Pricing and reimbursement: industry gets the squeeze
Pricing has been transformed in the last decade, with a new configuration of stakeholders that has substantially altered the
power equation in favor of the payer. During his second term, US President Barack Obama persuaded Congress, as part of a long-term
deficit reduction deal, to require the federal government to purchase drugs for the Medicare Part D program directly from
manufacturers, via a bid system. Gone is the era of the $4 pill. Today, prices paid to Big Pharma by the government are closer
to Veterans Administration formulary prices. That $4 tablet is now purchased by the federal entitlement programs for 75 cents.
Spurred by negative publicity from a series of Senate and House committee hearings about the high profit margins from drug
pricing in the private sector, prices obtained from the big PBMs and managed care insurers—whose enrollments have been swollen
by millions of new customers enlisted through the 2010 Affordable Care Act – have fallen by an average 35 percent. Pharma
company CEOs, discredited by years of publicity about excessive pay and stock options, were unable to defend why published
US prices were often double those in Western European countries with similar levels of wealth.
If that were not enough, the three remaining large PBMs have leveraged their market clout to render their own interpretation
of "value-based pricing" for their Managed Care clients. In essence, pharmaceutical companies are being forced to cap estimated
MCO expenditures for a therapeutic category. Big Pharma has reacted to the price pressure by purchasing reinsurance to protect
itself from an escalating cycle of unpredictable financial risk. The fact is that government has taken de facto control of
the entire US healthcare system, setting price precedents that are subsequently applied by the giant PBMs to the entire patient
Technology assessment: precision tools for personalized medicine
It is now common to genotype each patient entering a physician's practice. From this information, physicians know which drugs
are likely to work for each patient, instead of the old hit or miss strategy prevalent back in 2010, where a drug might help
anywhere from 60 percent to 85 percent of patients, and sometimes much less. What were once considered blockbusters are only
semi-blockbusters as the medical profession applies the evidence that shows some products cannot be used for all patient types;
other therapies previously considered "me too" imitators have moved up in the physician prescribing ranks since they have
been identified as the optimal drug for some patient genotypes.
The good news is that intensive research using new processing and analytical tools has given new life to compounds that had
been shelved for failing to demonstrate efficacy on their own, but which perform spectacularly as fixed-dose combinations.
Industry researchers are discovering that discarded ACE inhibitors that barely lowered blood pressure, when combined with
a diuretic or calcium channel blocker that fared equally poorly alone, work in combination better than anyone could imagine.
This new concept of attacking diseases from multiple angles has opened up huge new opportunities for treatment, particularly
in high-profile diseases like cancer.
Technology innovations in computer assisted order entry has simplified prescribing and reduced adverse events and drug interactions.
The result is that nearly all prescriptions are being written at the correct dosage for patients. Over the last five years
almost all medical practices, clinics, and hospitals have switched over to electronic health records, which includes direct
prescribing on hand-held computers right in the examining room. The physician wanting to prescribe lovastatin will see a screen
that says this patient's insurance covers only simvastatin and pitavastatin, and since pitavastatin is not metabolized in
the liver, it would be a better choice for the hypothetical Mrs. Jones. The prescription generated on the computer is e-mailed
to the patient's preferred pharmacy where there are no mysteries or guessing—handwritten prescriptions are a relic of the
Even more dramatic is the way in which the patient interacts with the healthcare system. In 2020, patients access the system
by either phone or e-mail to an assigned patient care manager, usually a nurse with advanced training, employed by their insurer.
The patient explains the symptoms and is directed to a website that employs artificial intelligence and asks about 15-25 questions
customized on the basis of the patient's cumulative health record. So the patient complaining of gastritis will be asked if
the pain is constant, or localized in a standing or sitting positions; and whether it occurs after a spicy meal. The website
will then tell the nurse practitioner that the problem is 85 percent likely to be simple indigestion, and will further present
options for follow up by an MCO employed physician who can order diagnostic tests able to uncover something more serious.
These website diagnosing modules will be in place for nearly all of the most common chronic medical conditions by 2020.