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June 2021 Industry Updates
Medicaid Could Save Billions in Prescription Drug Costs With Increased Survey Participation
Mandating National Average Drug Acquisition Cost survey (NADAC) responses from all pharmacies could save more than $10 billion in the next decade, a new report says.
The NADAC report is compiled from data collected in a voluntary monthly survey conducted by the Centers for Medicare & Medicaid Services to establish benchmark prices for drugs in retail pharmacies.
Researchers estimate that Medicaid plans could see potential annual savings of $937 million if all retail pharmacies report acquisition prices to the NADAC survey and $155 million if NADAC surveys expanded to create prices for over 1600 more products.
The report, funded by Capital Rx and conducted by 3 Axis Advisors, compared pricing data in voluntary and compulsory NADAC reports between the third quarter of 2019 and second quarter of 2020. Because the NADAC survey is voluntary, researchers based compulsory data on that of Alabama, a state that has its own mandatory survey of prescription drug costs.
NADAC prices are lower than traditional pricing benchmarks that are based on manufacturer-set list prices, such as average wholesale price and wholesale acquisition cost (WAC). Most states use NADAC data to pay for prescription drugs covered by Medicaid, but the survey only has a response rate of approximately 20%, which limits its scope and pricing accuracy.
Researchers noted that Medicaid plans could save an average of 22% per drug with compulsory reporting. Nearly 1600 products included in Medicaid that do not have NADAC prices represent $3.7 billion in annual Medicaid costs. If they were to have a NADAC price, they could be discounted 4%, relative to WAC.
The study does not address additional potential savings for commercial payers, Medicare Prescription Drug Plans, or Medicare Advantage Plans. —Maria Asimopoulos
CMS Data Shows Decline in Mental Health Service Utilization
Medicaid and Children’s Health Insurance Program (CHIP) beneficiaries utilized mental health services 22% and 34% less, respectively, in 2020 when compared to the previous year, according to a new Centers for Medicare & Medicaid Services (CMS) report.
“Although utilization rates for some treatments have rebounded to pre-pandemic levels, mental health services show the slowest rebound,” said CMS in a press release. “The gap in service utilization due to the [public health emergency], particularly for mental health services, may have a substantial impact on long-term health outcomes.”
Adults aged 19 to 64 years used 12 million (22%) fewer mental health services and 3.6 million (13%) fewer substance use disorders services between April and October 2020. CHIP beneficiaries used approximately 14 million fewer mental health services. Utilization appears to keep declining despite evidence suggesting that more adults are reporting adverse mental health conditions throughout the pandemic.
The report also compared COVID-19 treatment and utilization of various other services through October 2020 using the CMS’s Transformed Medicaid Statistical Information System Analytic Files, which gathers data from providers, managed care agencies, and pharmacy benefit managers monthly.
In addition to decreased mental health service utilization, the data also indicated a 9% (1.8 million) decline in vaccinations for children up to age two, 21% (4.6 million) fewer child screening services, and 39% (11.4 million) fewer dental services.
Telehealth screenings, however, have seen a 2700% increase between 2019 and 2020, with the largest increases among adults aged 19 to 64 years and children aged 18 years and younger.
Over 1.2 million Medicaid and CHIP beneficiaries received COVID-19 treatment and 124,000 were hospitalized through October. Additionally, Medicaid and CHIP paid for more than 9.9 million COVID-19 testing services during the period of study.
The report noted that services covered by Medicare were not included in results, so data may not reflect the full scope of COVID-19 treatments where beneficiaries were dually eligible.
“More than 100 million Americans, including 43 million children, relied on us to deliver access to mental health and other services they needed through Medicaid and CHIP in 2020,” said CMS Acting Administrator Liz Richter. “While we’re encouraged that people are accessing some health care services at pre-pandemic levels, there is work to do to connect people to mental health care services and to ensure we fill the gap in other types of services that was caused by the pandemic.”—Maria Asimopoulos
Generic Drug Price Spikes Cost Medicaid Millions
Generic drug product cost spikes cost Medicaid approximately $1.5 billion over 3 years, according to a report published in Health Affairs in May.
The report analyzed Medicaid State Drug Utilization Data from 2012 to 2018 to identify price changes in 11,390 generics. Generics currently account for approximately 90% of all prescriptions filled in the United States.
Per the report, 1 of every 5 generic drugs experienced a price spike between 2014 and 2017 initiated by at least one manufacturer.
The costliest spike was Akorn’s lidocaine 5% ointment in 2015, which cost an estimated $58 million in excess. Spikes for clobetasol propionate 0.05% topical drugs by three manufacturers resulted in $191.1 million excess spending.
Price spikes can be caused by several factors such as number of manufacturers, route of administration, and shortages. Drugs produced by three or fewer manufacturers accounted for 64% of price spikes.
Spikes are most common in injectable drugs as opposed to those administered orally or topically, said the report. Of 542 drugs that experienced at least one price spike in the 3-year span, 51% were injectable.
Researchers also noted a trend toward fewer price spikes over time, dropping from 7.8% in 2014 to 5.8% in 2017.
Almost a third of generics were still made by a single manufacturer in 2017, resulting in policy makers’ interest in increasing competition to lower prices. Researchers wrote that “a surprising number” of drugs with eight or more manufacturers experienced price spikes, which suggests that more competition may be an insufficient solution on its own.
The report’s findings support initiatives to address shortages, such as those launched by the FDA in 2019. Others have proposed market solutions such as long-term contracts out of concerns that low prices will encourage generic drugmakers to exit certain markets.
As of 2017, the Medicaid Drug Rebate Program’s goal is to ensure that price spikes will have little to no effect on Medicaid spending. Researchers noted that spikes will, however, continue to affect expenses for commercially insured and Medicare enrollees. —Maria Asimopoulos
Corporate Executives Call Rising Health Care Costs Unsustainable, Favor Greater Government Interventions
Top executives at large US companies believe that the cost of health benefits for employees is excessive, and more government policy is needed to address coverage-related expenses, according to a study published by the Kaiser Family Foundation (KFF).
The survey, commissioned by the Purchaser Business Group on Health and KFF, was conducted by Beresford Research throughout December 2020 and January 2021. Researchers interviewed executive decision-makers at 302 private companies and found that a significant majority (87%) believe that the cost of providing benefits “will become unsustainable in the next 5 to 10 years.”
“The COVID pandemic has made even more clear the problems with our current system, including high costs, incomplete coverage, limited access to care, under-investment in public health, and serious racial and ethnic inequities,” researchers wrote. “Large employers are a primary source of private coverage, and thus are important stakeholders who will be influential in policy debates.”
Respondents did not blame one single factor, but most said that the cost of prescription drugs, provider consolidation, fee-for-service payments, and the population’s unhealthy behaviors are “moderate” to “very large” factors driving expenses.
The bulk of executives said that employers can collectively change costs, although most believe greater government involvement would be better for the business (83%) and employees (86%). Respondents who favored greater government intervention said it could reduce premium costs for employees (43%) and costs for employers (42%).
Respondents overwhelmingly supported government policy interventions such as antitrust and anticompetitive conduct laws (92%), and improvements to pricing transparency and total cost of care (90%). Fifty-six percent also believe policymakers should support the development and use of generics and biosimilars.
Findings indicated that many executives at least slightly support current proposals such as lowering the Medicare eligibility age to 60 years and creating a public option. Researchers note, however, that this may be due to a lack of detail about how these options would be implemented.
Respondents also noted some disadvantages with government interventions. The two most significant concerns were that the government does not have the best track record with running big programs effectively (43%) and that lawmakers will not reduce costs because they receive too much campaign money from the health care industry (41%).
“The new political landscape may portend a new and more viable discussion of expanded roles for government in providing health coverage and restraining prices and costs,” researchers noted. “While this has long been controversial, the results of this study suggest that the employers are frustrated by the current health care system and their limited opportunities to address cost and that they may be open to options that involve a broader role for government.” —Maria Asimopoulos
Post-Discharge Services Associated With Reduced Readmissions and Costs
Institutional outpatient care, home health care, and primary care physician visits after discharge from an index admission (IA) are associated with reduced readmission rates, length of stay (LOS), and costs, a new Journal of General Internal Medicine study showed.
Researchers sought to investigate the association between unplanned 30-day readmission, LOS, and inpatient costs, and different post-discharge services administered at 7-, 14-, and 30-day intervals.
The study evaluated outcomes for seven types of post-discharge services including institutional outpatient, primary care physician, specialist, nonphysician provider, emergency department (ED), home health care, and skilled nursing facility. Participants included 583,199 all-cause IAs from 2014 Medicare fee-for-service beneficiaries that met IA inclusion criteria.
The probability of unplanned 30-day readmission was 0.1176, average readmission LOS was 0.67 days, and average cost was $5648.
Researchers found that these rates decreased with utilization of institutional outpatient, home health care, and primary care physician visits at all time intervals. Specialist visits were associated with an increase in all outcomes at 7 and 14 days but a decrease at 30 days, and ED visits were “strongly associated” with increases no matter the time interval.
Post-discharge services’ varied impact on readmission, LOS, and costs should be taken into consideration when providers coordinate post-discharge follow up, although more research is needed to understand the driving factors behind these findings, the study noted. —Maria Asimopoulos
Higher Costs, Care Burden for Patients With Dementia in ACOs Compared With Medicare Advantage
Decedents with dementia covered under accountable care organizations (ACOs) did not experience less costly or potentially burdensome end-of-life care than those with traditional Medicare (TM) despite ACOs’ cost incentives, according to a new study published in the Journal of American Geriatric Society.
The study compared end-of-life care for patients with dementia enrolled in TM with those covered by Medicare Advantage (MA) and ACOs, which both operate under incentives to reduce cost and care burden. Only MA enrollees experienced less costly care than those with TM, which would suggest that ACOs need policy changes, researchers concluded.
Researchers evaluated 370,094 dementia decedents who had a nursing home stay between 91 and 180 days before death, two or more functional impairments, and cognitive impairment ranging from mild to severe. Of those:
- 93,801 (25.4%) were in enrolled in MA (mean age 86.9, 67.6% female);
- 39,586 (10.75) were ACO attributed (mean age 87.2, 67.3% female); and
- 236,707 (63.9%) were enrolled in TM (mean age 87, 67.6% female).
In the last month of life, 27.9% of TM enrollees and 28.1% of those ACO attributed were hospitalized, compared to 20.5% of MA enrollees.
Researchers found an adjusted odds of hospitalization in the last 30 days of life to be 0.72 among MA enrollees and 1.05 among those attributed to ACOs, relative to TM enrollees. Adjusted odds of death in the hospital were 0.78 among MA enrollees and 1.02 among ACO attributed patients. Additionally, MA enrollees were less likely (0.80) to use invasive mechanical ventilation than those in TM.
The study accounted for sociodemographics, functional and cognitive impairments comorbidities, and Hospital Referral Region to determine adjusted odds. —Maria Asimopoulos
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