Test 2 Flashcards
Define social justice
Idea of collectivism and restraining of markets applied to health care. Role of distributing social (collective) goods assigned to govt. national healthcare programs
National - supply side rationing. Planned rationing
Define market justice
Capitalism and free markets applied to health care. Role of distributing economic goods is assigned to the market
US - demand and price rationing
Limits of market justice
Social justice becomes unavoidable when dealing with human populations
(Housing transportation education healthcare)
People in ill health place economic burden on society.
Critical care provide to the uninsured
Human problems have broader implications for society
Define health economics
Study of supply and demand of health care resources and impacts on population
Efficient allocation of scarce resources
Forces shaping medication use policy
Govt Private Accredited and QI Science Patients Specialty organizations
Supply and demand
Market equilibrium
Buyer determines demand
Seller determines supply
Types of markets
Perfectly competitive Oligopoly Monopoly Monopolistic competition Monopsony Oligopsony
Oligopoly
Small number of competitors
Not always aggressive competition
Monopoly
One seller which controls price
Sole supplier
Cost dictated by supplier
Monopolistic competition
Many competitors with slightly differentiated products
Each seller may set price for own product
Monopsony
One buyer which controls price. Like electric boat and subs
Buyer has market power
Law of demand
Other things equal then quantity demanded of a good falls when the price rises
Movement along the curve when change price
Demand curve - substitutes
When fall in the price of one good reduces the demand for another good
Demand curve - complements
When the fall in price of one good increases the demand for another good.
Supply
Quantity of goods that a seller is willing and able to sell
As quantity supplied increases price increases
Elasticity
Measure of the sensitivity of change in one variable to another
% change in one variable given a 1% change in another.
E= %change in quantity/ % change in price
Sign positive or negative tells the directionality
Elasticity of demand
E > 1 elastic demand
E < 1 relative inelastic
E = 1 unit elastic
E = 0 perfectly inelastic
Inelastic demand
Change in price have little impact on quantity demanded
Highly elastic demand
Small changes in price impact quantity demanded
Ex automobiles. Groceries
Types of production costs
Fixed Variable Average Marginal/incremental Opportunity
Define fixed costs
Costs to keep doors open
Overhead
Not affected by changes in production
Variable costs
Change with level of output
Ex supplies and staffing
Average costs
Total costs/quantity produced
Total costs = fixed + variable
Marginal costs
Cost per additional unit produced increases
Cost to make one more unit of output
Diminishing marginal returns
Opportunity costs
Costs of what you sacrifice to get it
Cost of other alternative forgone
Perfect competition
Many firms selling same product
Many buyers
No restrictions on entry to industry
Firms in industry have no advantage over new entrants
All firms must accept market price
Price takers
Firms and buyers have complete info about the market
Economics of health
Inelastic demand Universal demand Unpredictability of illness Health care as a right Supplier-induced demand Third party insurance and patient-induced demand
Functional components of health care delivery
Financing-employer Medicaid
Insurance- self insurance companies blue cross to protect against catastrophic risk
Delivery - providers like doctors hospitals any entity that delivers health care and receives insurance payments directly
Payment - insurance companies or third party claims processors
Before managed care
Direct access to any provider Itemized billing to insurer Few controls over the amt of payment Sickness coverage only (no wellness) Insurers just passive payers of claims
Define managed care
Body of clinical financial and organizational activities designed to ensure the provision of appropriate health care services in a cost efficient manner
Make health care more efficient and less wasteful.
Features of managed care
Negotiated fees (prefer prospective payment)
Gatekeeping - need referral to see specialist
Patient cost sharing or shifting (premiums increased. Deductibles increased)
Coordination of benefits
Preventative care and wellness programs
plan designs and coverage options
HMO
Health maintenance organization
Assumes or shares both financial risks and delivery risks associated with providing medical services
Usually for a fixed prepaid price
Gate keeping. Need prior authorization.
HMO act of 1973. Nixon. Allow to go out of network. Response to people saying plans too restrictive.
Managed care continuum
Indemnity Indemnity plus cost containment Ppo Pos (point of service plans) HMO
Manage quality cost and access
PBM
Pharmacy benefit manager
Provide external management of health plan or pharmacy benefits by applying managed care principles and procedures to contain cost and enhance quality
Arranges for rebates
AWP
Average wholesale price.
Roughly reflected actual acquisition costs
20% mark up on what retailers paid to wholesale r&d
AWP= 1.2xWAC
Sticker price. Price reported by mfg to publishing firms
Used for the last 20 years
WAC
Wholesale acquisition price
Manufacturers reported list price for Rx drug for sale to wholesale r&d
Does not include MFG discounts
Approximates costs for brands but not generics
Wholesalers sell to pharmacy about 2-3% above WAC
List price
Price sold to wholesalers
ASP
Average sale price
Under Medicare in 2003 Break from AWP Based on MFG selling price including discounts and rebates Substantially Less than AWP Pay 104-106% above ASP (Medicare)
AMP
Average manufacture price
Medicaid 1990. Important to state.
Avg price paid to manufacturers for drugs through retail pharmacies
Reflects rebates paid to wholesale r&d and retail pharmacies BUT not PBMs Medicaid and 3 parties
MAC
Maximum allowable costs
Upper limit for reimbursement
Typically used for generics
Federal upper limit 150% of published price of least costly equivalent
Updated quarterly
U/C
Usual and customary
What the cash customer pays
Never less than contracted price
Public Health Service pricing 340B
Equal to price state Medicaid would pay (does not include discount or rebate)
Highest price a 340B could be charged
US health care expenditures - public vs private - 1960 vs today
1960 about 25% public
Today about 50% public
Public is federal state and local govt
National health care expenditure per capita. 1990 to 2019
1990 was $3000
Now about $10000
2019 expected to be $13000
How much of health care spent on Hospital care Physicians services Other health care Other personal health care Prescription drugs
Hospital = $850B 30% Physicians = $540B 20% Other = $420B 15% Other = $400B 15% Prescription drugs = $260B 10%
Percent change in national spending on health services
Peaked during 2001-2006 (5-15%)
While still increasing not increases as much (3-5%)
Prescription drug spending. 1980-2010
- About 15B
2010 $100-260B
Growth in prescription drug spending as total of health
1999 peaked around 20%
Now around 4%
Prescription drug expenditures bt payer type 1990 to 2008
Consumer out if pocket decreased from 56% to about 21%
This 30% difference split between private insurers and public fimunds with about 20% picked up by public funds (from 18% to 37%)
Pharmaceutical sales 1997 - 2008
80B in 1997 to over $200B in 2007
But not growing as rapidly as in late 90s
Number if blockbuster drugs with sales $1B
1996 about 7
Peak in 2006 with over 50
Biggest increase 1996 to 2002
Biggest blockbuster drug
Lipitor in 2006 with over $13B
2011 top product by total dollars
Lipitor
2011 top product by total prescriptions
Hydrocodone (over 58M scripts)
Brand name vs generics tend
Generics being prescribed more frequently
About 50% of scripts in 1998
In 2008 about 75%
In 2011 about 80%
Info on generics
Now 80% of all prescriptions
If generic available dispensed 94% of the time
Generics represent 27% of total spending
Specialty medicines
Increase by 15% from 2010-2011
Cost more than traditional meds
Some cost more than $10K per month
Not as frequently used by Medicare
Avg copayment with tiers
Generic $10
Preferred $20
Non preferred $30-40
Fourth tier $60-85
Prescription drug benefit cost and plan design by employer size
Larger employers use step therapy and quantity limits more than smaller ones
Also tend to have more controls in place
Medicare drug plan 2007
$265 deductible
Enrollee pays 25% up to $2400 plan pays 75%
Gap where enrollee pays 100% up to $5500
Then pay 5% and Medicare picks up 80% plan pays 15%
Brand drugs gap fix 2010-2020
Deductible $320
Enrollee pays 25% upto $2900
Then pays 25% and manufacturer picks up 50% discount and plan pays 25% up to $6730
Phase in plan coverage increase
Gap coverage plan for generics
Plan to pick up 75% by 2020 while enrolle goes from paying 100% to 25%.
Typical pricing algorithm
"Lower of" AWP -%+dispensing fee MAC + dispensing fee Usual and customary If move from AWP to AMP Then would increase dispensing fee
Medicaid drug rebate program
Requires drug mfgs to have a national rebate agreement with HHS to be on Medicaid formulary
15-23% of AMP or difference between AMP and best per unit price
Result of Medicare part D
Obamacare and drug pricing
FUL
Federal upper limit no less than 175% of the weighted average of the AMP for multidirectional drug products
Expands access to 340b programs
Extends rebate program to Medicaid managed care
Evolution of pharmacy benefits management
Direct pay Access oriented 3rd party admin Price conscious 3rd party admin Influence drug use process Manage diseases
Components of pharmacy benefit
Benefit design Network management Claims processing Customer & provider service Formulary management Drug utilization review Pharmacy care services
Benefit design
Co-payments co-insurance Step therapy Therapeutic class management Expenditure caps and deductibles Provider communication Contracting
Trends in benefit design
Stepped tiered copays Stepped therapy Value-based designs Mail order incentive OTC Incentive Therapeutic class management Lifestyle incentives
Value-based benefit design
Identify subgroups that benefit most from a given treatment and cost sharing is reduced. Maybe even to zero
Ex heart attack patients and cholesterol lowering drugs vs just patients with high cholesterol
Charge patients lesser amt for drugs that offset other costs.
Network management
Inclusion
Reimbursement
To manage costs and drive utilization
Any willing provider must be allowed in if willing to accept rate
Restricted network - limited options
Claims processing
Computerized system
Data management
(Forecasting payment utilization review)
Real time. Electronic data interchange
National drug codes
NDC unique number Universal for human drugs #####-####-## Labeled-product-package
Customer and provider service
Provide knowledge of benefit design and mechanics
Ensures satisfaction
Drug utilization review
Prospective
Concurrent
Retrospective
Formulary adherence
Quality. ADR
Cost containment
Identify abuse
Medication related problems
Formulary management
Up to date list of meds based on current evidence bases med. physicians pharmacists experts to treat disease and preserve health
Encourage use of safe effective most affordable meds
Pharmacy and therapeutic committee
Committee for determining formulary
Evaluate new drugs
Devise coverage policies copays
Devise management strategies
Negotiate price
Pharmacy care services
Drug utilization review
Med oriented disease management
Interdisciplinary care and care transitions
Medication therapy management
Methods for managing specialty pharmaceuticals
Medical vs pharmacy benefit Co-insurance - pay % or fixed copayment Prior authorization or step therapy Supply channel management Provider and patient education Outcomes based reimbursement (Compare outcomes to clinical trial results)
Ideal drug reimbursement benchmark
Transparent Accessible Comprehensive Timely Immune to manipulation
AAC
Actual acquisition cost
Final price paid by pharmacy after all discounts
Used by state Medicaid programs
NADAC
National average drug acquisition cost
Costs collected by CMS from pharmacies to be averaged into single price
Idea not yet in practice
Dimensions of quality
Technical performance Access to services Effectiveness of care Efficiency of service delivery Interpersonal relations Continuity of services Safetphysical infrastructure and comfort Choice
Aims for improvement in redesign of health care
Six aims Safe Timely Effective Efficient Equitable Patient-centered
WHO definition of adverse drug reaction
Any noxious and unintended effect of a drug which occurs at doses used in humans
Excludes therapeutic failures
Intentional or accidental overdose
Errors in admin or adherence
Types if ADRs
Type A
Predictable
Often dose dependent
Type B
Unpredictable
Unrelated to drugs known action
WHO definition of adverse drug event
Any injury resulting from admin if a drug
Includes events that are preventable
Overdose and admin errors. Adherence
What drugs most commonly implicated in ADE treated in ER?
Insulin
Warfarin
Definition of medication related problem
An event involving a patients drug treatment that does or could interfere with the achievement of optimal outcome
3 categories - overuse, underuse and misuse
Underuse MRP
Untreated indication
Sub-therapeutic dosage
Failure to receive or take drug
Prescribing and adhering
Examples of overuse MRP
Overdose
Drug use without indication
Drugs of abuse
Examples of misuse MRP
Adverse drug reaction Drug interactions Improper drug selection Inappropriate drug in elders Inadequate therapeutic monitoring
Costs of MRPs
Fit every dollar spent on drugs spend >$1 on drug-related problem so
Underuse a huge problem
MedWatch
FDA program
Healthcare professionals and consumers can report serious problems
Make easier to report ADE
make it clear what FDA wants
More visible actions taken by FDA resulting from reports
Awareness if drug-induced disease
Efficiency
Generic substitutes
Therapeutic substitutes
Therapeutic duplication
Safety in Rx utilization
Drug drug interactions
Drug disease interactions
Therapeutic duplication
Drug age contraindications
Effectiveness in Rx utilization
Adherence to therapy
Use clinically important therapies where evidence indicates
Appropriate dose and formulation
Joint commission
Looks at hospitals
Aspirin at arrival for heart attack
Avoid polytherapy with antipsychotics
Pharmacy quality alliance
Improve quality of meds used across health care settings through collaboration - key stakeholders agree on strategy to measure and report performance info related to meds
Being developed
URAC
Utilization review accreditation commission
Promote improvement through accreditation and education for PBMs
Health care quality
Pure food and drug act
1906
Standards for traded drugs
Labeling
Misbranding punishable by law
Harrison narcotic act of 1914
Upper limits on amounts of cocaine morphine etc
Food drug and cosmetic act of 1938
Standards for inert ingredients Safety FDA authority to regulate promotional materials Prohibits misbranding Interstate commerce only if FDA approved
Durham Humphrey act of 1951
Created legend drugs
Rx only
Kefauver Harris amendment of 1962
In response to thalidomide
Advertising claims questioned by medical community
Need to report all side effects to FDA
Needs to be safe and effective
Substantial evidence that a drug is efficacious. Causes increase in r&d costs
Efficacy standard.
Phases of drug development
Preclinical - lab animals. To assess safety and biological activity. 1-2 years. 100% pass
File IND.
Phase 1 - 20-100 healthy volunteers. Determine safety and dosage. Year 3. 70% of INDs
Phase 2 - 100-300 patient volunteers. Efficacy and side effects. Years 4-5. 33% of INDs.
Phase 3 - 1000-5000 patient volunteers. Verify efficacy. Years 6-8. 27% of INDs.
Then file NDA
Phase IV - where do pharmaecomomic analysis. Not randomized
PDUFA
Prescription drug user fee act. Of 1993
Used to bring in more people to approve drugs. Speed up process.
Result 60% at >2 years. Down to less than 10%
Estimated cost to bring new drug to market
$200M in 1979 to $2B in 2003
More expensive clinical trials
Specialty drugs and biologics
Personalized medicine
Promoted claims
2 or more controlled studies (randomized)
Real world effectiveness data
Specific to product label
Substantiation standards. Want population based outcomes
FDA regulates health economic info
All promotional materials
Need regulation because
Poor quality of studies
Unsubstantiated cost-effectiveness claims
Scientific exchange or promotion
Pharmacoeconomics methods not standardized and complex
Types of study outcomes
Economic outcomes
Clinical outcomes-intermediate indicators like blood sugar
Final outcomes
Other outcomes (pain compliance)
DDMAC 1995
Division of drug marketing and communication. DRAFT
Don’t care about costs
Care about efficacy/effectiveness
Need substantial evidence
Argues impedes dissemination if useful info.
FDAMA 1997
Food and drug administration modernization act of 1997
Extends PDUFA
Encourages pediatric indications
Encourages submission of supplemental indications
Sec 144 Health care economic info
Health care economic info
FDAMA 1997
Analysis that Ids measures or compares the economic consequences including costs of the health outcomes of the use of a drug to the use of another drug to another health care intervention or to no intervention
FDAMA 1997
Provide to formulary committee or similar entity.
Directly relates to an indication
Competent and reliable scientific evidence. No longer randomized clinical trial
FDAMA 1997 and off label use
Can provide articles if
If sNDA to be filed
FDA pre-review of promotional activity
Off label use
Physicians may use drugs for indications not approved by FDA
Scientific knowledge may outpace FDA approval process
What about safety and efficacy
Distort info
Avoid costs of sNDA
- WLF vs Henney Shalala
FDA cannot regulate speech
Regulate conduct not speech
Judge Lambeth. Preposterous
- FDA v WLF appeal
No longer about speech
Now about interstate commerce
No issue. No debate
Uncertainty
2009 FDA guidance.
Can distribute info on off-label
No requirement for sNDA
must be separate from promotional brochures
Need statement identifying article about off label use
No relationship between firm and author
Need to be from peer-reviewed journals and disclose finding
- FDA guidance to unsolicited requests about off label info
Flow chart. What is allowed.
Cannot give unsolicited info. Or info on different company’s product.
No public response on off label.
Included social media.
Comparative effectiveness research
Look at all evidence of alternative methods to prevent treat diagnose monitor condition
To assist consumers clinicians purchasers policy makers to make informed decisions
PCORI
Patient centered outcomes research institute
$1.1B from ARRA to do CER
Qualitative research involves patient perspective.
CER and pharmacy benefits complexities
Off label use Conditional coverage Value based Rx benefit designs Provider contracting and payments Manufacturer focused
Ways to use CER
Tools and tactics to deer mine which drug has higher value and incorporate into health care
Conditional coverage
Consumer cost sharing
Provider contracting
Drug payment policy
Distributive justice
How goods are allocated within society
Mix of market justice and social justice
Intersection of supply and demand curve
Efficient allocation based on perfectly competitive model
Overage and shortage
Elasticity related to total revenue
Inelastic. Increase price demand goes down but revenue still up.
Elastic. Increase price demand goes down and revenue goes down.
Unitary. Price goes up demand goes down and revenue unchanged.
Moral hazard
Tend to consume more if isolated from actual price tag
May need to sensitize consumers to price
Capitation
Pay provider upfront for services per patient. Prospective payment. Global payment
Risk underwriting
Pay more if you are at higher risk
Smoker. Age. Gender. Geographic region
Indemnity
Visit doctor. Submit to insurance. Get paid back
Little control of price
Little use of utilization tactics
Also known as conventional.
Managed care manages…
Cost
Quality
Access
POS PLAN
Point of service plan
Like HMO but consumer allowed to opt out and see out if network providers for a large fee.
Core network of providers with incentives
PPO PLAN
Preferred provider organizations Providers agree to certain costs/fees. Some oversight No gate keeping Less managed by insurance company
CMS
Center for Medicare and Medicaid services
Medicare prescription drug plans
PDP - standalone thru PBMS like entity
MA-PD - Medicare advantage Whole managed care plan
CER
How do all drugs compare for a specific condition
All methods to prevent treat diagnose monitor a clinical condition
Use to make informed decisions
Conditional coverage
Need pre-approval
May be restrictions on use
For adding data to clinical trial
Limit access to service that would not be effective
Consumer cost sharing
Tiered formulary
PPOs increases deductibles
Percent coinsurance/copay for specialty meds
Value based benefit design
Provider contracting and payment methods
Network designs
Pay for performance bonuses for efficiency and quality.
Pharmaceutical company contracting and payment methods
Step therapy
Reimburse only if drug deemed appropriate
Reimbursement linked to outcome and comparison to clinical trial results
