Defending health reform: Experts assess ACA
Despite a rocky start, the full rollout of health reform under the Affordable Care Act has already brought major benefits to the nation’s troubled health system and affordable coverage to millions of formerly uninsured or underinsured Americans, one of the Obama administration’s top health officials asserted recently.
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Marilyn Tavenner, administrator of the U.S. Centers for Medicare and Medicaid Services, strongly defended the controversial health reform law in a panel discussion at the New York Times “Health for Tomorrow” conference. She was joined onstage by John Bertko, chief actuary and director of research for Covered California, the Golden State’s health insurance exchange, and by Elisabeth Rosenthal, M.D., correspondent and senior writer for the New York Times.
“It’s been a tough year of implementation, but a great success,” Tavenner said in a presentation on the progress of the ACA rollout and the impact of health reform. “More than 8 million people are now covered in the health insurance exchanges, and a little more than half the United States has expanded Medicaid coverage [state by state].”
Bertko predicted a big jump in the number of new enrollees over the next two to three years, from 8 million to roughly 20 million, along with “a smaller number of people buying the same health plans … separately, without the exchanges.”
“The goal now is to make those plans much more efficient,” he said.
According to Tavenner, the reimbursement and coverage changes mandated by the health reform law are beginning to yield larger health and cost-saving benefits as public and private health plans begin to shift the focus of coverage from standard fee-for-service payments to prevention and the avoidance of hospitalizations. “A lot of the ACA removes co-pays and deductibles around preventive care because part of our mission is to [encourage] folks to have early care in an outpatient setting,” said the CMS chief. “And that’s what we’re seeing. Early indications are it’s tracking as we thought.”
Whatever the pace of those changes in health delivery, they can’t come fast enough, asserted Karen Ignagni, president and CEO of the insurance industry trade group America’s Health Insurance Plans, or AHIP. “On the cost issue … we’re getting to the point where the chickens are coming home to roost, and to keep people in the healthcare system, you have to talk about the issue of affordability … and sustainability,” she said in a separate panel discussion at the conference on the impact of the Affordable Care Act and the economics of health reform.
Out-of-pocket costs, Ignagni said, are “the kitchen-table test of healthcare reform” that many lower- and middle-income families are grappling with as they try to balance higher insurance deductibles and lower monthly premiums in the plans available either through the health insurance exchanges or via employers or the private health plan marketplace.
“All research suggests there are families very focused on out-of-pocket healthcare costs … as they face a range of choices,” Ignagni said. “We need a better support system in terms of what works.”
Will Obamacare help improve that system? “It will certainly help prevent bankruptcies and help patients with pre-existing conditions, but it still involves considerable outlays for patients who can’t afford it,” Rosenthal said in a separate presentation. “We still have to figure out a way to get those initial price tags down.”
Rosenthal ticked off some dramatic comparisons to underscore the rise in healthcare costs in the United States. “In 2012, childhood vaccines averaged more than $1,700 to immunize a child against childhood diseases to the age of 18, versus about $70 in 1990,” she said. “The cost of our hospital stay is many, many times what it is in other countries. And we don’t get better results for that.”
According to research published by the New York Times, a day’s stay in a hospital averages more than $4,200 in the United States, and can range as high as $12,500, Rosenthal said. That compares with an average of less than $1,500 in Australia, $853 in France, $731 in the Netherlands, $476 in Spain and $429 in Argentina.
Bending the healthcare cost curve nationally won’t be easy. There’s no simple fix, said Mark Pauly, Bendheim professor of healthcare management at the Wharton School of the University of Pennsylvania, who joined Ignagni in the talk on healthcare economics.
Much of the dramatic rise in health spending over the past two decades, Pauly said, has been driven by factors like expensive new technology; an insurance system that historically has shielded patients from much of the cost impact of lab tests, MRIs and other health services; and the fact that “we pay healthcare people better than almost any other country.”
“In terms of controlling healthcare spending growth, we know how to do it, but it’s hard to know how to do it in ways that do more good than harm,” Pauly said.
“The bottom line is we could have lower healthcare spending growth if we’re willing to have lousy new technology, terrible job [growth] in the healthcare sector, more skin in the game [by patients] and a continuous political debate about healthcare reform,” Pauly said. “To get lower prices [for care], we’ll have to give up something.”
Americans covered under the Affordable Care Act still face an out-of-pocket maximum expenditure of $6,350 in potential annual health costs, according to several conference panelists. “We’re all facing greater co-pays, deductibles and out-of-network issues,” Rosenthal said. “Americans aren’t accustomed to these kinds of charges … [especially] in an era of stagnant wages. How do you educate people to learn the language of health insurance?”
That question is clearly on the minds of federal health officials. As reforms continue to roll through and transform different sectors of the nation’s healthcare system, Tavenner said, “there is going to be more and more personal responsibility” for patients, along with more choices that will have to be made. That will require a big and ongoing commitment to “consumer education,” she told participants.
It also will require new thinking from all health providers and stakeholders, and an insurance industry and health plan payment system that supports continuing innovation and new approaches to patient-centered, cost-effective and holistic care. “Our job is to help consumers balance access and affordability by recognizing that premium costs are something they are very focused on,” AHIP’s Ignagni said. “So we’re [supporting] things like disease management … and significantly increasing care coordination and disease management. We’re doing tailored networks. We’re doing a whole range of things to support consumer choices wherever they are on that spectrum of choice.”
Added Bernard Tyson, chairman and CEO of Kaiser Permanente, “the ACA has been both a positive and a negative. It’s been a tremendous challenge in that there’s still a lot of uncertainty that’s being worked through in this country.”
One big source of that uncertainty, Tyson said in a talk at the Health for Tomorrow conference titled “Transforming Health Care to Achieve Affordability,” is whether the vision of universal coverage for Americans is sustainable. “We have no idea at this point what the risk level is of this population because it’s too early to tell,” he said. “We’re going to work to figure all of that out.”
‘Health for Tomorrow’ summit explores future of U.S. healthcare delivery
“We have a system that needs fixing.”
That comment on the state of the nation’s healthcare system, shared by physician and New York Times correspondent and senior writer Elisabeth Rosenthal, served as the springboard for a high-level summit on the future of health care in the United States. The event drew a who’s who of nationally known health experts, scientists and government officials.
(For the full chain pharmacy section of DSN's Aug. 25 issue, click here.)
Rosenthal, author of a yearlong special series in the Times titled “Paying Till it Hurts,” moderated the event, dubbed the New York Times “Health for Tomorrow” conference. Held in late spring on the campus of the University of California-San Francisco, the summit featured a range of experts, including Marilyn Tavenner, administrator of the Centers for Medicare and Medicaid Services; Toby Cosgrove, president and CEO of Cleveland Clinic; Bernard Tyson, chairman and CEO of Kaiser Permanente; Diana Dooley, secretary of California’s Health and Human Services agency; and Eric Topol, director and professor of genomics at Scripps Translational Science Institute.
Speakers and panelists at the daylong summit grappled with a host of issues surrounding the nation’s fractured healthcare system, the impact of health reform and possible solutions to the urgent challenges of unsustainable health costs, patient access, rising chronic disease rates and new technologies.
Those challenges are considerable, conference speakers agreed. But along with the hurdles to better, more cost-effective care they explored throughout the day, participants also offered plenty of ideas aimed at putting the nation’s $3 trillion-plus healthcare system on a path to a more sustainable, rational and integrated network of patient-centered care.
Underlying much of the discussion: the need to align health spending more effectively with the goals of improved patient outcomes, healthier behaviors and a reimbursement system that will “change the incentives to wellness,” in Dooley’s words.
“The system of delivery of care and the incentives for that are dramatically changing, and California has embraced that,” Dooley added. “We will have to push the system to create this integration and coordination of care.”
Much of the discussion at the summit revolved around health reform spawned by the Affordable Care Act. “The ACA,” Dooley said, “is changing everything about health care. The theory is that if you have everyone in a system of care, you can manage their care earlier and avoid catastrophic circumstances to a larger degree. But it also creates the opportunity for payment and delivery reform” as the focus by health plan payers and insurers shifts to wellness and disease prevention.
Leading health systems like Cleveland Clinic are helping to drive the revolution in patient-centered wellness programs, disease management and accessible, community-based care, Cosgrove said.
“As a healthcare industry and frankly, as physicians who are going to lead this [change], we have to create a vision of greater health care and what we want it to be, and take the steps that will get us there,” he told an audience of physicians, health plan administrators, insurance experts and other stakeholders. “We have a once-in-a-century opportunity to make a new healthcare delivery system that can be better for everybody. And we have to remember that the reason we’re in health … is so that we can look after and take care of people.”
Nexium 24HR’s impact: How top brands respond
In May 2014, Pfizer introduced Nexium 24HR, one of the top-selling acid blockers, over the counter in the United States. Nexium has been a leader in prescription acid blockers for more than 10 years, and its approval to be sold as an OTC medication makes it much more accessible to consumers. Nexium has clearly found its place in the OTC antacid category in the short time it has been available, but how have other top brands responded? How has this introduction affected both retailers and consumers?
(For the full report, including charts, click here.)
DSN has partnered with Competitive Promotion Report and IRI to create an exclusive report on the initial impact Nexium has created in the OTC antacids category. This analysis looks at the changing trends in sales, list and retail prices, and retailer margin of top national brands of competing OTC acid blockers.
For drug retailers, Nexium has contributed to a nearly 30% increase in incremental retail dollar sales year over year — about $10.1 million in OTC acid blockers alone for June and July. At an average retailer margin of 24.7%, it added another $2.5 million margin dollars to the OTC drug channel. Additionally, as with any large new product introduction, increased advertising draws more consumers, who, in turn, benefit from increased competition in the marketplace.
While all this is beneficial for drug stores, it is at the expense of Nexium’s competitors. While the actions to be taken by competing brands are not yet known, it will be interesting to observe how each competitor responds to this important development, as well as to each other’s actions. Specifically, Prilosec, Nexium’s leading OTC competitor did not immediately show a noticeable change in promotional strategy, as its mix of promoted units stayed essentially static through the months of June and July. The lack of competitive pricing and more aggressive promotional strategies to brace the impact of Nexium’s presence allowed Nexium to take immediate control of the antacids category.
The following are some additional findings in the study:
- Dollar sales of Nexium’s competitors dropped by an average of 19% in the two months following Nexium’s introduction as an OTC.
- Nexium surpassed Prilosec, the leading acid blocking brand, in July 2014 and is poised to become the dominant brand in the OTC antacids category.
- Total OTC acid blocker units increased by 570,714 year over year in the drug channel. Nexium accounted for 691,325, meaning Nexium has added consumers to the category but also has drawn away sales from other brands.
- Though Nexium and Prilosec are similarly priced at retail, drug stores are positioned to benefit further from the introduction of Nexium, with it providing an additional 5.5% more in margin per unit than Prilosec.
- Pfizer is the only manufacturer to gain ground in antacid tablet retail sales between May and July. Total private label dropped by 4.8%. Prilosec dropped by 21.2%.