Post Midterm Flashcards
1
Q
What is Aledade’s model based on?
A
Focusing on preventative services, improved comprehensive primary care to reduce costs.
Came from the insight that 1 ACO = 100 PCPs who each have 2,000 patients who cost $5,000 per pt per year = massive money if they all buy in for savings.
1. Get Drs to buy in
2. Get payers (accountability for reduced costs, creates incentives)
3. Get savings
4. Get efficiency
2
Q
Explain the hypertension example.
A
Controlling hypertension is the best candidate to reduce mortality.
More profitable for hospitals to wait to control b/c more strokes are incentivized b/c that means more $$.
Need to incentivize earlier preventative care.
3
Q
What does Aledade use to get savings that the quality metrics of CMS don’t capture?
A
- Access to primary care = telemedicine, scheduler as gatekeeper
- Point of Care = does the Dr know your history/potential health risks/what specialists you’re saying?
- Care compass = someone with very complex health issues or making end-of-life decisions may be out of the PCP’s scope
- TCM (transitional care management) = if a patient goes to the ER will the PCP/other providers have tools/time/workflow to call them and assist in transition/check in?
4
Q
Has Aledade seen savings?
A
10-12% savings, working with CMS in the MSSP.
Looking at possible 15% savings for the most successful groups.
5
Q
How do primary care decisions impact downstream care?
A
Primary care doctors impact referrals, imaging, procedures.
Providers often don’t think they’re responsible for controlling costs.
6
Q
What is the burden of sickness like in the US?
A
Life expectancy is stalling, the burden of sickness is unevenly distributed due to socioeconomic factors.
Health policies need to address factors outside of the medical system that affect health.
7
Q
How are structural changes in the economy affecting life expectancy?
A
3 factors driving the declining life expectancy:
- Worse circumstances for low income individuals (wage stagnation, increased inflation)
- Decrease in job opportunities
- Driven by automation, foreign trade, de-unionization
- Manufacturing decline - as plants close see a large increase in opioid deaths mostly among ppl w/ low education
- Unions - increases in unions = wage bump = better economic outcomes and lower mortality risks - Social safety net can’t support everyone
8
Q
What are a few policy responses to boost health?
A
- Welfare not relying on employment status but instead poverty status
- Increasing minimum wage and uninsured benefits
- New age job retraining to deal with autonomation
- Environmental regulation
- Educational investments throughout the life cycle
9
Q
What is Medicare Advantage? What does it cover?
A
Privately insured medicare, covers Part A+B+benefits and normally D with NO ADDITIONAL PREMIUMS.
Insurance companies contract w/ Medicare and receive payments PER PATIENT.
MA plans have narrower provider network and higher cost sharing but more additional benefits, like vision/dental/etc.
10
Q
Is enrollment in MA decreasing or increasing?
A
Increasing, people like the additional benefits it offers with the $0 premiums.
11
Q
What are a few financing problems the US is facing w/ the aging population?
A
Increasing beneficiaries for Medicare w/ increased volume/intensity of services for these beneficiaries = Medicare spending growth.
Spending on drugs increasing because of the increased average price for drugs.
12
Q
What is MedPAC and what is its role?
A
MedPAC is a nonpartisan congressional agency that advises Congress and CMS on issues affecting Medicare.
- Has obligation to Medicare program
- Influences CMS through “threat of action” where CMS comes to MedPAC with an idea, MedPAC advises = MedPAC shaping executive policy
- House Ways & Means, House Energy & Commerce, Senate Finance
13
Q
What are several key impacts due to MedPAC proposals (2)?
A
The inflation reduction act (2022) and the consolidated appropriations act (2021).
14
Q
Explain the Inflation Reduction Act.
A
Explain the Inflation Reduction Act.
Restructured Medicare pt D so that plans take on increased insurance risk above the out-of-pocket threshold limit. Shifts the weight from beneficiaries to drug manufacturers, the ultimate goal is to reduce the cost of expensive drugs.
MA ptD beneficiaries will save with the IRA.
15
Q
Explain the Consolidated Appropriations Act.
A
New designation for rural emergency hospitals to be critical access hospitals. There have been declining admissions at CAHs and they bill Medicare based on their costs, even if there’s a small number of patients.
MedPAC recommended these hospitals should act as outpatient only, paid on outpatient per service with a fixed subsidy for their operating costs.
Rural Emergency Hospital = critical access hospital w/ <50 beds
CAHs that become REHs can’t go back.
16
Q
Have high deductible plans increased or decreased in enrollment? Why?
A
HDHPs have lower premium costs but very high deductibles, so adults enrolled in them are more likely to delay care due to the cost.
They’re increasing but this is employment based - directly purchased HDHP haven’t changed that much.
17
Q
Which are the dominant employer plans?
A
PPOs are the dominant employer plans at 49%, and also have the highest premiums.
Larger firms can pay for HC through funds not insurance, smaller firms combine plans with stop-loss plans (re-insurance).
18
Q
What are the 4 different types of payers?
A
- Nationals = for-profit, many lines of business, often contract with large employers
- Blues/Regionals = not-for profit, local density
- Local Players = for profit and not for profit, strong local density and community ties
- Specialty = usually not for profit with geographic breadth, focuses on care management for specific populations (ex. Military, Medicaid).
19
Q
What is the difference between fully and self insured?
A
Self-insured is when the EMPLOYER bears the risk (ex. re-insurance) and the insurer is contracted for administrative services only.
Fully-insured is when the insurance company/PAYER accepts full risk and management of care costs, usually for smaller employers that can’t take on the risk.
20
Q
What are the trends involving payers and consolidation?
A
Payers are more for-profit and are consolidating both horizontally (buying up other companies) and vertically (buying through value chain, not just insurance companies).
LESS regulatory scrutiny for provider consolidations, MORE for payer consolidations.
- If providers consolidate that means they have more negotiating power w the payer and this affects the payer’s profits.
21
Q
What are private equity trends?
A
Private equity interest is growing and they are buying up doctor contracts/nursing homes/etc most commonly in the south.
PE buy-outs have corresponded with decreased quality of care.
22
Q
How is MA enrollment changing?
A
Grown by 8% since 2014.
23
Q
How did the government allow for Medicaid changes during COVID?
A
They allowed for expanded Medicaid enrollment so HUGE increases, but states now going through and disenrolling people.
Disenrollment = ACA exchange plan enrollment at an all time high.
24
Q
What is driving the transition to EHRs? What are the status quo problems?
A
Need to limit medical errors and increase healthcare quality.
Status quo had a lot of missing results/lost records or missing problems/history.
25
What are concerns associated with AI application in HC?
AI has biases, particularly towards certain races/genders. There’s a fear AI may incorrectly label patients or ignore disease, false positives or negatives.
There is a concern about privacy norms and the lack of transparency in AI training and whether the information collected goes to a dataset. It’s hard to explain why certain things are suggested by AI - correlation not causation.
26
What’s a promising example of digital involvement?
Targeted automatic e-consults (TACo) works combat the resource intensive consult where physician referral triggers a specialist consult - not very efficient.
So identifies patients automatically via the EHR for common conditions that are straightforward for virtual consultation - this is triggered by objective data. Should be started w/ clinicians on limited # of services, then should get feedback and scale up the practice.
27
What’s the HITECH Act of 2009?
Promote the adoption and meaningful use of technology in health information. Really emphasized the value of the EHR and improved the use of + access to patient EHRs.
28
What is precision medicine? Give an example of this.
Precision medicine is tailoring care to an individual’s history, behavior, lifestyle, environment, genetics. Involves converting notes to computable data, combining with individual specific data and using AI to include future risks and recommendations.
PREDICT looked at a drug and flagged the patients who may need it, then they were genotyped to see if it would work for them! When they needed the drug it had already been determined whether they could have it - this avoids all barriers with starting a new drug.
29
Does tech contribute to clinician burnout?
Tech increases clinician burnout - think “click fatigue”. Really dis-empowers physicians and makes it extra work - they’re not able to take notes the way they want, but have to work within a system that’s created by 3rd parties.
30
What are the 6 elements of transformation for HC delivery?
1. Catalyzing crisis - overcomes status quo and compels change
2. Leadership pushes change forward - not sufficient to transform alone
3. Culture, governance, physician engagement - values for change should be embedded in company culture and leaders should embody them
4. Data + access to data
5. Physician and management alignment
6. Financial incentives - so everyone shares in the risk
31
How are e-consults beneficial for PCPs?
They’re beneficial for Medicaid patients and rural patients, because specialists are more likely to see them because of cost and access.
PCP can message reviewer who decides on referral = increased efficiency and decreased wait times.
Some PCPs say econsults increase their burden with low reimbursement.
32
Why should we focus on the physician office and behavioral changes?
Shifting burden to patient (ex. Price transparency) hasn’t worked, patients clearly have skin in the game but shouldn’t be responsible to lower the cost of care (they don’t make a lot of HC decisions, they often think more expensive = better quality).
Need to focus on getting physicians to eliminate low value, high cost care, unnecessary, inefficient. Physicians control referrals, prescriptions, hospitalizations, tests, etc.
33
How do we change physician behavior?
1. Incentives - FFS offers status quo incentives, need financial incentives to counteract
2. Infrastructure - need to make low cost/high quality options easier to choose to overcome laziness
3. Information - Drs may not know how to change or may not have the information on what certain services cost
34
What are the key practices that should be changed?
1. Scheduling
2. Chronic Care Coordination
3. Behavioral Health
35
Explain how scheduling is inefficient as it is, and how it should be changed. Provide 2 examples.
Currently, there’s a large no-show rate, very overbooked, no same-day appointments, long waiting times, limited patient satisfaction, high stress.
By centralizing scheduling to an off-campus handler the doctor/nurse doesn’t have to handle schedules, decreases waiting time, and set number of same-day appointments reserved for walk-in patients.
Ex. Cleveland clinic - centralized, off-campus call center with 14 walk-in clinics = LARGE INFRASTRUCTURE
Ex. Extended office hours - accommodate patients who need care after work/on weekends = reduction in ED visits = INCREASED ACCESS
36
How was chronic care coordination inefficient?
Hospitals aren’t very good at managing chronic illness, better at acute care management.
- Chronic care management needs many expensive specialists to coordinate and care in the US is FRAGMENTED for sicker patients.
- Patients require adherence to regimen and self management, proactive care, and coordination between providers. Polypharmacy is a HUGE problem with the risk of not taking meds as prescribed increasing with the more meds you take (HUGE for chronic care).
37
How can we change chronic care coordination? Provide an example.
To reduce chronic care costs:
1. Identify high risk patients
2. Embed care managers in primary care teams
3. Empower care managers to close care gaps
4. Use active outreach to contact the patient and improve compliance/access
5. Educate patients about their illness and how best to use the HC system
Geisinger Health System saved 7% through implementing chronic care coordination with consistent office visits, frequent check ups, education with results explained, contact with care manager to ensure adherence, extended office hours - DECREASED ED VISITS = SAVINGS.
38
How is behavioral health inefficient?
Behavioral health conditions are very expensive per patient basis and make other illnesses much harder to manage.
These patients can also be more expensive on the non-mental health side because (for example) if the doctor doesn’t soothe patients with anxiety about care/symptoms they may go to the ED to get a second opinion = higher costs.
39
How can we change behavioral health? Provide an example.
INTEGRATION W/ PRIMARY CARE
Advocate Health practices collaborative care model where primary care is in the same facility as behavioral health specialists and MA patients are screened for behavioral health. If they screen positive they are brought directly to behavioral health for follow up.
- Hard b/c of the shortage of mental health professionals
40
Why is there no political will to change in the Canadian HC system?
People think the system is just good enough, there’s no real revolt to make politicians change, status quo seems fine.
41
What is the path dependency for Canadian HC (brief history)?
Pre-WW2 care was mostly based on listening and compassion, Saskatchewan developed the first insurance system for hospitals, then for physician services in the 50s.
The feds incentivized provincial hospital insurance by saying they’ll cover half the bill in 1957.
Then the same for physician services in 1968
Then changed cost-sharing to 8%, changed taxes to provincial so they collect the $ in 1977
In 1984 outlawed extra billing.
42
How do Canadian provinces receive federal funds (5 conditions)?
1. Universal coverage for all citizens, residents, refugees
2. Portability between provinces
3. Comprehensive (some provinces added certain things but all had the requirements)
4. Public administration
5. No extra billing
43
Is there private medical insurance in Canada?
No private insurance is BANNED. It’s a one-tier system.
44
How are hospitals paid in Canada?
Hospitals have a global budget which is determined by past payments and a fixed percentage.
45
How are physicians paid in Canada?
Physicians are mostly FFS which is negotiated through the ministry of health and the medical associations to determine price. NO integration between PCPs and specialists.
Provincial government is buyer, medical association is seller
46
Who covers drugs in Canada?
Drugs aren’t federally mandated, most provinces cover for people 65+, on social assistance, or with very large drug expenditures.
EMPLOYERS provide GENEROUS drug benefits subsidized by the tax break.
47
What are the objectives of Canadian Medicare?
To provide health insurance to every citizen/resident.
To reduce disparities related to income.
48
What are some strengths of the Canadian system?
- Coverage easy for patients to navigate
- Simple, universal system
- Low admin costs
- Control total expenditures
- Extensive physician manpower control
49
What are some weaknesses of the system?
- Inflexible
- Long wait times
- Geographical location problems w/ access
50
How has private equity acquisition affected healthcare outcomes?
Private equity acquisition of nursing homes has led to increased resident deaths, decreased healthcare outcomes.
51
What is surprise billing?
Patients who were treated in hospitals that accepted their health insurance received larger than expected bills, could be because one or more Dr wasn’t covered, etc.
No way to disclose or get consent - about 20% of visits result in surprise billing!
Surprise billing changes based on geography, specialty, medical transport, classification system, market concentrations
⅔ of hospitals outsource EU physician staffing (enter PE!)
52
How does private equity lead to surprise billing?
Buys up doctor practices, contracts, etc.
One strategy is to immediately exit the network, bill OON, raise charges
Another is the physicians temporarily leave the network and rejoin later with higher in-network rates
BASICALLY doctors aren’t hospital employees so they can bill out of network/higher charges.
53
How are we dealing with surprise billing?
1. Mandated “fair prices” for OON billing
2. Limit OOP costs to co-payments
3. Independent arbitration
States could protect consumers:
- Could require insurers to cover OON costs/claims and apply in-network cost sharing (insurers hate this and this doesn’t prevent PE acquisition/raising prices)
- Could ban providers from balance billing patients and only collect in-network cost sharing
54
Has arbitration worked for surprise billing?
NO! Incentive structure may reduce patient payments but it doesn’t reduce HC costs and it’s good for PE firms (can overwhelm arbitration system to increase HC costs instead of entering into new network agreements). Arbitration decisions result in higher charges!!!
55
What’s the No surprises act?
Passed in 2022! Insurers must count services as in-network for purposes of patient cost-sharing, deductibles, OOP limits!
Health plans and providers can negotiate privately over the amount to be paid for surprise bills and if they can’t agree enter the Independent Dispute Resolution.
- IDR chosen by HHS then baseball style arbitration
- Plan and provider submit the best offer for OON payment amount for a claim
- IDR begins with the presumption that the insurer’s historical median in-network rate for service is CORRECT and then considers OTHER FACTORS
56
How does healthcare create private equity opportunity?
Patchwork system, patients don’t have much provider choice.
57
What are the reasons for the malpractice system?
1. Incentivize people to increase quality
2. Promote mistake/performance accountability
3. Compensate those affected for damages/injuries
57
Why are physicians focused on medical malpractice reform?
Both low and high risk specialties are at risk, claims are DECREASING but the payment amounts are INCREASING and affect DR PREMIUMS = BIG DEAL!!!!
58
What are the top reasons for malpractice cases?
Diagnosis -> Surgery -> Medicine/treatment
59
Does the system work for accountability and compensation?
NO b/c it’s focused on finding the bad apple and NOT reforming the system! So many people contribute to mistakes!!
Harmed patients often aren’t compensated because negligence isn’t considered malpractice!!!
60
What are forms of potential reform that have been attempted for malpractice?
Saying sorry program - online incident reporting w/ set fee for claims, formal investigation and APOLOGIES! REDUCED total claims and DECREASED the total number of cases with MORE PEOPLE RECEIVING COMPENSATION!
61
Should CMS look at the broader policy impact beyond Medicare?
Yes because the non-Medicare market dynamics affect its programs - commercial market dynamics affect how health systems interact with value based payments.
62
How have monopolies affected health care prices?
Regional monopolies drive up the cost for hospital care, mostly because they have leverage to set their own prices.
Hospitals buy up physician practices to get outpatient pricing (site neutral solves this)
Use practices to drive patients to their hospital instead of competitor
63
What are anti competitive contracts?
Anticompetitive contracts are between hospitals and insurers, they bar insurers from sending patients to less expensive or higher quality healthcare providers, thereby reducing competition.
To counteract this some states have any willing provider laws (insurers have to contract w/ any willing hospital in the state) or network adequacy laws (required to contract w/ large hospitals), but these reduce insurer’s ability to exclude high cost hospitals and limit bargaining = allows for hospitals to charge higher prices.
64
What are the 6 solutions to encourage competition and drive down prices?
1. Transparency - price and contract transparency helps insurers/employers negotiate, makes patients aware.
2. Discourage consolidation - Increase the regulation of anti competitive practices and publish data, increases the ability to discourage mergers.
3. Encourage new entrants - Decrease the bureaucratic hurdles to entry for new hospitals to encourage more competition.
4. Eliminate/lighten network adequacy requirements - implement reference pricing
5. Increase medical tourism/telemedicine - increase the competition outside of the regional area to include other markets.
6. Integrate VA - compete on price with non-VA hospitals.
65
Are price premiums charged by consolidated hospitals related to quality?
NO. They’re solely down to the contribution margin/profit - causes a cycle where weak hospitals close or become acquired.
Some quality decreases with mergers.
66
How does the US compare to other countries for hospital pricing?
The difference in spending in US hospitals is due to prices, because the US is lower for discharges/bed occupancy than OECD median, but paying much more.
67
What is the herfindahl-Hirschman Index?
The sum of market shares of each player in a given market - so a monopoly with 100% share has an index of 10,000 (100x100) or a market with 60% and 40% would be 5,200 (60x60 + 40x40).
Anything greater than 2,500 is highly concentrated! But there’s little regulation even though many hospital markets are above this.
68
What are the options for already consolidated hospital markets?
1. Stay consolidated with NO executive pricing power
2. Voluntarily divest holdings to restore competition and bring HMI < 4,000
Site neutral payments would also be a great solution!
69
How has CMS promoted HC transparency? Has this worked?
Hospital price transparency regulation to make standard charges public - only 27% made data readable, some have fixed this but many haven’t made the information centralized/accessible.
70
What is the premise of delivery system reforms?
Assumption that FFS causes overuse of medical services + poor quality, convinced physicians that payment change was inevitable = should shift to VBPs.
71
What is Zeke’s equation?
PV = C
Price * volume = constant
if price increases, volume decreases (vice versa)
72
Why are pricing failures important?
Huge source of HC waste through the price variations.
- Insurers negotiate very different prices, even 1 insurer can have different prices in the same institution
73
What is the premise of price transparency for patients? Has this worked?
- Politicians like it bc it puts the onus on patient w no direct regulation
- Makes the market more competitive + empowers patients with information
BUT not a lot of people use it and it doesn’t really lower spending
74
What are barriers to success for price transparency initiatives?
1. Many different prices in HC (different negotiated prices, depends on intervention, etc)
2. Limited salience to insured consumers (insurance might be paying the whole thing so who cares how much it is!)
3. Limited “shop-able” services (you can’t shop big, urgent care)
4. Variable price elasticity (how important is it? How much are you willing to spend?)
75
What’s the CMS price transparency tool?
Hospitals have to share payer-specific negotiated prices, but only have to show 70/300 services.
Some hospitals can show different services than others (no comparisons).
Can choose the 70 to show to make them look good (game the system)
BAD AND INEFFECTIVE
76
Do price transparency tools drive up prices?
They can! Hospitals are aware of what competitors are charging and may ask for more.
77
Does price transparency change behavior?
No!!!!! Doesn’t have enough salience for consumers and isn’t accessed enough.
OFTEN price is NOT the critical factor for decision making!
78
What is pricing in specialty care? What is outcomes matter innovations?
Specialty care spends a LOT more in HC spending than primary care - some specialties make a percentage of the drugs administered which incentivizes MORE!!!
Outcomes matter innovations was founded to make it better for INSURER, DOCTOR, AND PATIENT!
- Front end financial security compensates physicians for upfront losses due to practice change (talks to physician and covers drug differential to prescribe cheaper drug)
- Back end clinical assurance shares some of insurance savings with Doctors (shows insurer how much they save on cheaper drug, splits it with them 50:50 and gives some to the doctor as incentive)
79
How did all payer rate setting come about?
All Payer-Rate Setting came out of high inflation due to oil rates in the 70s. Cost of private insurance was increasing national healthcare costs and the hospital negotiations with diff insurers was increasing hospital costs for private insurance.
80
What is the Maryland model?
Maryland said: state commission sets the prices hospitals can charge and EVERYONE is equal - commercial pays slightly less, Medicare/Medicaid pays slightly more to make them EQUAL.
Rates still differ hospital to hospital, but the payers for each pay the same
81
What are the strengths of the Maryland model?
1. Prevents cost-shifting (hospitals charging more for private payers to subsidize public shortfalls)
2. Reduces payer mix gaming (hospitals don’t avoid Medicaid patients)
3. Reduces price discrimination (smaller payers pay for more hospital services b/c of less leverage/less patients)
4. Eliminates complexity (reduces the admin burden of negotiating multiple rates)
82
How was the Maryland model expanded?
Hospitals STILL maximizing volume even though prices are the same!!! FAILED to address the FFS incentives!!!!
SO they introduced global hospital budgets with high level annual targets for overall spending/revenue.
THEN they expanded budgets to coordinate hospitals with PCP to address TOTAL cost of care!
83
How does the IRA affect drug prices?
1. Requires feds to negotiate drug prices for high cost drugs covered by Medicare
Eligible if they are 9 years (pills) or 13 years (biologics) past approval
2. Requires drug companies to pay rebates if prices increase faster than inflation
84
How does the IRA reduce OOP beneficiary spending?
Caps OOP spending at $2000, eliminated above the catastrophic threshold.
85
Why are drug prices important?
Drugs are ~18% of HC spending and are ~33% of the total per capita difference in HC costs between US and EU countries!!!
High drug prices can drive HC spending - if 10,000 patients need $1,000,000 per year treatment = $10 billion in HC costs.
86
What are the excuses for high drug prices?
Companies say they need to innovate and need $ for research and development.
87
What was the FDCA Act of 1938?
FDCA: If firms want to sell the drug they need safety evidence and a physician prescription.
88
What was the Kefauver-Harris Amendment of 1962?
Kefauver-Harris: Required firms to show safety and efficacy of the drug.
89
What was the Hatch-Waxman Act of 1983?
Hatch-Waxman: Required ONLY the demonstration of bioequivalence for generics - NO clinical testing.
90
What’s the accelerated approval pathway? What drugs is it most commonly used for?
Created in 1992 and amended in 2012, for drugs that treat serious disease/illness that have unmet medical needs.
- Have to provide meaningful clinical advantage over existing treatment
- Must show effect of drug on SURROGATE ENDPOINT that predicts clinical benefit
Most commonly used for cancer drugs, likely because going through clinical trials costs a lot of money when you could be on the market earning money!
91
How does accelerated approval create perverse incentives/market failure?
Almost ⅓ of the drugs approved NEVER completed confirmatory trials because there’s NO INCENTIVE TO! They’re making money on the market already then why would they!!!!
If news is BAD = go off market
If news is GOOD = no real change!
LIKE 50% OF CANCER DRUGS APPROVED W/ SURROGATE ENDPOINTS COMPLETED CONFIRMATORY TRIALS AFTER 5 YEARS!
92
Explain the Aduhelm scandal.
The clinical trials used a surrogate endpoint that has NEVER been correlated with cognitive/clinical improvement in patients. The FDA basically bent the rules for this drug, required less evidence to approve.
VERY expensive drug.
93
What are potential solutions to fix the challenges with accelerated approval?
1. Surrogate/Intermediate endpoints that are HIGHLY or MODERATELY correlated with long-term clinical benefit should be used as primary outcome measures
2. Accelerated approval should NOT be granted until after recruitment for confirmatory trial has begun
3. TRANSPARENCY regarding recruitment, progress of confirmatory trials, firm deadline
94
How expensive really is R&D?
DEPENDS on where you look!
Tufts - $2.6 billion but uses 10.5% as the cost of capital which seems inflated from the recommended 5.6-6.4%.
Using 6% reduces Tufts estimate by $600 million
JAMA says R&D WITH cost of capital is ~$760 million.
By company, drug R&D is LOWER than other tech companies!
95
What drugs do companies prefer to invest in?
HIGH price drugs that will bring profit! Mostly new cancer drugs!
96
Are US drug prices really that high because of R&D?
NO!!!! The difference between US Revenue and EU revenue is over $100 billion, which is LARGER than the WORLDWIDE TOTAL R&D FOR ALL COMPANIES.
Pharmaceutical companies generated almost ~200% of their global R&D from US premium pricing
97
How does the US system give drug companies leeway for high prices?
1. Patents/market exclusivity
Pharma companies get a monopoly on brand name drugs - they can raise prices until they have enough profits!
They have 12-13 years of market exclusivity = MORE $ TIME
SHORTAGE of generics w/ no real incentive to produce (low price!)
2. Exacerbating conditions
Patients don’t pay full cost (they’re insured) so don’t weigh costs/benefits
Physicians don’t know the full costs of drugs
Physicians have no incentive to prescribe cheaper drugs
98
Explain the Germany drug approval process.
1. Drug approved for marketing
2. Federal Joint Commission and IQWiG reviews the efficacy compared to other drugs (6 months)
2. EITHER
a) Drug therapeutically similar to existing drug = price set based on equivalents (6 months)
b) Drug therapeutically superior to existing drug (3+6 months)
- Negotiations between pharmaceutical and federal association of sickness funds
i. If negotiations agreed upon = price set
ii. If not, then set by arbitration body
Bilateral monopoly is good because there’s no fragmented leverage like the US, but can also result in gridlock if insurers say high prices are unsustainable, manufacturers insist they’re necessary for innovation.
Reduced period from 12 to 6 months where the price is set by drug companies without any negotiations/price being set.
99
