Study finds weak results for outcomes-based drug contracts

There is no evidence that outcomes-based pharmaceutical contracts lead to less spending or higher quality health care, according to a study conducted by the Commonwealth Fund. The limited impact of outcomes-based reimbursement may be due to the fact that the reimbursement model is only used for a small subset of drugs which offers limited metrics to evaluate the model’s effectiveness. The Commonwealth Fund suggested that voluntary testing and more rigorous evaluation could lead to better understanding of outcomes-based pharmaceutical reimbursement.

Outcomes-based

Following the trend towards value-based reimbursement in health care, some pharmaceutical manufacturers and private payers have made a push towards an outcomes-based pricing model in the prescription drug market. Outcomes-based models attach rebates and discounts to the health care outcomes observed in the patients who receive certain drugs. The purported goal of such arrangements is to improve the value of pharmaceutical-based care by paying more for drugs that work and less for drugs that do not. The reimbursement model appeals to manufacturers and payers as a means to increase the scope of formularies and coverage while reducing prices.

Restrictions

The outcomes-based model is limited by the fact that the model cannot apply to pharmaceuticals that do not have reliable outcomes measurements. Additionally, the outcomes measurements that do exist typically rely on claims data and exclude significant clinical outcomes. In other words, the outcomes-based contracts may not lead to optimized value because the actionable outcomes are limited to those that can be measured. Thus, while outcomes-based pharmaceutical reimbursement has the potential to increase the value of pharmaceutical treatments, greater evaluation of the model’s effectiveness and implementation is necessary to determine its true benefit.

Continuous improvement in compliance can proceed systematically

Provider organizations should not dread continuous improvement in compliance and can apply several techniques to simple problems to bring about simple solutions. In a Health Care Compliance Association (HCCA) webinar entitled “Continuous Improvement in Compliance,” presenter Alan Wileman, Corporate Compliance Manager at Shriners Hospitals for Children, discussed applying principles from Lean and Six Sigma to improve function and eliminate waste in company functioning.

Improvement methodologies

Wileman noted that compliance goals evolve, and that the OIG uses subjective terms for compliance matters such as “reasonable,” “appropriate,” and “meaningful.” What is meaningful or reasonable for one compliance area may not be sufficient for another area or at a later date. Overall, lowering risk is the focus of many compliance tasks, but there may be better ways to bring about that desired result.

Improvement methodologies such as Lean, Six Sigma, and project management have been proven to streamline procedures, eliminate waste, and bring value. Lean ideas and practices originally derived from industrial manufacturing, and have one main purpose: eliminating waste. Six Sigma is often grouped with Lean concepts, and focuses on eliminating error waste by removing variation in procedures. According to Six Sigma, there may be multiple ways to do the same thing, but there is always a best way to do so that reduces variation. Project management focuses on clearly defined terms, roles, and goals in order to successfully complete a project—a non-routine operation with a definite beginning, end, and goal.

Waste

According to Wileman, there are several types of waste. Among those discussed included talent, inventory, waiting, defects, and motion. Compliance departments should ensure that a particular task is being completed by the employee whose strengths play to that area. Motion waste comes from requiring employees to move around the work area too much in unnecessary ways, when communication could effectively be conducted in a non-face-to-face manner or when a workplace could be reorganized to provide a better workflow.

Toolkit

Reorganization also applies to employees’ personal workspaces, which should be uncluttered and only contain the necessary, crucial supplies. Wileman suggests adding the “5S” strategy to an operation’s compliance toolkit. The five elements are: sort, set in order, shine, standardize, and sustain. These elements ensure that a workspace is stocked as necessary, arranged to promote efficiency, neat, organized consistently with other spaces, and sustained in this manner. For tasks, the “DMAIC” acronym is made up of the elements define, measure, analyze, improve, and control. Once a problem is clearly defined, it is easier to map out the process, identify the cause of the problem, implement the solution, and maintain the solution over time.

Prescription drug spending in U.S. among highest worldwide

Prescription drug spending in the United States exceeds spending in nine other high income countries, with generic drugs comprising 84 percent of the total pharmaceutical market. Besides the U.S., a Commonwealth Fund issue brief looked at prescription drug spending in Australia, Canada, France, Germany, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom.

Prescription drug spending in U.S. increases in 1990s

According to the Commonwealth Fund review, spending on prescriptions drugs increased substantially in the mid-1990s due largely to the growth of the pharmaceutical industry. For instance, FDA approved drugs were at an all-time high and sales of cancer drugs increased. Additionally, drug spending increased due to the expansion of federal programs such as the Children’s Health Insurance Program, Medicaid, and Medicare.

Prescription drug spending increased by 20 percent over a period of two years during the mid-2000s. The growth was primarily due to introducing many expensive specialty drugs to treat hepatitis C, cystic fibrosis and other conditions. Passage of the Affordable Care Act likely led to such increases as well. U.S. spending on pharmaceuticals surpassed $1,000 per person in 2015 and was 30 percent to 190 percent higher than in the nine other countries. The next countries, behind the U.S., in spending in 2015 were Switzerland with $783, Germany with $686, and Canada with $669.

Reasons U.S. spending on prescription drugs is so high

The Commonwealth Fund offered possible reasons to explain why the U.S. spends so much on prescription drugs, including country population and volume of drugs consumed, drug utilization per person, type and mix of drugs consumed (e.g., generics versus brand-name drugs), and prices at which drugs are sold.

Although the U.S. population is ranked among the largest and has the highest prescription drug spending as a country, spending per capita remains much higher in the U.S. than that of other countries. Higher per person spending is not due to the large population of the U.S., however.

The impact of generic prescription drugs

Generic drugs make up 84 percent of the total U.S. pharmaceutical market, which is a larger share than in all other countries, excluding the U.K., which is tied with the U.S. with 84 percent. Followed by the U.S. are Germany with 81 percent, Netherlands with 71 percent and Canada with 70 percent of the share of generic prescription drugs. Lower prescription drug prices in the other countries reflect more centralized processes for obtaining pharmaceuticals and setting coverage.

Conclusion. Price continues to play a primary factor in the high prices associated with prescription drugs in the U.S. The reasons can be attributed to the fragmented nature of health care delivery and payment, as well as separate negotiation arrangements between drug manufacturers and payers and complicated arrangements for federal and state health programs. Also, the U.S., unlike other countries, allows for greater latitude for monopoly pricing of brand name drugs.

Kusserow on Compliance: Trustees forecast Medicare hospital trust fund solvent until 2029

The hospital trust fund forecast for Medicare’s hospital insurance trust fund found improvement in the past year due to health costs rising more slowly than expected and predictions that enrollees will use hospital services less often. The trust fund would last through 2029, one year later than what was projected last year. As in past years, the Trustees have determined that the fund is not adequately financed over the next 10 years. They projected modest surpluses to continue in 2017 through 2022, with a return to deficits thereafter until the trust fund becomes depleted in 2029. HHS Secretary Tom Price, one of four Medicare trustees, also said the hospital trust fund forecast was secure enough that it would not trigger a Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) provision to make automatic cuts to the program. Those cuts are required by the ACA when spending is expected to exceed certain benchmarks. Despite the slightly improved outlook, the trustees warned that the aging of the baby boom population and rising health care costs will cause Medicare expenses to increase and deplete the trust funds.

The report noted that in 2016, Medicare covered 56.8 million people. About one third of these beneficiaries have chosen to enroll in Part C private health plans that contract with Medicare to provide Part A and Part B health services. Total expenditures in 2016 were $678.7 billion, and total income was $710.2 billion, which consisted of $700.4 billion in non-interest income and $9.8 billion in interest earnings. Assets held in special issue U.S. Treasury securities increased by $31.5 billion to $294.7 billion


Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of
Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC
, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2017 Strategic Management Services, LLC. Published with permission.