Anthem, Eli Lilly Announce Initiative on Drug Prices

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By Sara Hansard

Jan. 29 — Anthem Inc. and Eli Lilly & Co. Jan. 29 announced a collaborative initiative to find a solution to the high cost of prescription drugs.

Current regulations can have a “chilling effect” on pre-approval communications by drug developers about the efficacy or safety of a new medicine, but health plans need the information to price drugs in advance, the blog posting said. In addition, anti-kickback statutes and Medicaid best-price rules discourage value-based pricing arrangements aimed at creating incentives structured around the efficacy of a drug in patient populations, it said.

“While the rest of the health care system is moving toward paying for value, payments for drugs largely continue to be stuck in a 20th century construct that focuses on price, regardless of the health outcomes of each patient,” Sam Nussbaum, Anthem's former chief medical officer and currently chair of an alternative payment model work group in the Centers for Medicare & Medicaid Services's Health Care Payment Learning & Action Network, and David Ricks, Eli Lilly's senior vice president, wrote in a Health Affairs blog posting.

Health insurers have raised alarms about skyrocketing prices for innovative pharmaceuticals that are providing cures for diseases that were once death sentences. The CMS's Office of the Actuary Dec. 2 reported that retail purchases of prescription drugs, the third largest category of health-care spending in 2014, increased 12.2 percent from 2013 to $297.7 billion, compared to increases of between 4 percent and 5 percent during the same period for hospital and physician costs.

Value as Total Costs for Patient

“Paying for value requires evaluating new treatments in the context of total health costs for the patient,” Nussbaum and Ricks said in the blog posting. Value could be measured according to improvement in outcomes over a previous standard of care, or value could recognize that certain individuals may experience better results than others, they said.

“What we're hoping to achieve is really to nudge the debate on high-cost drugs in a more productive and actionable direction,” Tony Mader, vice president of public policy, for Indianapolis-based Anthem, told Bloomberg BNA in a telephone interview Jan. 29. With more than 38 million enrollees, Anthem is the nation's second-largest health insurer based on membership behind UnitedHealth Group Inc.

The policy issues highlighted in the blog posting could be addressed by Congress or the administration, he said. “I would expect there's going to be interest and we'll be talking to interested folks in the administration, interested folks on Capitol Hill,” he said.

Like Anthem, Eli Lilly is also based in Indianapolis and “we talk with them quite a bit,” Mader said. “We wanted to work with them to see if we could find common ground,” he said.

Predicting Prices Important for Insurers

The ability of drug manufacturers and health insurers to communicate with each other before a drug is approved by the Food and Drug Administration would help insurers predict costs in advance, John Rother, executive director of the Campaign for Sustainable Rx Pricing (CSRxP), told Bloomberg BNA in a telephone interview Jan. 29. The CSRxP is a coalition of hospitals, doctors, insurance companies, employers and consumers.

“This is a reflection of what happened with Sovaldi,” Rother said. The Gilead Sciences, Inc. hepatitis C drug was approved by the FDA in December 2013, and the manufacturer's price tag of $84,000 for a typical patient “really played havoc with the insurance financial system” since premiums had already been set for the following year, he said.

More importantly, Rother said, is the potential to move drug pricing toward performance-based pricing like hospital and physician payments. “If you had a new drug and you tracked the impact of the drug and it showed it saved substantial hospitalization costs then presumably the drug is worth more than if it just had a very marginal impact,” he said.

Having varied pricing depending on performance “is not really possible today under the best-price Medicaid rules,” under which Medicaid is guaranteed set discounts, Rother said. Under a value-based system Medicaid also could save on hospital costs, he said. “The burden would be on the drug manufacturer to demonstrate savings.”

Mader said that even with policy changes “there are operational challenges with value-based contracting.” However, hospitals are meeting operational challenges in implementing value-based pricing in accountable care organizations, he said. “The operational issues can be overcome,” he said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Nancy Simmons at nsimmons@bna.com

The Health Affairs blog posting, Discovering New Medicines And New Ways To Pay For Them, is at http://healthaffairs.org/blog/2016/01/29/discovering-new-medicines-and-new-ways-to-pay-for-them/. Anthem and Eli Lilly also posted a white paper, “Promoting Value-Based Contracting Arrangements.”