Posts made in December, 2011

Happy Holidays From Real Endpoints

Posted on Friday, December 23, 2011

Real Endpoints will be on holiday until January 2, 2012. Wishing you and yours the very best this holiday season. Peace and joy in the New Year. Thanks for...

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ICD-10: A Gift for Product Makers

Posted on Friday, December 23, 2011

There’s been a lot of talk about the migration from ICD-9 to ICD-10 and what’s going to happen in October 2013 when we jump from a medical coding system with around 18,000 codes to one with around 8 times that number. In theory, the more precise mechanism to account for diagnoses and procedures provided by the federally mandated 10th revision of the International Classification of Diseases should improve cost management, budgeting, and outcomes research while reducing fraud and abuse. But the cost of implementing ICD-10 is also a subtle — albeit short-term — gift to product makers. Let me explain. Recall that with payment reform, we are moving toward a system of bundled payments where monetary incentives help providers deliver the most efficient – and lowest cost – care to patients. This move away from fee-for-service has a direct impact on product makers.  Many specialist physicians haven’t really had to think too much about the cost of products – choosing instead, for example, the implant they individually prefer rather than what might be the most cost-effective option.  But as part of a group that gets paid on the basis of total cost effectiveness and quality, the higher the product cost, the lower the profit to be shared. As such,...

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Our Two-Tiered Healthcare System

Posted on Wednesday, December 21, 2011

Bundled payments are coming! Bundled payments are coming! With the announcement Dec. 19 of the creation of pioneer accountable care organizations, fee-for-service’s swan song has begun. Or maybe not. The ability to move away from FFS to a bundled reimbursement environment is predicated on providers’ readiness.  But readiness is more than the obvious informational and data challenges (figuring out actual costs, for example).  It’s also about the ability to handle two basic payment systems – fee-for-service and bundling — at once. As we pointed out in an earlier post, the whole goal of bundled care is to deliver healthcare as efficiently as possible. If you do things as cost-effectively as possible while delivering the best possible outcome, the provider group gets more money for its efforts. But it’s the polar opposite for FFS. Treat FFS patients as efficiently as possible and providers leave money on the table because they aren’t billing for all the procedures or tests or visits that they theoretically could. We like to think that providers always do the right thing and that standards of health care mean there aren’t differences in how medicine is practiced. But during the transition from FFS to reimbursement based on outcomes we effectively have a two-tiered system in which the...

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Moving to ACOs: It’s Complicated

Posted on Tuesday, December 20, 2011

Oh Pioneers! Health and Human Services released its much ballyhooed list of the organizations participating in its Pioneer ACO initiative on December 19th. What’s striking isn’t who’s on the list, but who’s not.  No Mayo Clinic, no Cleveland Clinic, no Geisinger Health Systems, no Kaiser Health Network. Indeed, of the 32 founding organizations, most aren’t exactly what you would call household names: Partners Healthcare and Beth Israel Deaconess are the two recognizable exceptions. Recall that the pioneer ACOs are meant to be a bit different from the Medicare Shared Savings program that will ultimately be put in place. In the first two years, the model tests a shared savings and shared loss payment arrangement that has participants taking on higher levels of both reward and risk than the MSSP. And things really get interesting in year three when groups are eligible to move to a “population-based payment model”. Since CMS will pay the ACOs a fixed per-beneficiary-per-month payment amount, this is designed to replace fee-for-service with a bundled compensation structure. The press conference unveiling the 32 pioneer ACOs was long on lofty ambition and short on details. We heard a lot about improved quality of care and better health outcomes without “limiting consumer choice”. But not a lot about...

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The Healthcare Round-Up: 12/12 -12/19

Posted on Monday, December 19, 2011

Here at Real Endpoints, we know you’re busy. And we’re aware that trawling the web for reimbursement-focused news can be a time-consuming slog. That’s why we’re introducing “The Healthcare Round-up”, a one-stop resource for the best reimbursement-related analysis and news coverage appearing on the web in the past seven days. See a story that’s interesting? Send it our way for potential inclusion. And make sure to tell us what you like  — and what you don’t — so we can adapt the Round-Up to better meet your needs. Send thoughts directly to Ellen at or via the comments button at the bottom of the post. 1. An “Essential” Definition Of Health Benefit: On Dec. 16, HHS provided updated guidance tied to the “Essential Health Benefit”, critical information for employers and payers as they try and implement changes mandated by the Affordable Care Act. Who knew the word “essential” could hold so many different meanings? In an effort to provide states with more flexibility, the guidance gives states four choices for designing their benchmark insurance packages. While the guidance likely pleases the states, which wanted maximum flexibility, patient advocates were disappointed. Not only do the proposed guidelines fail to offer a strong national standard, but outside the minimum 10...

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Biosimilars: Proving Pharma Gets Cost-Driven Innovation

Posted on Friday, December 16, 2011

We called in a previous post for a new definition of healthcare innovation – specifically, one that includes value. One need look no further than branded pharmas’ (and biotechs’) growing love affair with biosimilars for proof that at least some companies understand – or at least claim — that innovation is about more than novel targets and mechanisms of action. “Shot through with innovation,” is how Merck BioVentures’ president Mike Kamarck describes the biosimilar enterprise. Kamarck, in a recent piece in IN VIVO, points to newer, more efficient production techniques, and clever, corner-cutting clinical trial design. But the end-goal of these measures is a kind of innovation that matters to patients and providers: pricing innovation. Cheaper drugs of equivalent high quality. Sure, as they explain and justify their forays into creating copies of complex biologics like Rituxan or Enbrel, so the likes of Merck and Pfizer prefer to put the emphasis on quality not price. “These [products] should be more than a price play; it’s about comfort and quality, and having a choice of [a product] you can trust,” which is also affordable, said Pfizer’s general manager, biosimilars, Diem Nguyen earlier this year. But as more branded players enter this fast-evolving universe of copy-cat large molecules, it’s price, not branded-level quality,...

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Payer-Pharma Data Collaborations: Anything More Than Business as Usual?

Posted on Thursday, December 15, 2011

2011 was a break-out year for deals between pharmaceutical companies and payers, with three major drug makers – AstraZeneca, Sanofi, and Pfizer – inking broad alliances with the research/data businesses or departments of  WellPoint, Medco Health Services, and Humana. Theoretically, all three deals are attempts to orient pharma R&D programs closer to results that matter to payers.  Explaining AZ’s rationale for its deal with WellPoint’s HealthCore unit to the audience at Elsevier Business Intelligence’s annual Pharmaceutical Strategic Alliances meeting in September 2011, AZ’s Mahmood Lahda said, “We realized … the way we had been doing research was not going to be adequate down the road. Not only do we need to make sure new products are safe, efficacious, and approvable, but now we have to make sure they are reimburseable as well.” But given the dearth of specifics revealed about these deals, it’s hard to know whether any of these them are radical enough to spark change within their respective R&D organizations. Information deals between pharmas and payers have been in existence for decades: drug companies purchases of insurers’ claims data to use in reimbursement discussions has been a big part of businesses like United’s Optum or WellPoint’s HealthCore.  But the dealmakers behind the three major alliances announced in 2011...

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Set The Price Up Front: Iressa Single Patient Access Scheme Shows How Risk-Sharing Can Work

Posted on Monday, December 12, 2011

AstraZeneca may have figured out how to make risk-sharing work in the U.K. – and even beyond. My last post highlighted how some programs, like J&J’s Velcade Response Scheme, are too complex and costly to administer, and thus don’t work – at least not for the payer. AstraZeneca’s Single Payment Access (SPA) scheme for lung cancer drug Iressa, recommended as part of cost-watchdog NICE’s nod to the drug’s reimbursement in May 2010 isn’t simple.  National Health Service practitioners have to fill in a detailed form (and read 9 pages of terms & conditions too). But once they do, it’s easy: all patients receive as much of the drug as they need for however long they need it in exchange for a fixed payment of £12,200 ($19,000) per patient (or £14,335 with the value-added tax).  Importantly, the first two months’ worth of drug are free (payment is only taken once the third pack of treatment is received). So if a patient doesn’t respond by then, there’s no payment due. With just 659 patients enrolled in the Iressa program, SPA hasn’t caught on in a big way. Although AZ designed the scheme for use with all its oncology drugs, for now only Iressa is reimbursed this way. But the scheme provides some...

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Payers Diversifying for Pharma Dollars, Among Others

Posted on Thursday, December 8, 2011

Among payers, uncertainty – mostly around the impact of the Affordable Care Act — has bred diversification. And much of that diversification has involved information businesses. Humana’s acquisition of San Diego-based Anvita Health is just the latest example of a payer looking for new revenue sources. This year alone, Aetna, for instance, has purchased Continental Life Insurance and PayFlex Holdings, deals that bolster the insurer’s footprint in the Medicare Supplement and consumer products businesses, while Cigna ponied up $3.8 billion for HealthSpring to deepen its ability to sell Medicare plans. Why this uptick in deal making? Assume the existing version of the Affordable Care Act isn’t radically transformed by the Supremes. That new legislation mandates insurers must offer a basic level of healthcare via electronic exchanges where it will be easy for consumers to shop for services by price. As Steve Wunker at New Markets Blog notes, such transparency rapidly commoditizes private insurers’ core product. In this scenario –even with the millions of new customers mandated by healthcare reform — profits to payers will fall. To thrive in this new environment, payers must build new, adjacent businesses that take advantage of the existing wealth of claims’ data and physician networks they’ve already amassed. Even better if these new opportunities...

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Putting A Price On Eylea: Why Regeneron’s Decision Matters

Posted on Wednesday, December 7, 2011

Kudos to the commercial team at Regeneron for understanding that reimbursement is an environment.  That is: Regeneron doesn’t think that payers are the only ones who matter in the reimbursement decision. Just before Thanksgiving, the company took the unusual step of announcing it would price its newly approved wet AMD treatment Eylea at a discount to the standard-of-care Lucentis. “We feel the price is fair to physicians; it is also fair to Medicare,” SVP of commercial Bob Terifay noted in a November 18th conference call outlining Eylea’s pricing strategy. That price is $1850 an injection — $100 cheaper than competitor Roche/Genentech’s Lucentis, but still significantly more than microdoses of Avastin used off-label. As the smart folks at “The RPM Report” note here (subscription required), in a buy-and-bill model this pricing decision, which is a financial disincentive to retinal specialists, plays specifically to the payers, particularly Medicare. But the company hasn’t forsaken the physician constituency. Without specifically citing Dendreon, Terifay noted in an interview that Regeneron had studied what had gone wrong with its launch. In a model where docs have to first buy the drug outright, the “real challenge” he says “is to appropriately protect physicians against the risk that they won’t be reimbursed” for Eylea. Thus, at launch it’s...

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