Like so many millions of people—or so few, depending on whom you ask—I spent a couple of days in our nation’s capital during the Trump administration’s first week, but I wasn’t out on the National Mall with a cleverly worded sign. I was there to join other healthcare industry leaders, thought leaders and pundits as they discussed the evolving healthcare environment. I wanted to get a sense for what may be coming down the pike, and based on what I heard, it seems that the only constant is change—and pharmaceutical leaders better get ready to help shape this change. Here are four of my takeaways:
- Tremendous uncertainty prevails. While that’s not exactly surprising, the level of uncertainty in these discussions felt different. The pundits don’t know the future, and they’re freely acknowledging their ignorance, which is new. Even the decision makers in Congress don’t know what they’re going to do, but they’re sure that they’re going to do something. Nobody even knows who the key idea makers in this new administration are going to be, and few positive policy details were articulated before Inauguration Day. Two topics that did come up, though, related to the fact that Republicans had no consensus replacement plan for Obamacare, and that government-negotiated pharmaceutical prices potentially could be on the horizon (but that prospect seems to have receded by the time I published this post).
- “Repeal” is popular, but “revert” isn’t. Speaking of Obamacare, the “R” words were flying thick and fast—repeal, replace, rescue, rebuild, repair—but no one, not even the Congressional majority, has been willing to consider “revert.” They aren’t keen on the idea of going back to pre-ACA times. It’s heartening that maintaining coverage for the 20 million Obamacare-covered citizens, plus covering pre-existing conditions and not destabilizing the individual market, seems to have solid bipartisan and private-sector support.
- Fee-for-service is a thing of the past. The shift from volume to value may have slowed down a bit, but it’s definitely not going away. For a moment, some were willing to contemplate a flight back to the bad, old days of fee-for-service, but value is here to stay. As I see it, there are three reasons for this:
- The biggest driver is the private insurers. They’re large and powerful, even if there are no more mergers, and the only way that they bend their cost curves is by demanding value from all others in the ecosystem.
- Price pressure used to be the main lever before, and even though it’s very much in the crosshairs, especially for pharmaceutical products, I think that payers know that 37% of gross drug revenues don’t go to the manufacturers. Recent research from PhRMA highlighted that fact. Price pressure will stem the “bad actor” behavior, but net branded pharmaceutical sales growth has varied between -5% and +5% in the last few years. Squeezing pharmaceutical prices alone is hardly likely to make a big dent in healthcare costs. (I’ll talk more about price transparency and where the money goes in another blog post.)
- CMS under the new administration won’t push the switch to value metrics for reimbursement as aggressively, given Tom Price's opposition to similar measures in the past. But it may be more than happy to have consumers become empowered and choose with their wallets, and volume doesn’t fare too well in such a world. Progressive providers are agreeing that value is the right thing for patients, not volume.
- Value is in the eye of the beholder. This was the refrain of the week, echoed several times by different players around the table. No one agrees about how to measure it, and CMS isn’t likely to add regulations to posit the definition of value, given the "one in, two out" executive order signed recently. This is the private sector’s biggest challenge: how to get a market mechanism to shape a consensus on what value is. It may seem daunting, but it’s like the conventions on the internet: Without a central government authority specifying them, they all worked out with consistency to an amazing degree around the world. There are many challenges to defining value, but the thorny ones that keep bubbling to the fore are:
- The ant or the colony- Who should be at the center: the patient or the “system/society”? The “tyranny of the average” would dictate that helping the average person is more important than helping each individual. Take your philosophical pick.
- The ant or the grasshopper- If value takes a long time to accumulate, is it worth it?
I gained a fresh perspective from my time in D.C., and I think that the needs of the hour there are to bring clarity quickly, take the long view and use the market to find a solution. And while pharmaceutical companies are nervous about being in the spotlight concerning pricing, the industry can’t be a spectator. As one longtime D.C. luminary put it, “You can fight it and die, you can accept it and survive, or you can shape it and thrive.”
I’m planning to flex my writing muscles and offer up more president-related prognostications, so stay tuned.
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