The Patient Protection and Affordable Care Act and Managed Care Repercussions - Q&A with Norm Smith, President of Viewpoint Consulting, Inc.

First Report Managed Care conducted an interview with Norm Smith, one of our Editorial Advisory Board members, to discuss how the Patient Protection and Affordable Care Act (ACA) is impacting the managed markets, including costs, coverage, and access to medications. Here you will find Mr. Smith’s take on current events related to the healthcare system.

Q: Before starting your own company, Viewpoint Consulting, you worked for various pharmaceutical companies as a hospital representative and director of managed care. Can you tell us about your experiences that led you to create and launch your own company?

A: My time in the industry at Merck, Genentech, and Johnson & Johnson gave me invaluable experience and training. When I moved over to the agency side at Saatchi & Saatchi to establish a managed care group, I learned what it took to manage a profit and loss and drive business from the vendor side. Altogether, it prepared me to start my own consulting business, driven by primary market research among managed care decision-makers. This included multiple segments of the marketplace, including wholesalers, long-term care, and hospitals. There just were not many people with that background who had left the industry and were willing to work in the vendor role. Hard work, great teachers and managers, great products to sell, and plain luck, led me to start a business on my own.

Q: You have been involved in the managed care arena for many years. What changes have you seen over time regarding patient health coverage, healthcare costs, access to care, and the pharmaceutical industry?

A: Besides all of the obvious changes in benefit design, I will cite 3 other developments I see in my business at Viewpoint Consulting:

(1) The impact of high copays and coinsurances is making patients become hesitant in utilizing newer, innovative technologies. Even if individuals have insurance and their doctor explains why this new technology or product would be best, it just has not sunk in to many patients’ minds that there have been some really important advances across medicine, but they will [have high] costs. For too long, patients were protected from the actual cost of new products by a rich benefit design and low caps on the total out-of-pocket costs.

(2) In pharmacy, we always thought “innovation,” and new products are good, and if they provide an incremental benefit, physicians will prescribe them and patients will accept them. Many of the managed care decision-makers are very skeptical of any new product and want to see extensive clinical data, especially on safety. We think, “innovation is good and improves patients’ lives;” [physicians and patients] see innovation as something to distrust, to hold back. There certainly is a case to be made that new products need to be thoroughly vetted. In some of the people we are talking with, the idea is to find reasons to hold back technology, driven mainly by costs, then patient safety.

(3) “Consumer-driven healthcare” sounds like a really good way to reduce overutilization and let the patients have some “skin in the game.” This is a great idea if the consumer has enough medical awareness to make sound decisions. Unfortunately, this lack of knowledge, either on clinical or economic issues, allows managed care decision-makers to be the “deciders,” and often price is the driver of their decision. There has to be some “rebalancing” of patients, their treating physicians, and payers to avoid cost being the dominant factor in patient care.

Q: From your perspective of marketing managed care, what are the top challenges the managed care market is facing today? What are some challenges that will persist in the future?

A: There are numerous challenges for products today; some have been always around, like limited patent life and new competitive entries, but some recent challenges have emerged, including the following:

• The complete “locking out” of certain products within a class, like Express Scripts or CVS Caremark are trying to do with several brands. The rationale given for this payer decision is the company is using coupons to lower copay amounts, undermining the payer’s formulary controls; or the company is unwilling to discount to the levels demanded by the payers. “Sounds like real hardball to me.”

• A second challenge is creating a “defensible value proposition” for a product, one that can stand up to the clinical decision-makers’ questions, while providing real value to the patients. But, it is not just the creation that is hard; it is effectively communicating that value to payer decision-makers [that is difficult]. Most account personnel are not trained in that discussion and end up waving in the Medical Science Liaison (MSL). That is fine if the MSL is trained in managed markets, but it is not common for them to have the sales skill training needed for a successful conversation. 

Q: At Viewpoint Consulting, you provide marketing strategies and research analyses for pharmaceutical and biotechnology industries within managed care. Can you elaborate on the approach your company takes to carry out and deliver this information?

A: It is really straightforward: know the people involved, know what their job is on a day-to-day basis, have a fundamental understanding of the science around the product we are discussing, and then listen to and probe their answers. I might also say preparation is key, so keeping up with the 50 or so industry newsletters a day and the major managed care health journals like First Report Managed Care is essential to “staying in the game.” If I were out of this world for 3 months, I would be lost!

Q: Since the implementation of the ACA on January 1, how do you feel this law will impact the healthcare industry in years to come?

A: Full disclosure: I have not been a fan of the ACA from its inception. Too partisan, not well thought out, the “Law of Unintended Result” has kicked in here, big time. I do not have to say much about the implementation; the nightly news says it all.

With that said, Americans of all parties need to be honest about what the ACA is trying to do: develop a system of health insurance that is not actuarially correct. The Milliman people have been saying that from day 1. The result will be a tightening of margins for everyone, leading to a bias against innovation. “If it is new, it costs too much.” Or, “new mode-of-action,” that means new side effects and higher costs. Unfortunately, I hear [those phrases] too often from our respondents with new products or technologies.

Q: Since enrollment began for the health insurance exchanges in October 2013, there has been a lot of media attention about people having trouble logging onto the Web site to purchase insurance. Do you think the glitches will have lasting effects among the public perception? If so, what are the implications for the healthcare system?

A: A glitch is a glitch, and glitches get fixed. Lack of leadership, let alone accountability, had a lot to do with the problems they had. It certainly was not from lack of funding! Short term, it probably turned some people off and fed the late night comedy shows with tons of material. The law needs to be “unbundled,” keeping the parts that are actuarially sound and implementable and modifying those areas that both sides agree need fixing. In the present partisan atmosphere, I am not optimistic; after 2014, we have a much better chance of moving the law in a workable direction.

Q: From your perspective, how are accountable care organizations (ACOs) impacting the managed care market? Will these programs help to cut down healthcare costs moving forward? How has the industry changed? Are pharmaceutical companies paying more attention to reimbursement issues than they did when you first started?

A: ACOs have the potential to improve patient care. I am not as confident they can cut costs as much as the health system thought leaders believe. As the Baby Boomers age, they are going to want (demand) some of the technologies that have matured during their lifetime. From a pharmacy perspective, the majority of ACOs do not have the ability to contract for pharmaceuticals and generally do not administer their own formularies. This makes it difficult to negotiate a contract, but there may be selected programs tailored to the ACO model that could bring value to the physicians and their patients. Going back to the early days of managed care, “If you have seen 1 ACO, you have seen 1 ACO.” It will take a great deal of flexibility from pharmaceuticals to develop aligned goals with different forms of ACOs.  

Q: The pharmaceutical industry is changing with many branded medications going off patent and the introduction of biologics and biosimilars. What are your projections for the pharmaceutical industry in the coming years, given the progression we have seen in the last few years?

A: There are so many challenges to the global pharmaceutical industry right now; it is hard to list them all. If you are just looking at the US market, the 3 biggest, in no particular order are:

(1) Government price controls without considering product value.

(2) Counterfeiting of products, especially in life-threatening conditions.

(3) Losing sight of the patient as the reason [for which] we do what we do.

Q: In the last few years there have been approvals on numerous specialty pharmaceuticals. How are payers dealing with the high costs and other issues related to these drugs?

A: Payers are doing a very good job of adjusting to the challenges of specialty drugs. The growth of specialty pharmacy, the advent of application service provider pricing and drop shipping in place of “buy and bill systems,” and the acceptance of most plans that they will have a limited number of these high-cost patients on specialty products has worked in the pharmaceutical company’s favor. The industry has also done an excellent job of adjusting to a world where a company may only have 2000 to 3000 patients worldwide on their product. The challenge will come for both insurers and pharmaceutical companies when a big population needs a specialty pharmaceutical, as in Alzheimer’s disease. Talk about a high value product, just as the Baby Boomers hit Medicare age.    

Q: Before reimbursing drugs, payers are sometimes demanding companies show not just the clinical data that led to FDA approvals but also the economic value of the products. How are pharmaceutical companies marketing their drugs and proving their worth to payers?

A: It has taken many years for pharmaceutical companies to understand that Health Economic (HECON) data, in all of its forms, are really selling tools. Companies and their product lines vary, but the growth of field-based outcomes managers and more highly educated MSLs that can explain most HECON studies to a managed care audience have led the way in making HECON data useful. There is still much to be done in this nation’s pharmacy schools, where understanding the results of HECON studies is not [currently] a focus of their curriculum.