National Employer Initiative on

Specialty Drugs & Biopharma

Employer Focused, Employer Driven

Innovation Flourishes at a Time Of Benefit Coverage Uncertainty

Fall 2012/F. Randy Vogenberg, RPh, PhD

Now that the Affordable Care Act (ACA) has survived a Supreme Court challenge, major structural changes to our healthcare system — only some of which have been reported by the press — will be implemented between now and 2020.

The ACA will impose sweeping new requirements on self-funded commercial health plans (employers, unions, and municipalities) between now and 2014. Because of these changes, plan sponsors will need to make significant revisions to their business plans and administrative practices. State-based health insurance exchanges will change the marketplace in states moving forward with them. And Medicaid will have a significant impact on state budgets, policy, and — courtesy of the Supreme Court — the potential for adverse cost shifting to employers.

As a result, there is a fluidity in healthcare. At the same time that we are facing increasing health benefit costs and economic uncertainty, there is an uplifting drive toward a new understanding of pathophysiology and cellular-level receptor interactions in pharmacotherapy. For example, two Bristol-Myers Squibb drugs enable the immune system to recognize and attack cancer cells. Researchers say the drugs work against several types of cancers, significantly shrinking tumors in some patients with advanced skin, lung, and kidney cancers. Most of the patients whose tumors have responded significantly to the treatment have experienced a long-term benefit (Winslow 2012).

Other researchers are reporting similar gains in cystic fibrosis, Alzheimer’s disease, and rare diseases. Not to be left out of technological innovation, traditional medications are being reformulated — combined into unique dual or triple therapies in a one-dose form (see ASCO roundup on page 7). But not all have had clear sailing on the way to profitability.

One example that involves the U.S. Food and Drug Administration, pharmacies, hospitals, and a manufacturer is exclusivity for a reformulation of an old drug that is used in obstetrics and preterm labor (Armstrong 2011). Do novel formulations and FDA approval imply an advantage and should that influence healthcare coverage? Even more broadly, is paying for innovative dosage forms or biotech products required as a social insurance mandate or do we still operate under the rules of health insurance (Parker 2012)? The ACA has yet to resolve the complicated issues of adverse selection, moral hazard, and the extent to which obtaining health insurance is an individual’s voluntary decision.

As the focus turns from science to economic considerations, a balance is being struck in American society.  A reasoned value proposition that addresses both clinical and economic considerations has become an important research goal. Commercial plan sponsors and clinical providers are also showing a similar interest in the value proposition.

And the economy still trumps everything in nearly every country on our planet — particularly now. So how will the next president deal with immediate funding issues? And how will governors balance their state budgets?

For biotech startups and big pharma, private equity capital has dried up as investors seek faster returns and focus on the question “Who is going to be able to pay for the new drug technologies?” (Timmerman 2012).

As uncertainty about our health delivery system and benefits continues under ACA implementation, will medical treatment innovations find the right balance in meeting the needs of all patients in an economically sound way?