When the Payer IS the Player - Pharmaceutical Executive

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When the Payer IS the Player
As Medicare, Medicaid, and the nation's vast web of private payers consolidate and gain market power, how can pharma stay ahead of the cost-containment curve? Pharm Exec hosts a conversation between two experts on each side of the payer and pharma divide


Pharmaceutical Executive


PE: Is it inevitable that the US will have to adopt a more European-type model, where Medicare is the single major player and other payers just follow its lead?

TS: I think that private payers are actually waiting for that—on a range of issues from oncology management to dealing with biosimilars. There's certainly a desire among private payers to use what Medicare does as cover. But Medicare's not taking action at the pace that some would hope, so some large private payers will probably lead the way on certain issues.

I don't think the US healthcare system will ever get to a point where there is a single dominant player. There will always be a lot of private players because of the desire to maintain competition. As a result, the US healthcare system will remain fragmented, despite consolidation that is taking place right now in the private sector. And while the government is prohibited from making coverage decisions based on cost, the Part D payers—Part D being implemented by private plans—do make formulary decisions based on cost.

JH: The European countries are appreciating their leverage—they're less afraid to do so, and there's more of a political or governmental agreement to do so. But given the US marketplace and political landscape, I don't believe Medicare will ever get that kind of stature.

TS: Medicare has tried cost-containment policies in the past, such as the concept of "least costly alternative," to try to manage their reimbursement rates. But a couple of court decisions have said that Medicare doesn't have the authority to do that. So it would require legislative action to gain that authority, and following the reforms and the amount of political capital that was spent to get those through, I don't see something as controversial as letting Medicare make decisions based on price happening any time soon.

JH: I don't see that happening in our lifetime or in any lifetime, probably. Fairly or not, it smacks too much of this great political statement of Big Brother stepping in, and that's viewed as so fundamentally un-American.

PE: With that note of agreement on the one thing that is certain not to happen, I will conclude this conversation. Thank you very much.


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