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AHIP: The role of payer and pharma in affordability of drugs

Value-based agreements are increasing between health insurers and pharmaceutical manufacturers.

Susan Morse, Managing Editor

Susan Dentzer, AHIP, Eric Schulz, Harvard Pilgrim and David Ricks, Eli Lilly, in Austin.Susan Dentzer, AHIP, Eric Schulz, Harvard Pilgrim and David Ricks, Eli Lilly, in Austin.

Payer and pharma got together to talk about the balance between innovation and the affordability of prescription drugs, and how both organizations can work together.

Eric Schultz, president and CEO Harvard Pilgrim Health Plan, and David Ricks, chairman, president and CEO Eli Lilly and Company, shared the stage at America's Health Insurance Plans Institute & Expo in Austin on June 8.

Value-based agreements are increasing between health insurers and pharmaceutical manufacturers.

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"Now is the time for collaboration and innovation," Ricks said. "We spend 18 percent of GDP on healthcare."

[Also: Insurers more likely to cover new drugs, treatment of hepatitis C for children]

Drug increases have come under a national spotlight with some pharmaceutical companies such as the makers of EpiPen and Daraprim, standing out for hiking prices.

"EpiPen, Valeant, we get painted with that brush. That's not helping us," Ricks said. "We'd like that to go away."

"The prices that we're seeing are unsustainable," said Schultz who said he heard that "seven is the new three."

That means a drug price increase to $300,000 is now $700,000. A million dollar drug for one person with a rare condition puts an additional $1,000 burden on every beneficiary.

"What I believe we need," Schultz said, "instead of having hundreds of insurance companies coming up with what coverage should be on new therapies, I believe there should be some independent entity that can come up with a value. What is the value of this drug - look at the cost, the impact on life. I believe as a consumer I would appreciate knowing what's the value of these new drugs coming forward."

[Also: Turing Pharmaceuticals to cut Daraprim costs for hospitals only after outcry over Martin Shkreli's price hike]

That independent entity could be the Institute for Clinical and Economic Review, or ICER, he said.

Health plans and innovators are talking about forecasting expenses before drugs come to market. Ricks said.

"There is value for things like ICER which can predict pricing," Ricks said. "We think a better way to determine value is in health plan value experience."

Drug manufacturers spend a lot of money on research and development.

"If it works, we'd like to know there's a market for that," he said. "What we're not is interested in short-term arbitrage because of market scarcity."

Ricks said increased competition is a better answer than price control. And having a Food and Drug Administration that would more readily approve substitutes and alternatives.

Supply gaps are an issue, and not because of price, he said. "A third issue is list price changes."

The list price is escalating though discounts and rebates can cut that in half. But this means consumers are paying more at the pharmacy.

[Also: Mylan will pay $465 million settlement over CMS classification of epipen for Medicaid Drug Rebate Program]

"We're shifting the burden of the product across the system," Ricks said. "Keep the net price now, which is what we're doing."

This is the right time for collaboration because there's new innovation in drugs and therapies, such as new cancer medication, according to Schultz.

On 12 of Harvard Pilgrim's contracts, there's an incentive for pharmaceutical companies to negotiate.

The role of the consumer is growing as well as more emphasis on transparency.

When one new drug came out for $96,000, there was a discount in the 50-percent range.

"How do you come up with $96,000 for a six month supply of pills?" Schulz said. "That's the piece we have to put pressure on. We're going to bump into each other, but learn along the way."


Twitter: @SusanJMorse