient outcomes. The strategy has already seen some success with large pharmacy benefit managers who negotiate with drug makers for the pharmacy plans they administer, and it’s expected to expand as payers evaluate drugs competing for limited space in health plan drug formularies.

How will this be a better strategy than the status quo? Well, for much of the past century, drugs have been marketed through providers, with prescriptions driving growth. In this way, it was quite possible for new drugs that might be ineffective – or no more effective than already available medicines – to gain market share and distribution, in spite of higher costs. In the Random Spotter’s opinion, evidence-based pricing strategies in this area are long overdue.

Ms. Funk’s comments in representation of the industry sound like more of what we’ve been hearing for a long time from drug makers.  The industry bemoans the high costs of regulation and research that somehow justify astronomical prices for new drugs, even those that may not be most effective. They spend hundreds of millions of dollars annually to lobby government regulators. And, when all else fails, they frighten Grandma with threats that the medication she relies on will no longer be available to her. Theirs is a well-rehearsed playbook whose success is irrefutable.

And, yet, this is a difficult issue for the Random Spotter. I’m not one who supports a Robin Hood approach, in spite of the immense profitability of this segment. The fact that drugs are profitable is not necessarily a reason to interfere here. I am, after all, a believer in free markets and a staunch supporter of limited government regulation and capitalist principles. So, who am I to question the profit-maximizing behaviors of organizations that answer to their profit-seeking shareholders?

The answer is that I am a flawed, principled individual. I try to examine myself, my actions, and my values frequently. And, I think that’s the right way to live. I also don’t whine about my woeful circumstances while secretly benefiting handsomely from the illusion I help to sustain. That’s pharma, and that sickens me. I’m not saying that my values rule here. I’m only saying that, in the long run, people should matter more than profits, and truth should trump lies.

Sure, regulation sucks. I’d definitely rather see free forces address these problems. But, in the absence of values driven transformation, regulation will prevail. The sweeping changes cited by Ms. Funk are coming to Medicare Part B and the broader insurance marketplace because they are in the best interests of patients and payers. She and her colleagues would do well to limit their distorted posturing and to escalate their cooperation.