0
Q
Define social justice
A
Idea of collectivism and restraining of markets applied to health care. Role of distributing social (collective) goods assigned to govt. national healthcare programs
National - supply side rationing. Planned rationing
1
Q
Define market justice
A
Capitalism and free markets applied to health care. Role of distributing economic goods is assigned to the market
US - demand and price rationing
2
Q
Limits of market justice
A
Social justice becomes unavoidable when dealing with human populations
(Housing transportation education healthcare)
People in ill health place economic burden on society.
Critical care provide to the uninsured
Human problems have broader implications for society
3
Q
Define health economics
A
Study of supply and demand of health care resources and impacts on population
Efficient allocation of scarce resources
4
Q
Forces shaping medication use policy
A
Govt Private Accredited and QI Science Patients Specialty organizations
5
Q
Supply and demand
A
Market equilibrium
Buyer determines demand
Seller determines supply
6
Q
Types of markets
A
Perfectly competitive Oligopoly Monopoly Monopolistic competition Monopsony Oligopsony
7
Q
Oligopoly
A
Small number of competitors
Not always aggressive competition
8
Q
Monopoly
A
One seller which controls price
Sole supplier
Cost dictated by supplier
9
Q
Monopolistic competition
A
Many competitors with slightly differentiated products
Each seller may set price for own product
10
Q
Monopsony
A
One buyer which controls price. Like electric boat and subs
Buyer has market power
11
Q
Law of demand
A
Other things equal then quantity demanded of a good falls when the price rises
Movement along the curve when change price
12
Q
Demand curve - substitutes
A
When fall in the price of one good reduces the demand for another good
13
Q
Demand curve - complements
A
When the fall in price of one good increases the demand for another good.
14
Q
Supply
A
Quantity of goods that a seller is willing and able to sell
As quantity supplied increases price increases
15
Q
Elasticity
A
Measure of the sensitivity of change in one variable to another
% change in one variable given a 1% change in another.
E= %change in quantity/ % change in price
Sign positive or negative tells the directionality
16
Q
Elasticity of demand
A
E > 1 elastic demand
E < 1 relative inelastic
E = 1 unit elastic
E = 0 perfectly inelastic
17
Q
Inelastic demand
A
Change in price have little impact on quantity demanded
18
Q
Highly elastic demand
A
Small changes in price impact quantity demanded
Ex automobiles. Groceries
19
Q
Types of production costs
A
Fixed Variable Average Marginal/incremental Opportunity
20
Q
Define fixed costs
A
Costs to keep doors open
Overhead
Not affected by changes in production
21
Q
Variable costs
A
Change with level of output
Ex supplies and staffing
22
Q
Average costs
A
Total costs/quantity produced
Total costs = fixed + variable
23
Q
Marginal costs
A
Cost per additional unit produced increases
Cost to make one more unit of output
Diminishing marginal returns
24
Opportunity costs
Costs of what you sacrifice to get it
Cost of other alternative forgone
25
Perfect competition
Many firms selling same product
Many buyers
No restrictions on entry to industry
Firms in industry have no advantage over new entrants
All firms must accept market price
Price takers
Firms and buyers have complete info about the market
26
Economics of health
```
Inelastic demand
Universal demand
Unpredictability of illness
Health care as a right
Supplier-induced demand
Third party insurance and patient-induced demand
```
27
Functional components of health care delivery
Financing-employer Medicaid
Insurance- self insurance companies blue cross to protect against catastrophic risk
Delivery - providers like doctors hospitals any entity that delivers health care and receives insurance payments directly
Payment - insurance companies or third party claims processors
28
Before managed care
```
Direct access to any provider
Itemized billing to insurer
Few controls over the amt of payment
Sickness coverage only (no wellness)
Insurers just passive payers of claims
```
29
Define managed care
Body of clinical financial and organizational activities designed to ensure the provision of appropriate health care services in a cost efficient manner
Make health care more efficient and less wasteful.
30
Features of managed care
Negotiated fees (prefer prospective payment)
Gatekeeping - need referral to see specialist
Patient cost sharing or shifting (premiums increased. Deductibles increased)
Coordination of benefits
Preventative care and wellness programs
plan designs and coverage options
31
HMO
Health maintenance organization
Assumes or shares both financial risks and delivery risks associated with providing medical services
Usually for a fixed prepaid price
Gate keeping. Need prior authorization.
HMO act of 1973. Nixon. Allow to go out of network. Response to people saying plans too restrictive.
32
Managed care continuum
```
Indemnity
Indemnity plus cost containment
Ppo
Pos (point of service plans)
HMO
```
Manage quality cost and access
33
PBM
Pharmacy benefit manager
Provide external management of health plan or pharmacy benefits by applying managed care principles and procedures to contain cost and enhance quality
Arranges for rebates
34
AWP
Average wholesale price.
Roughly reflected actual acquisition costs
20% mark up on what retailers paid to wholesale r&d
AWP= 1.2xWAC
Sticker price. Price reported by mfg to publishing firms
Used for the last 20 years
35
WAC
Wholesale acquisition price
Manufacturers reported list price for Rx drug for sale to wholesale r&d
Does not include MFG discounts
Approximates costs for brands but not generics
Wholesalers sell to pharmacy about 2-3% above WAC
List price
Price sold to wholesalers
36
ASP
Average sale price
```
Under Medicare in 2003
Break from AWP
Based on MFG selling price including discounts and rebates
Substantially Less than AWP
Pay 104-106% above ASP (Medicare)
```
37
AMP
Average manufacture price
Medicaid 1990. Important to state.
Avg price paid to manufacturers for drugs through retail pharmacies
Reflects rebates paid to wholesale r&d and retail pharmacies BUT not PBMs Medicaid and 3 parties
38
MAC
Maximum allowable costs
Upper limit for reimbursement
Typically used for generics
Federal upper limit 150% of published price of least costly equivalent
Updated quarterly
39
U/C
Usual and customary
What the cash customer pays
Never less than contracted price
40
Public Health Service pricing 340B
Equal to price state Medicaid would pay (does not include discount or rebate)
Highest price a 340B could be charged
41
US health care expenditures - public vs private - 1960 vs today
1960 about 25% public
Today about 50% public
Public is federal state and local govt
42
National health care expenditure per capita. 1990 to 2019
1990 was $3000
Now about $10000
2019 expected to be $13000
43
```
How much of health care spent on
Hospital care
Physicians services
Other health care
Other personal health care
Prescription drugs
```
```
Hospital = $850B 30%
Physicians = $540B 20%
Other = $420B 15%
Other = $400B 15%
Prescription drugs = $260B 10%
```
44
Percent change in national spending on health services
Peaked during 2001-2006 (5-15%)
While still increasing not increases as much (3-5%)
45
Prescription drug spending. 1980-2010
1980. About 15B
| 2010 $100-260B
46
Growth in prescription drug spending as total of health
1999 peaked around 20%
| Now around 4%
47
Prescription drug expenditures bt payer type 1990 to 2008
Consumer out if pocket decreased from 56% to about 21%
This 30% difference split between private insurers and public fimunds with about 20% picked up by public funds (from 18% to 37%)
48
Pharmaceutical sales 1997 - 2008
80B in 1997 to over $200B in 2007
But not growing as rapidly as in late 90s
49
Number if blockbuster drugs with sales $1B
1996 about 7
Peak in 2006 with over 50
Biggest increase 1996 to 2002
50
Biggest blockbuster drug
Lipitor in 2006 with over $13B
51
2011 top product by total dollars
Lipitor
52
2011 top product by total prescriptions
Hydrocodone (over 58M scripts)
53
Brand name vs generics tend
Generics being prescribed more frequently
About 50% of scripts in 1998
In 2008 about 75%
In 2011 about 80%
54
Info on generics
Now 80% of all prescriptions
If generic available dispensed 94% of the time
Generics represent 27% of total spending
55
Specialty medicines
Increase by 15% from 2010-2011
Cost more than traditional meds
Some cost more than $10K per month
Not as frequently used by Medicare
56
Avg copayment with tiers
Generic $10
Preferred $20
Non preferred $30-40
Fourth tier $60-85
57
Prescription drug benefit cost and plan design by employer size
Larger employers use step therapy and quantity limits more than smaller ones
Also tend to have more controls in place
58
Medicare drug plan 2007
$265 deductible
Enrollee pays 25% up to $2400 plan pays 75%
Gap where enrollee pays 100% up to $5500
Then pay 5% and Medicare picks up 80% plan pays 15%
59
Brand drugs gap fix 2010-2020
Deductible $320
Enrollee pays 25% upto $2900
Then pays 25% and manufacturer picks up 50% discount and plan pays 25% up to $6730
Phase in plan coverage increase
60
Gap coverage plan for generics
Plan to pick up 75% by 2020 while enrolle goes from paying 100% to 25%.
61
Typical pricing algorithm
```
"Lower of"
AWP -%+dispensing fee
MAC + dispensing fee
Usual and customary
If move from AWP to AMP Then would increase dispensing fee
```
62
Medicaid drug rebate program
Requires drug mfgs to have a national rebate agreement with HHS to be on Medicaid formulary
15-23% of AMP or difference between AMP and best per unit price
Result of Medicare part D
63
Obamacare and drug pricing
| FUL
Federal upper limit no less than 175% of the weighted average of the AMP for multidirectional drug products
Expands access to 340b programs
Extends rebate program to Medicaid managed care
64
Evolution of pharmacy benefits management
```
Direct pay
Access oriented 3rd party admin
Price conscious 3rd party admin
Influence drug use process
Manage diseases
```
65
Components of pharmacy benefit
```
Benefit design
Network management
Claims processing
Customer & provider service
Formulary management
Drug utilization review
Pharmacy care services
```
66
Benefit design
```
Co-payments co-insurance
Step therapy
Therapeutic class management
Expenditure caps and deductibles
Provider communication
Contracting
```
67
Trends in benefit design
```
Stepped tiered copays
Stepped therapy
Value-based designs
Mail order incentive
OTC Incentive
Therapeutic class management
Lifestyle incentives
```
68
Value-based benefit design
Identify subgroups that benefit most from a given treatment and cost sharing is reduced. Maybe even to zero
Ex heart attack patients and cholesterol lowering drugs vs just patients with high cholesterol
Charge patients lesser amt for drugs that offset other costs.
69
Network management
Inclusion
Reimbursement
To manage costs and drive utilization
Any willing provider must be allowed in if willing to accept rate
Restricted network - limited options
70
Claims processing
Computerized system
Data management
(Forecasting payment utilization review)
Real time. Electronic data interchange
71
National drug codes
```
NDC
unique number
Universal for human drugs
#####-####-##
Labeled-product-package
```
72
Customer and provider service
Provide knowledge of benefit design and mechanics
| Ensures satisfaction
73
Drug utilization review
Prospective
Concurrent
Retrospective
Formulary adherence
Quality. ADR
Cost containment
Identify abuse
Medication related problems
74
Formulary management
Up to date list of meds based on current evidence bases med. physicians pharmacists experts to treat disease and preserve health
Encourage use of safe effective most affordable meds
75
Pharmacy and therapeutic committee
Committee for determining formulary
Evaluate new drugs
Devise coverage policies copays
Devise management strategies
Negotiate price
76
Pharmacy care services
Drug utilization review
Med oriented disease management
Interdisciplinary care and care transitions
Medication therapy management
77
Methods for managing specialty pharmaceuticals
```
Medical vs pharmacy benefit
Co-insurance - pay % or fixed copayment
Prior authorization or step therapy
Supply channel management
Provider and patient education
Outcomes based reimbursement
(Compare outcomes to clinical trial results)
```
78
Ideal drug reimbursement benchmark
```
Transparent
Accessible
Comprehensive
Timely
Immune to manipulation
```
79
AAC
Actual acquisition cost
Final price paid by pharmacy after all discounts
Used by state Medicaid programs
80
NADAC
National average drug acquisition cost
Costs collected by CMS from pharmacies to be averaged into single price
Idea not yet in practice
81
Dimensions of quality
```
Technical performance
Access to services
Effectiveness of care
Efficiency of service delivery
Interpersonal relations
Continuity of services
Safetphysical infrastructure and comfort
Choice
```
82
Aims for improvement in redesign of health care
```
Six aims
Safe
Timely
Effective
Efficient
Equitable
Patient-centered
```
83
WHO definition of adverse drug reaction
Any noxious and unintended effect of a drug which occurs at doses used in humans
Excludes therapeutic failures
Intentional or accidental overdose
Errors in admin or adherence
84
Types if ADRs
Type A
Predictable
Often dose dependent
Type B
Unpredictable
Unrelated to drugs known action
85
WHO definition of adverse drug event
Any injury resulting from admin if a drug
Includes events that are preventable
Overdose and admin errors. Adherence
86
What drugs most commonly implicated in ADE treated in ER?
Insulin
| Warfarin
87
Definition of medication related problem
An event involving a patients drug treatment that does or could interfere with the achievement of optimal outcome
3 categories - overuse, underuse and misuse
88
Underuse MRP
Untreated indication
Sub-therapeutic dosage
Failure to receive or take drug
Prescribing and adhering
89
Examples of overuse MRP
Overdose
Drug use without indication
Drugs of abuse
90
Examples of misuse MRP
```
Adverse drug reaction
Drug interactions
Improper drug selection
Inappropriate drug in elders
Inadequate therapeutic monitoring
```
91
Costs of MRPs
Fit every dollar spent on drugs spend >$1 on drug-related problem so
Underuse a huge problem
92
MedWatch
FDA program
Healthcare professionals and consumers can report serious problems
Make easier to report ADE
make it clear what FDA wants
More visible actions taken by FDA resulting from reports
Awareness if drug-induced disease
93
Efficiency
Generic substitutes
Therapeutic substitutes
Therapeutic duplication
94
Safety in Rx utilization
Drug drug interactions
Drug disease interactions
Therapeutic duplication
Drug age contraindications
95
Effectiveness in Rx utilization
Adherence to therapy
Use clinically important therapies where evidence indicates
Appropriate dose and formulation
96
Joint commission
Looks at hospitals
Aspirin at arrival for heart attack
Avoid polytherapy with antipsychotics
97
Pharmacy quality alliance
Improve quality of meds used across health care settings through collaboration - key stakeholders agree on strategy to measure and report performance info related to meds
Being developed
98
URAC
Utilization review accreditation commission
Promote improvement through accreditation and education for PBMs
Health care quality
99
Pure food and drug act
1906
Standards for traded drugs
Labeling
Misbranding punishable by law
100
Harrison narcotic act of 1914
Upper limits on amounts of cocaine morphine etc
101
Food drug and cosmetic act of 1938
```
Standards for inert ingredients
Safety
FDA authority to regulate promotional materials
Prohibits misbranding
Interstate commerce only if FDA approved
```
102
Durham Humphrey act of 1951
Created legend drugs
| Rx only
103
Kefauver Harris amendment of 1962
In response to thalidomide
Advertising claims questioned by medical community
Need to report all side effects to FDA
Needs to be safe and effective
Substantial evidence that a drug is efficacious. Causes increase in r&d costs
Efficacy standard.
104
Phases of drug development
Preclinical - lab animals. To assess safety and biological activity. 1-2 years. 100% pass
File IND.
Phase 1 - 20-100 healthy volunteers. Determine safety and dosage. Year 3. 70% of INDs
Phase 2 - 100-300 patient volunteers. Efficacy and side effects. Years 4-5. 33% of INDs.
Phase 3 - 1000-5000 patient volunteers. Verify efficacy. Years 6-8. 27% of INDs.
Then file NDA
Phase IV - where do pharmaecomomic analysis. Not randomized
105
PDUFA
Prescription drug user fee act. Of 1993
Used to bring in more people to approve drugs. Speed up process.
Result 60% at >2 years. Down to less than 10%
106
Estimated cost to bring new drug to market
$200M in 1979 to $2B in 2003
More expensive clinical trials
Specialty drugs and biologics
Personalized medicine
107
Promoted claims
2 or more controlled studies (randomized)
Real world effectiveness data
Specific to product label
Substantiation standards. Want population based outcomes
108
FDA regulates health economic info
All promotional materials
Need regulation because
Poor quality of studies
Unsubstantiated cost-effectiveness claims
Scientific exchange or promotion
Pharmacoeconomics methods not standardized and complex
109
Types of study outcomes
Economic outcomes
Clinical outcomes-intermediate indicators like blood sugar
Final outcomes
Other outcomes (pain compliance)
110
DDMAC 1995
Division of drug marketing and communication. DRAFT
Don't care about costs
Care about efficacy/effectiveness
Need substantial evidence
Argues impedes dissemination if useful info.
111
FDAMA 1997
Food and drug administration modernization act of 1997
Extends PDUFA
Encourages pediatric indications
Encourages submission of supplemental indications
Sec 144 Health care economic info
112
Health care economic info
| FDAMA 1997
Analysis that Ids measures or compares the economic consequences including costs of the health outcomes of the use of a drug to the use of another drug to another health care intervention or to no intervention
113
FDAMA 1997
Provide to formulary committee or similar entity.
Directly relates to an indication
Competent and reliable scientific evidence. No longer randomized clinical trial
114
FDAMA 1997 and off label use
Can provide articles if
If sNDA to be filed
FDA pre-review of promotional activity
115
Off label use
Physicians may use drugs for indications not approved by FDA
Scientific knowledge may outpace FDA approval process
What about safety and efficacy
Distort info
Avoid costs of sNDA
116
1998. WLF vs Henney Shalala
FDA cannot regulate speech
Regulate conduct not speech
Judge Lambeth. Preposterous
117
2000. FDA v WLF appeal
No longer about speech
Now about interstate commerce
No issue. No debate
Uncertainty
118
2009 FDA guidance.
Can distribute info on off-label
No requirement for sNDA
must be separate from promotional brochures
Need statement identifying article about off label use
No relationship between firm and author
Need to be from peer-reviewed journals and disclose finding
119
2011. FDA guidance to unsolicited requests about off label info
Flow chart. What is allowed.
Cannot give unsolicited info. Or info on different company's product.
No public response on off label.
Included social media.
120
Comparative effectiveness research
Look at all evidence of alternative methods to prevent treat diagnose monitor condition
To assist consumers clinicians purchasers policy makers to make informed decisions
121
PCORI
Patient centered outcomes research institute
$1.1B from ARRA to do CER
Qualitative research involves patient perspective.
122
CER and pharmacy benefits complexities
```
Off label use
Conditional coverage
Value based Rx benefit designs
Provider contracting and payments
Manufacturer focused
```
123
Ways to use CER
| Tools and tactics to deer mine which drug has higher value and incorporate into health care
Conditional coverage
Consumer cost sharing
Provider contracting
Drug payment policy
124
Distributive justice
How goods are allocated within society
Mix of market justice and social justice
125
Intersection of supply and demand curve
Efficient allocation based on perfectly competitive model
Overage and shortage
126
Elasticity related to total revenue
Inelastic. Increase price demand goes down but revenue still up.
Elastic. Increase price demand goes down and revenue goes down.
Unitary. Price goes up demand goes down and revenue unchanged.
127
Moral hazard
Tend to consume more if isolated from actual price tag
May need to sensitize consumers to price
128
Capitation
Pay provider upfront for services per patient. Prospective payment. Global payment
129
Risk underwriting
Pay more if you are at higher risk
Smoker. Age. Gender. Geographic region
130
Indemnity
Visit doctor. Submit to insurance. Get paid back
Little control of price
Little use of utilization tactics
Also known as conventional.
131
Managed care manages...
Cost
Quality
Access
132
POS PLAN
Point of service plan
Like HMO but consumer allowed to opt out and see out if network providers for a large fee.
Core network of providers with incentives
133
PPO PLAN
```
Preferred provider organizations
Providers agree to certain costs/fees.
Some oversight
No gate keeping
Less managed by insurance company
```
134
CMS
Center for Medicare and Medicaid services
135
Medicare prescription drug plans
PDP - standalone thru PBMS like entity
MA-PD - Medicare advantage Whole managed care plan
136
CER
How do all drugs compare for a specific condition
All methods to prevent treat diagnose monitor a clinical condition
Use to make informed decisions
137
Conditional coverage
Need pre-approval
May be restrictions on use
For adding data to clinical trial
Limit access to service that would not be effective
138
Consumer cost sharing
Tiered formulary
PPOs increases deductibles
Percent coinsurance/copay for specialty meds
Value based benefit design
139
Provider contracting and payment methods
Network designs
| Pay for performance bonuses for efficiency and quality.
140
Pharmaceutical company contracting and payment methods
Step therapy
Reimburse only if drug deemed appropriate
Reimbursement linked to outcome and comparison to clinical trial results
Pharmacoeconomics Test 2
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