Six Tensions of Pharmaceutical Drug Pricing, With Sarah Emond | A Scrupulously Fair Assessment of What is Wrong and Right about American Healthcare

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I was out drinking martinis with Cora Opsahl, director of 32BJ Health Fund, and Cora said, "Look, most plan sponsors' biggest expense is health system spend, hospital spend." I know this is an unexpected start to an episode about pharmaceutical pricing and value featuring Sarah Emond, CEO of ICER (Institute for Clinical and Economic Review). But yeah, 50% of most plan sponsors' spend these days goes to health systems. Fifty percent! One half!

For a full transcript of this episode, click here.

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So, if a patient who is adherent to a drug and that drug keeps that patient out of the hospital, why do I want to make a patient have excessive skin in the game to get that drug, which everybody knows at this point this "skin in the game" can cause said patient to not be adherent in many cases, cost being a very big reason patients give for not taking medications as prescribed.

So then we have this not adherent patient who winds up in the hospital, via the ER often enough. The core issue here that surfaced, bottom line—and I'm not sure if this was in spite of the martinis or as a result of them—but while hospital spend is the largest health expense, high-value drugs that prevent hospitalization often face patient cost sharing and access restrictions, which leads to poor patient adherence and ultimately higher system cost potentially.

So then Cora and I spent the next half hour debating when the statement is empirically true and when it's not. And you know what it all boils down to? What's the value of the drug?

Do we even know what that means to start? But if it's determined that the drug is relatively high value, then the plan desperately should want to do everything possible to keep that patient on that medication, and cost sharing is a huge barrier to adherence.

Today, as I said, I'm speaking with Sarah Emond, CEO over at ICER, and we get into all of this in the conversation that follows. In fact, most of the conversation that follows explores the tensions that exist in the current way that we sell and buy pharmaceutical products.

I'm just gonna sum up these tensions in a list here at the top of this show. There's six of them that Sarah Emond and I discussed today by my counting, and each of these we explore in some depth. So, here's the list.

Tension 1: The value of any given drug (in other words, what is the fair price for that drug considering the health gains that it delivers) versus the total cost to the plan for the total population taking that drug.

GLP-1s have entered the chat. GLP-1s (by ICER's analysis, at least) are super high-value drugs that also can bankrupt plans due to the number of folks who may benefit from taking the drug. Definitely a tense tension to kick off our list here.

Tension 2: The list or net price of a drug versus patient access and affordability. Again, this can be tense in an area of much misalignment. You can have a great well-priced drug with huge patient affordability and access challenges because drug net price and coinsurance amounts often have nothing to do with each other.

Tension 3: Lifetime value of a drug versus a 3-, 2.5-year, whatever time horizon that many plan sponsor actuaries use in their value assessment.

We discussed this today, but there's a Summer Short (SUMS7) on actuarial value horizons with Keith Passwater and JR Clark if you wanna dig in on this further.

Tension 4: The tension between the societal value of a drug or even the patient's perceived value of a drug versus what an employer plan sponsor might perceive as the value.

What is the formula used to determine value? What's in and what's out? So, that's a bigger conversation just beyond the time horizon for what's included in this calculation.

Tension 5: Exacerbating the what's included in the value contemplation beyond just what you include in there is the tension between what is hypothetically of value and what is possible to measure.

If you have pharma datasets and medical datasets separate in silos, who knows how many hospital readmissions were prevented by whatever drug? And how much presenteeism or absenteeism exists. I mean, it is an outlier, again, if anyone even knows the net price they paid for a drug, just to level set context here.

Tension 6: Lowering financial barriers for patients to take drugs that are of value versus status quo goals and incentives. Like, for example, PBMs (pharmacy benefit managers) are often told that their goal is to reduce drug spend.

Okay … so, how do I do that? Oh, reduce access either by prior auths or delay tactics or really high coinsurance, which is gonna reduce adherence by design. And it's someone else's problem—if I'm just thinking like a status quo PBM—if medical spend goes up, right? So, that's our last and not insignificant tension.

And look, who comes out the loser in all of these tensions when they get tense? Patients. Not pricing based on value and not buying and setting up cost sharing based on value punishes patients and also plan sponsors or any other ultimate purchaser in the long term, given that the plan is but a population of patients if you start thinking about it in that context.

Here is Sarah's advice in a nutshell: Pharma, sell. Pick your price based on something other than market power. And some pharma companies are actually dipping their toe into these waters and doing it.

But then PBMs and plan sponsors have to hold up their end of the bargain here and buy drugs based on their value, not just the size of their rebates or some other discounting promise. And then we gotta continue the through line through to member affordability and access.

High-value drugs should get preferred. So, right, do a high-value formulary. Listen to the show with Nina Lathia, RPh, MSc, PhD (EP426) on high-value formularies and then listen (after you're done with that one) to episode 435 with Dan Mendelson entitled "Optimized Pharmacy Benefits Are Required if You Want to Do or Buy Value-Based Care."

Also, as I said, GLP-1s come up in this conversation, so … yeah, buckle up.

One last thing, besides my normal thank you to Aventria Health Group for sponsoring this episode, I am so pleased to thank Payerset for donating to help Relentless Health Value stay on the air.

Payerset is a price transparency company with a mission to create fair and equitable healthcare for everyone. Love that. Payerset empowers healthcare organizations, employers, and patients with the most complete set of healthcare price transparency data. They benchmark every negotiated rate and claim and delivering the actionable insights needed for smarter contract negotiations and a more transparent healthcare system.

As I have said several times today, my conversation is with Sarah Emond, CEO of ICER.

Also mentioned in this episode are Institute for Clinical and Economic Review (ICER); Cora Opsahl; 32 BJ Health Fund; Keith Passwater; JR Clark; Nina Lathia, RPh, MSc, PhD; Dan Mendelson; Aventria Health Group; Payerset; Antonio Ciaccia; Elizabeth Mitchell; Purchaser Business Group on Health (PBGH); Shane Cerone; Sam Flanders, MD; Mark Cuban; Morgan Health; and Tom Nash.

For a list of healthcare industry acronyms and terms that may be unfamiliar to you, click here.

You can learn more at ICER.org and follow Sarah on LinkedIn.

Sarah K. Emond, MPP, is president and chief executive officer of the Institute for Clinical and Economic Review (ICER), a leading nonprofit health policy research organization, with 25 years of experience in the business and policy of healthcare. She joined ICER in 2009 as its first chief operating officer and third employee and has worked to grow the organization's approach, scope, and impact over the years.

Prior to joining ICER, Sarah spent time as a communications consultant, with six years in the corporate communications and investor relations department at a commercial-stage biopharmaceutical company and several years with a healthcare communications firm. Sarah began her healthcare career in clinical research at Beth Israel Deaconess Medical Center in Boston.

A graduate of the Heller School for Social Policy and Management at Brandeis University, Sarah holds a Master of Public Policy degree with a concentration in health policy. Sarah also received a bachelor's degree in biological sciences from Smith College. Sarah speaks frequently at national conferences on the topics of prescription drug pricing policy, comparative effectiveness research, and value-based healthcare.

08:18 Why list prices are a lie.

10:59 How does the rebate model sometimes get in the way of paying for value?

12:50 Bonus clip with Sarah Emond.

13:14 EP491 with Elizabeth Mitchell.

13:20 EP490 and EP492 with Shane Cerone and Sam Flanders, MD.

14:37 The tension that is created between affordability and adherence.

15:03 When cost sharing makes sense in pharmaceutical drug pricing.

17:26 INBW42 with Stacey on moral hazard.

18:53 How GLP-1s are "wildly cost effective."

21:32 Why the sticker shock on cost-effective drugs is a failure in the system for paying for value.

22:38 ICER's report on GLP-1s.

26:59 EP385 with Dan Mendelson.