Pharma utilization and cost management for self-funded employers

Listen in to hear healthcare research insights to drive pricing and market access strategies for the pharma sector.

The author(s)

  • Jason Boller Partner Advisory Services Market Access & HEOR
  • Scott Freeman Senior Consultant, Health CS&F
Get in touch

With rising prescription drug costs increasingly due to cell, gene and other high cost therapies, employers are exploring various approaches to managing drug utilization and spend by their employees. Listen to our on demand webinar exploring this topic in detail and outline implications to market access strategy development.

In this session we discuss:

  • Current trends in the employer management of formularies today (use of Benefit Design consultants, closed formularies, copay accumulators / maximizers)
  • Pharmaceutical innovation (cell and gene therapies, other high cost therapies in rare diseases) and the potential disruption to the self-funded employer market
  • Employer options in the face of innovation and disruption
    • Employer coalitions to share risk
    • Stop loss coverage
    • Alternative financing models
    • Policy advocacy – CMS negotiation of prices, Medicare carve outs for these therapies
  • Implications for future pricing and access strategy development

AI-generated audio transcript is offered below. Apologies in advance for inconsistencies that have been included.

0:04

Thank you for joining us for today's Ipsos Healthcare Webinar, Exploring pricing and Market Access Strategies for the Pharma sector.

0:14

Today's presentation will be given by Jason Boller and Scott Freeman, and you can read more about them on the slide in front of you.

0:23

Throughout today's session, you will remain in listen only mode, however, throughout the webinar, please submit your questions online using the Q and A feature.

0:34

Time permitting will answer questions at the end of today's session, however, if time ran short, then your question will be answered by e-mail.

0:45

Today's webinar is also being recorded and will be directly e-mailed to you.

0:51

So now, without further ado, it is my pleasure to introduce today's first speaker, Jason Boller, a partner in our Healthcare Advisory Practice.

1:03

You have the floor.

1:05

Thank you, Elen.

1:06

Welcome everyone. Thanks for joining us today.

1:11

A few months ago, I was meeting with a client, she's the head of Market access for a rare disease cell and gene therapy and development.

1:20

We're talking about the future of access to reimbursement in this space, in the US, looking out in the future, she asked a really good thought provoking question.

1:31

If you think about the recent innovation and the cost that comes with that back into the future pipeline and expected cost of these new therapies.

1:39

The question was, are we on the verge of breaking the US employer based coverage model.

1:46

Will employers be able to really absorb the cost of these innovative therapies in the future?

1:51

If not, where is this going?

1:54

And it really is a thought provoking question to sit back and think about that, just get a sense for.

1:59

Now how could this play out?

2:01

Where today we have a few therapies that are very curative and very innovative.

2:06

They transform care, but they do come at that high cost.

2:09

And for many employers, if you have 1 or 2 employees or ... on those therapies and you can absorb it.

2:16

But you can't really go beyond that without really having some significant cost management issues.

2:22

It doesn't make us think about, you know, where is the US market going?

2:26

Given that this kind of nation and expected launch of new therapies in the future, that will transform care, but also will be, will come at it at a cost, as the purpose of this of our research was really dig into that to understand, try to answer that question.

2:41

So, today, we'll go through material.

2:43

We'll start with just a primer on self funded markets, what that looks like, what drives that? Briefly get into what we're seeing today in terms of how employers are managing their farmers farmers. Farmers spend utilization.

2:58

But then we'll spend a bulk of time going through to find some reasons we did, with payers, benefit, design consultants, employers, just to get their perspective on.

3:09

In this trend of increasing cost innovation, where they think it's going, and what does it mean for manufacturers are developing patient access strategies.

3:19

So with that, I'll turn it over to Scott to really start us with that primer on the cell phone market discovery you.

3:27

Thank you, Jason.

3:29

So first, we'd like to give you an overview of the self funded market as it stands today.

3:34

Next slide, please.

3:40

As you know, a large proportion of Americans are provided health insurance through their employer.

3:45

Self funding or self insurance, as it's also known or Administrative services, only ASO, means that employees take on the role of insured themselves. So they bear the risk of health care cost of their employees making cuts.

3:58

This is in contrast to the fully insured model, which you can see illustrated on the left there in orange. And with full insurance, the employer pays premiums to the insurer, which have fixed, at least in the short-term. And it's the insurer who holds the risk.

4:10

If a member needs care, it's the insurer who pays the provider, and the employer is insulated from that risk.

4:16

With self funding, as you see on the right in green, the employer does use a third party administrator to handle claims, But the employer only pays an administration fee for that, no premiums, as such. And it's the employer who is the one ultimately footing, the bill for carrying code by their employees.

4:32

Another difference is that, with full insurance, employers are largely buying an off the shelf policy whereas self funded employees have the option to customize their benefits if they choose to do that.

4:43

Lastly, the regulatory environment is somewhat different between these two models. So with full insurance, State regulations apply.

4:50

Whereas self funded plans are subject to a riser, which is a Federal regulation and that preempts state regulations, and perhaps most importantly, on this front, certain aspects of the Affordable Care Act do not apply to self funded plans, such as the requirement to cover certain so-called essential health benefits. So self funded plans, don't have to worry about that.

5:10

Next slide please.

5:14

So you can already start to appreciate, perhaps why many employers choose the so funding option they use. So primarily because it's cheaper and also more flexible.

5:24

With full insurance, the insurer marks up the premium with a profit margin, since they're the ones taking on the risks, so they need an incentive to do that.

5:33

But, when an employer self funds, they pay the cost out of their own pocket, and then I'm looking that up for themselves, obviously. On top of that, so, funded plans avoid a lot of the taxes that states levy on insurance premiums, since there aren't any.

5:47

Similarly, as we said, a moment ago, soften, the plans are less regulated and ... plans and, principle, that allows self funded plans to be less generous. Although, in practice, it's more about having the flexibility to provide coverage for some things, and not for others, for a given amount of spending. And, more generally.

6:05

So, funding gives employees the ability, whether they access it or not, to customize many aspects of their benefits in a way that wouldn't be possible with an off the shelf fully insured plan.

6:15

Next slide, please.

6:19

So, who are the stakeholders in this market? Well, on the employer side in blue here, you can see that, of course, there are the employers themselves, and that's specifically going to be someone in human resources, so benefits director at large firms, or it's small companies. It might be the CEO themselves.

6:37

But of course, these people don't live and breathe health care, let alone farmer in medical technology, and so on. So they rely on brokers or consultants to guide them through the marketplace.

6:48

To advise them to initiate the RFP process with potential third party administrators they might want to use. And also, to engage with those administrators on their behalf.

6:58

Once they have a plan set up on the administrative side, on the right hand side of this illustration, the main point of contact for the employer is going to be the account manager. They're going to service the employer on a day-to-day basis, or perhaps that, that broker, more likely.

7:13

And they might manage the RFP process themselves, or they may have a salesperson who would manage the business development side for them, then up the chain from them. There are several stakeholders, but probably the most important from our point of view today, are the members of the PMT committees, so pharmacy directors, the medical directors, and someone. They don't often have contact with employers directly, but they are, of course, making the policy decisions on behalf of the employees, which doesn't make them a very important stakeholder by itself.

7:44

They'll also be involved if the employer wants to edit their coverage in some way. And they also get involved in specific claims from time to time making exceptions to policy, because employee complaint to HR, and now the employer wants them to cover that thing, that, that sort of thing. And at a similar level, there will also be people who are working in contracting strategy.

8:05

These are the people who are going to be negotiating with pharma companies.

8:08

They may not have direct contact with employers, but they do experience the pressure that employers can bring to bear around utilization of a particular drug and that may influence their approach to those negotiations that they have with pharma.

8:22

Next slide, please.

8:25

Another nuance of the self funded segment is stop loss. Since employers are taking on a significant financial risk, you might imagine that they would want to limit their risk in some way. So to that end, many of them by stop loss insurance. This is an insurance policy, which covers healthcare costs for the employer above a certain threshold. And, of course, the employer has to pay a premium for that.

8:49

There are two kinds of stop loss, which you can see illustrated here. That's the individual kind.

8:53

And the aggregate kind, individuals' stop loss, which you can see on the left, kicks in whenever an individual member exceeds a certain cost threshold within a year.

9:02

And then further cost accrued by that number will be paid by the current aggregate stop loss on the right only kicks in when the plan costs as a whole, exceed a threshold and then all the paying costs above that threshold of paid by the surplus care. It is common for policies to have both kinds of stop loss included on them.

9:21

But there's certainly a perception in the marketplace that stop loss is perhaps not all it's cracked up to be, that it's leaky. So employers tend to end up putting much of these costs themselves, even though they're paying these previous for them. And so it's perhaps, not such a good deal. And many employers choose not to buy stop loss for that reason. But we'll come onto that a little more in a short while.

9:41

Next slide, please.

9:45

As you can see here, the funded segment in yellow has been growing, relative to other segments. This hasn't been a step change. We've seen a gradual shift towards funding over the past few years, so 10 years ago you can see this was 59% of the employer sponsored market, and it was up to 67% last year.

10:04

The consensus is that obama-care and the regulations that impose specifically the regulations imposed on fully insured plans, but not on self insured ones, has driven some of that shift, accelerated that.

10:16

Next slide, please.

10:19

As one might imagine, the propensity to self fund is increasing an employer size. So at the largest firms, those with 5000 employees or more, it's essentially ubiquitous, 94%, at very small companies under 50 employees.

10:33

It's quite unusual, although not unheard of, and overall it's about two thirds, as we said.

10:38

Next slide, please.

10:43

So this is a market which is constant, which is concentrated amongst the largest employers, but it's also concentrated amongst the largest administrators. So as you can see here in the yellow, the top administrators by their share of the lives in this segment, Anthem, United, Aetna, Cigna, and Healthcare Service Corporation, And together they make up 70% of this market, so it is quite concentrated. And in the teal bars, that you can see the percentage of their lives, which are self funded or ASO. So, you can see that this is particularly a big part of sickness business, 73% of their lives. While United, on the other hand, they're a little skewed towards other channels. And 41% of their lives are self funded.

11:27

And now I'll hand back to Jason to talk about some of the recent trends in this market.

11:33

Thanks, Scott.

11:36

Let's say over the last several years, there's really been no shortage of articles, press releases, policies around drug pricing, drug spend, need to control for cost, transparency, it's, it seems like it's always in the news in this question of where is this going?

11:54

If you look at today, where we are, what we see the market do, just a few things pop.

11:58

one, the idea of going nuts, right, that's employers trying to manage costs through shifting some costs to their employees through hire up a plans.

12:09

Or through higher co-pays, higher co-insurance, good idea.

12:12

Let's shifting costs to the employee, either the utilization of these co-pay, maximize their own programs.

12:20

Again, the idea of having the patient take on more of that cost burden whose products then you get into manufacturers I'm sorry, the employer's carving up the pharmacy benefits from the medical and carving out work with the PBM, developed close formularies. that may or may not restrict access.

12:40

Then you get into more coalitions to see more of these employer based coalitions where employers are coming together too.

12:48

Do a variety of things.

12:49

It could be to share data, best practices, or advocate for policy change. Policy change. No.

12:56

Get into a bit more detail about the next page.

12:58

Then, lastly, we touched on this, like the idea of like how to spread risk through stop loss programs, getting into group captive plans, entering into programs like him, Evernote EMBARQ program around spreading sharing risk or cell and gene therapies.

13:16

But, there's a, there's a lot happening today from employers around their desire to manage, cost, me, expand, and lots of things that are happening to help them do that.

13:26

And, if they're about to begin this, I'm sorry, is there a quick example on coalitions? There's a couple of examples here. one, you have this, Employers are X, It's a large employer.

13:34

Your Employer Coalition, one of the group, and the goal of this group, is to advocate for policy change.

13:42

And so it's a lot of your, very orange Fortune 500 companies it runs in this coalition.

13:49

But the things we're advocating for, or include allowing the government to negotiate price for certain type of drugs, and for that price, to ensure that applies to the commercial market, as well as in Medicare, to cap price inflation, to eliminate the buy in Bill Incentive for Medicare Part B there's additional agenda items around just price transparency.

14:13

Rebate transparency, PBM, spread pricing transparency.

14:17

The idea of reducing costs, improved transparency, large policy agenda from the floor coalitions. And then you have the health transformation alliance, it's another coalition.

14:27

But then it's less about policy, but it's more about data sharing.

14:31

And for their members, they pool all their claims data, overutilization data, and they run analytics on that to identify opportunities to improve benefit design, reduce total cost of care, across Melbourne, pharmacy.

14:45

But the idea of data sharing analytics across numerous organizations, is to improve their ability to negotiate with payers when they design their their benefits.

14:58

Again, this comes back to the question of, Where is this going?

15:02

And we see a lot of activity today in the market, by employers doing various things, Variety of things to manage their drug spend and the utilization for employees.

15:11

But, again, like, where is this going, answers that question we spoke with.

15:16

Um, do payors, they're looking at national regional payers or PBMs benefit.

15:22

As I consult as an employer, HR and HR directors, just get a sense for in their mind, how can this evolve in the face of, again, innovation, transformation to patient care, but also rising costs?

15:37

And we had these discussions, the, there's consensus, that broadly stakeholders cost is their biggest concern, is the primary concern, that really just the right side of thinking about it.

15:47

There are really four key avenues for them to just address how they manage on that aspect to increase in cost.

15:54

The first is that continued shift.

15:58

A cost to their employees that cost sharing with employees.

16:02

Second that continued pressure of their PBMs and plans in the market to reduce that cost through their ability to negotiate additional discounts and rebates with manufacturers.

16:14

three looking at is how do you shift or better manage that costs through risk sharing and a bit of agreements of smoothing out the cost and, um hmm, avoiding that uncertainty.

16:27

Then, lastly, the idea, for some of these therapies given an expected budget impact cost, is there a way to shift that responsibility away from the employer entirely due to the federal, the federal government, walk it back and look like?

16:41

So these are the four levers that we identified through the research.

16:46

And now we're gonna go through each one of them in more detail, just talk about what we learned when we think a means to manufacturers, as you develop your access strategy, scalps, Rebecca ...?

16:58

Thank you, Jason.

17:00

So perhaps the most obvious of these approaches and the first one that comes to a lot of people's mind is to dump these rising costs on employees on the ones who are currently costs. So, raised deductibles, increase co-pays and co-insurance rates, adopt co-pay maximizes and co-pay accumulate as if they aren't already in place, and this is expected to continue to some extent, when we speak to stakeholders. There is a feeling that that's not, that's not over.

17:26

That's going to carry on, but, of course, you'll need to adapt to that, but, there's also a growing sense that we hear pretty clearly from the stakeholders that, well, amongst employees and administrators, certainly, that patient cost sharing is kind of reaching a zenith, that or a plateau that they're very much declining returns at this point.

17:46

In terms of the behavioral changes that further increases can achieve amongst patients, and also simply a realization that members are not going to accept higher cost sharing much longer. There's not much will, they can pay than they're paying today. So, we expect that the growth we've seen in recent years will slow down.

18:05

Of course, this doesn't seem to be anything peculiar to self funded employer's benefit design and cost sharing overall seems to be very similar between fully insured and self funded plans today. And we don't think there's any reason to expect them to diverged dramatically in the future.

18:18

Next slide, please.

18:22

So, the trajectory of patient cost sharing may flatten out, but it is still going to increase for at least a little longer. And, of course, this means that patients are more and more themselves, a payer, and, therefore, an increasingly important stakeholder for manufacturers.

18:37

When patients have personally footing, the bill for thousands of dollars in drug costs, we can't expect them to be more inclined to shop around. And unfortunately, to abandon their prescriptions or engage in fractional dosing to stretch out their prescription and things like that.

18:51

This raises the value of direct to consumer marketing and also patient support programs. As patients take more notice of the drugs they're taking and consider alternatives. The aspects of products that patients as opposed to traditional payers find valuable, will increase in salience. So we often hear, for example, that payers don't pay for convenience, but patients often do.

19:14

So that will change a little bit. And we spoke earlier about the adoption of maximizers and accumulate as, well. We can't necessarily get into, all the tactics one might use to overcome those barriers but, those innovative tactics to limit out of pocket costs for your patients will be of greater importance than ever going forward.

19:31

So, in future, what's your value story for patients, in particular? How are you going to get that story in front of them, and how are you going to support them in their treatment journey, and with the very cost sharing, which is making them such an important stakeholder in the first place.

19:46

Next slide, please.

19:49

So, as we mentioned a moment ago, there's a limit to how much employers can push these costs on to employees through cost sharing. To supplement that approach, employers can use one of the other approaches that Jason mentioned, which is to leverage the health plan itself.

20:05

Employers can influence the health plan, the health plan in several ways.

20:09

Of course, they can choose their own benefit design, by which we mean patient cost sharing, which we've already talked about, so we kind of put that under its own umbrella.

20:16

Another possibility would be to influence the decisions that P and T committees, and making it the plan, interestingly. When we speak to pay, as they tell us that self funding, so funding, employers really don't have any particular influence on the PMT committees on their decisions. So of course, in the committees, they do want to make the right decision for their clients, and for their members. But there's not very much distinctive about So fun and employers from that point of view.

20:42

From the point of view of pharmacy directors, the medical directors, they want to ensure that valuable, necessary medical care is covered. And they also wanted to control costs as much as possible, subject to that limitation. And they said that's aligned with the interests of self on employees as much as it is with other kinds of client that they work with.

21:00

It might occur to you, or I that perhaps softened and employers would be more interested in paying for things that keep workers productive and less interested in paying for drugs with side effects, for example, that reduce productivity. And that may be so, but it doesn't seem that P&G committees have internalized that.

21:17

So the other option is formulary customization, By which we mean making special requests to have drugs included or excluded from their benefit, move between tears, or perhaps some kind of modification to step at it or payroll requirements. And today this is not very common. These customizations to happen, but they're fairly rare and usually only for isolated drugs. Very few employers are building Ellicott formularies from scratch. Those are only about seven million lives and the employees who are doing that are either huge enough to have a bespoke formula rebuilt for them like Wal-Mart or they have the expertise and the capacity to be managing a form or you like that in house health plans for example. So besides those few today there are probably three main scenarios in which the employer might request the formulary edit. one is something like the CEO, spouse, needs Drug X, So can you please covered Drug X or make it co-pay for you, or something like that?

22:15

Too, is our workforce is making a fuss about something like mental health care or fertility treatment. So we want to cover it more generously than we are today.

22:26

And three is, we noticed we're spending an enormous amount of money on druck, why? So can you please excluded from coverage?

22:33

Well, the first one, you don't really have any control over, and the second one is likely to be about therapy areas rather than specific drugs, but the third could be an issue for you. So thankfully, pharmacy and medical directors tell us that they almost always push back on these requests. Occasionally, the employer does have a point. But usually they're not appreciating that contracting situation for that drug, or they're not fully thinking through the downsides of limited coverage, Although sometimes, of course, they do ignore this advice from the plan and they pushed through the change regardless.

23:04

Next slide, please.

23:07

So we'll formulary customization become a bigger deal in future. Will we see employers starting to say, Yay? Or nay to every new drug?

23:16

Well first, we'd like to give you a sense of how self funding employees think about their benefits and how they think about value.

23:22

So on the right hand side of this illustration, perhaps the first things that come to mind if they make their benefits less generous, if they restrict or exclude coverage, then they reduce their costs, and they reduce their exposure to risk as well. So why not slash and burn their benefits?

23:38

Frankly, one reason is a very human one: human resources do not want to be confronted by weeping mothers in their office telling them how their child desperately needs or ..., but you, hotlist bean counters won't pay for it.

23:51

It might be international business decision to cover something, but HR don't, then have stock options don't, usually, anyway, So, these kinds of things do matter to them.

24:00

Another motivation is the avoidance of bad press, The last thing any company wants is a story in the newspapers about how a 30 year veteran at their company needs keytruda for cancer, and they refuse them coverage.

24:12

Same goes for lawsuits. If something is FDA approved or recommended guidelines, how can you claim to provide your employee health insurance and yet deny them coverage for that without them being tempted to see you? And perhaps the biggest driver is that employers need their compensation, including benefits to be competitive in the labor market if they're going to recruit. And retain good, workforce is also a way. The way there's kind of inertia against formula changes or any kind of really. So, moving a drug upper tier, for instance, could drive employees who are using that drug to move to a competitor, and the cost of that might outweigh the savings they get for the change.

24:49

The drug savings that they got.

24:51

So for the most part, nobody wants to rock the boat. Nobody wants to stick their neck out. You cover what the PMT Committee says is medically necessary. You cover what your competitors cover and you don't make any negative formulary changes unless you absolutely have to.

25:05

Now, with that context stakeholders that we spoke to really agonized over the question of where this might go in the future. On the one hand, there's a real sense that this approach of covering just about everything simply cannot go on.

25:19

There has to be a point at which they say This drug may work perfectly well, but we just can't afford it on the other hand They say that they just can't say, no, if a drug meets a certain evidenced threshold. So we think this is a point of great uncertainty.

25:33

If the camel's back does break so to speak, then we don't expect the burden of decision making to full on employers. At least not for very long. Perhaps, you might start there. We might see a little bit more customization ramping up.

25:45

But we think ultimately, that pressure will come to bear on the, the administrators themselves, and that it will be up to the PMT committees to change their approach to making calls on coverage stance.

25:58

Next slide please.

26:02

Besides full customization, another way that self funded employees can have an impact through their plans is by kicking up a fuss with their administrators about their spending on a particular drug. Sometimes that conversation might lead to a request for formula customization. But more often, the outcome is that the administrator has a stronger incentive to negotiate for lower net price with the manufacturer.

26:23

And of course, that can make contracting tough for pharma companies.

26:28

These conversations come about because employers monitor their utilization, they're looking at their utilization data and spending, and they aren't usually looking at drug prices and rebates, and making a considered assessment as to whether they're overpaying. It's just that they noticed an item is costing them a lot, or perhaps a lot more than it used to. So they grew up about it.

26:48

We expect this kind of pressure to intensify, but only so much, because there's only so many hours in the day that HR people have to devote to this topic. And there's only ever going to be five drugs at the top of your drug utilization report. So it can only go so far.

27:04

Next slide, please.

27:07

So, given these ways in which employers might try to tackle rising costs through their plans, will manufacturers need to be engaging with self funded employers directly?

27:18

We think that varies a lot, depending on one's portfolio of assets. So employers are only really taking notice of drugs if they appear on their radar, which means standing out from the crowd in terms of spend.

27:30

Surface product is relatively affordable, if its market share is very high, if it's indications are not so prevalent than employers are unlikely to notice it.

27:39

On the other hand, if your product is expensive, it has a big share of the market, and it's for a common condition, then employers are likely to be aware of it. And they are liable to go to their administering that asking, too, restricted, or excluded, or urging them to do something about the price.

27:54

So will you stand out at a population level? Will you stand out at a patient level? Will patients on your drug B, particularly costly, or will they suddenly appear to be spending more when you increase the price? This is when employers are going to take notice and cause you problems potentially.

28:12

Next slide, please.

28:16

With that in mind, it's important to adapt this approach to the approach, to this, this issue, I suppose, to specific circumstances.

28:23

So, it's important to monitor plan level claims data for employers who are seeing high utilization of your products, and also who are big enough to justify engaging with them, and then target those employees.

28:36

When you engage, the goal must be to prevent the things that we've been talking about. So prevent employers from requesting restriction of coverage or exclusion from coverage, and to avoid them applying pressure to the administrators, asking them to negotiate higher on price or rebates.

28:51

To do that, you should be essentially pitching a value proposition to the employer as to why this drug is giving them value for money.

28:58

Of course, there are no health care professionals, so this is going to be this is not going to be the same conversation that you would have with a pharmacy director, for example.

29:07

If you're driving, drug is expensive, has a high market, share relatively common indications, then you certainly consider having a dedicated employee value proposition for these kinds of circumstances.

29:17

Another thing you can do is inform them or introduce patient support programs to help with adherence and so on, to emphasize the value that you're bringing to their business.

29:29

Of course, also, you'll want to lay out the rebates situation to the extent that you can, so that they understand that restricting your product may not even reduce their drug bill in the way that they assume that it might.

29:39

And, of course, you can do all this by engaging with employers themselves, if they're big enough to justify it. Or you can engage with their brokers, their consultants, which can be a good way to get shortcut, really, to indirectly reach a lot of employers.

29:54

And now I'll hand back to Jason to talk about risk management.

29:59

Thanks, Kyle.

30:03

Yeah, so now we'll talk about, really, by approaches that meant that employers are using to better than just management risks for some of these therapies.

30:13

First, stop loss, so Scott touched on stop loss or earlier in the conversation.

30:18

Any other keys, the word leaky.

30:19

Now it's leaking.

30:21

What ends up happening is the employer ends up paying most of billing way.

30:27

The leakiness comes from a few areas, one is around stop loss.

30:31

It's really meant to cover those unknown or unexpected one-time costs.

30:37

So for a curative staunching therapy, that's one time, in that first year it's likely covered however, the question of is that really unknown?

30:46

So for issues most myeloma, you have a multiple multiple myeloma patient.

30:51

Did you know that you have your membership?

30:55

If that patient progressing sent forth on therapy for that new gene therapy for myeloma, is that truly unknown? Could that be laser diode or excluded immediately upfront wear? Sunglasses would even cover that therapy.

31:09

So that's one aspect.

31:10

But also, it gets into once that event happens, and you've stopped us, covers that one time, all subsequent costs are really cool by employee or employer because a patient has been lays it out, so there are no longer covered under the program.

31:24

So when you take a step back and look at stop loss, it is good for those unknown, unexpected events to help spread that risk.

31:31

But for so gene therapies, curative therapies, crack therapies that are high cost over multiple years, or financing arrangements that have a pure time model, stop loss really doesn't protect employer from that risk and for the incremental cost.

31:48

Innovative contracting, so I think we're seeing more of this in the cell gene therapy space. Lots of interest in outcomes based Contract VPCs.

31:56

BBC has been around for awhile, but due to historical challenges around is operational challenges, alignment around metrics to slow adoption.

32:04

However, for the Sanjiv therapies, given the cost, the uncertainty of value in smaller patient population size, there is more of an appetite for these types of agreements.

32:15

And we're even seeing new stakeholders emerge that are helping facilitate and operationalize these contracts.

32:23

Didn't even get just the different financing models like the Netflix subscription, where it's as an employer or a payer. We have a set budget for this drug for the year. In regards to utilization, the total spend will not exceed X.

32:37

You have a new these styles words spreading out payments over time.

32:42

No, both these do help smooth those payments.

32:45

And you avoid those large upfront costs.

32:49

However, there are challenges. What subscription is the utilization certainty?

32:53

so how could that impact best price for a commercial plan.

32:58

And for the Nudie style, there was, there could be incentive alignment challenges between the payer and the employer.

33:05

So, if you're an employer with A patient that needs a cure to a one-time ... therapy, you're likely better off going with the upfront cost.

33:15

First is spread over time, if it truly is just a one-time hit, because at one time, assuming it's not, actually, isn't that's unexpected, then would be covered. So, in that case, the annuity, we're over time would not benefit the employer.

33:31

You another, we see growing, is this idea of private risk pooling, or getting into employer groups, combining into Group ...

33:38

group, captains, either remember own group captive or a single parent, Really all that is, it's multiple small employers coming together to pool risk across a larger employee or membership pool.

33:51

And chose with that is that alignment around benefit design, cost sharing, across employers, within that captive, um, but also for the single parent that does require that common ownership structure.

34:04

And I'm speaking to a bit of a design consultant.

34:06

That was a feedback or a barrier to this models.

34:09

You often do need, especially the small employers, you do need that single, corporate entity that typically owns all the companies in that cool, to make this work, we're seeing more and more private risk pooling options out there, the idea of helping spread the risk. So I think in general, that's a recurring theme.

34:29

There's an idea to spread the risk for these therapies across a much larger membership pool.

34:38

Another option is just going from soften it to full insurance.

34:41

So, it's going back to where they started.

34:44

An earlier slide, Scott showed the percent breakdown around ..., the percent of the business that are present market that's fully insured versus so funded.

34:55

Now, that increases with employer size.

34:58

I think we will, like, we could start seeing and the payer confirm this is that, although small employers, like 500, 200, or less, they may reconsider going back to the fully insured model.

35:11

If they believe that there you're at risk or expose a risk in the lack of a better way of managing that risk.

35:21

Variation of our model is just for ensuring certain therapies.

35:25

So looking at the Embark Program by Evernote example, This is a model where employers come together in the contribute A set PM PM per month for their membership, and that gives them full insurance for these two therapies.

35:42

Today, it's just these two therapies: Future And we talked about that. You know, the pipeline expected growth markets, how the growth, and the number of therapies and the cost, how that impact the premium on programs like this.

35:56

I think between, like, all these options, the Stop Loss, re-insurance doing this subset of a full insurance that does help spread the risk.

36:04

Now, protect employers, but as these therapies launch, in Costco, one.

36:10

when you have to expect that premiums will go up with it, Sylvain as employer route truly. How are you able to mitigate that and manage your total cost?

36:21

And in the private market, there really aren't that many of options.

36:25

That leads us to our.

36:32

Yeah.

36:32

So, because of all these options we talked about, for spreading risk, I mean, for me, like, the takeaway is that, as a manufacturer, or someone developing an exit strategy, there is this need to potentially gage new types of stakeholders that you may not be engaging today.

36:47

These are just a few examples of organizations in the market that provide various solutions: Stop loss, re-insurance.

36:55

Outcomes Based Financial Solutions.

36:58

Structured debt or financing, BBC Administration, analytics, there may be opportunity to engage the stakeholders in, well, your opportunity to just demonstrate value, the therapies, and help help them achieve their patient access goals.

37:12

Give an example: the HTA, that's the Large Employer Alliance group, that really, they share data.

37:21

And for all the members, crosses employers, they have access to their medical and pharmacy claims, are running analytics off that, looking at utilization, looking at opportunities to optimize benefit design. Manufacture is an opportunity to engage that organization, too.

37:37

Gerri evidence, talking about value value of the therapy and the portfolio, and how that helps them achieve their objectives around improving patient health outcomes, and reducing total cost of care.

37:49

These are the organizations that are helping with VPC B helping admins for VPCs.

37:56

Is that an object for you to engage them, to think about, for your therapy, what would be those metrics?

38:01

What are the opportunities for value based contract for some of these therapies? And then, for their customers, won't be the rate, payers, or stakeholders to engage in a discussion to enter in some of these innovative agreements.

38:17

Then lastly, look at government intervention.

38:22

So talking to payers, and then doing some research on this, there does seem to be the interest by employers for the government to take it bigger.

38:29

A bigger role in terms of how these drugs are covered reimbursed paid for Christ.

38:37

There are a few options on this.

38:37

There's a huge federal or state level risk pools Medicare carve out and allowing CMS to negotiate directly on price.

38:48

Risk pool, this is very similar to a private risk pool. It's essentially, it's an employer group. You pay up to a limit on some of these therapies.

38:56

The Government access re-insurance, the Medicare Carve Out option think of immunosuppressants for kidney transplant where all immunosuppressants or transplant patients aren't covered by Medicare and Margaret can behave backwards.

39:11

Access comes down to CMS coverage determination and then maybe add on premiums for some of these therapies just for those drugs.

39:20

Lastly, this be probably the most extreme is CMS directly negotiating price with manufacturing where price would be apply to the Marshall. Marc as well.

39:32

And we think that the government, to get invited in, this game of drug pricing, and ..., probably rely on a couple of inputs, one ... or ice or like, assessments, or value models, as any factual. Be prepared for that, the help of discussions.

39:46

Also, looking at international reference pricing, if the government doesn't get into pricing, so comparing international benchmarks with value frameworks to get a sense for a price paid? When negotiations we factor that, could be completely new way to negotiating and saint ...

40:00

country seamless, because some of these therapies, with the idea of that, it's initially focused on Medicare, but also an expectation that those decisions choices spillover to the commercial market.

40:16

So, that really covers the core, what we learned through this process.

40:19

Again, we set out to talk about where is this going in the, from the self unemployment markets.

40:26

Thinking about all of the innovation horizon of our transform patient to transform outcomes, expected costs that could come with that. What does this mean for self funded employers that are having their painful these therapies paying for the care?

40:40

And will the US model ultimately break, I think, and speaking with the stakeholders through, you know, through this research and through this efforts, think the short answer is short, in the short term. It's like, no, it's not going to break.

40:53

I think we'll see more smaller companies perhaps exploring, going back to a point your model, if they believe if a truly at risk and aren't able to manage that risk.

41:04

Stop loss.

41:06

You'll see a bit more of that today.

41:10

It's permanent Smart companies are doing that but could the larger companies start to get in that game as well? Just give them an expected number of new therapies and potential impact on their employee membership. You will be now only that protection as well.

41:22

If so, what does that mean for manufacturers if you're negotiating access?

41:26

But also doing innovative agreements with the payer that represent a self-employed and have stop loss at that stop loss care, resulting on the hook for some of these therapies and a BBC arrangement?

41:39

Now it's co-ordinating VPCs between the payer and employer as well as established carrier. So you don't tend to occasion is kind of discussions.

41:48

The idea of this being carved out to Medicare?

41:50

I think that, there's a potential there.

41:52

Especially to speak about employee mobility that challenge.

41:57

Um, I don't think given that children employee mobility, there was a belief that A single payer life construct isn't needed.

42:07

Help protect against that risk and you can do that again through the government, carving this out or to some very large, commercial risk pools.

42:16

I think that you know there is potential for that's an option where the government does get involved.

42:21

To take on that risk to cover a subset of these therapies. Kidnappings a question of: How do you draw the line?

42:27

Um, that is there as far as seen as negotiate price. I think it's, that's been talked about for a long time, for many years.

42:37

I don't think we don't see that happening in the near future. There are always is that the possibility that the government does get involved with providing coverage and reimbursement based therapies.

42:47

That they may want to also explore opportunities for them to negotiate price, to drive down that cost, and bring price and cost more in line with international benchmarks. Now, we think about value.

43:01

So, I'll pause there again. Thank you all for your time. I'd like to open up now for questions.

43:08

Let me see if you can see a few. Some sharing.

43:20

Yes.

43:31

All right, I do have a few questions.

43:35

All right. Here is one.

43:40

So, does today's topic primarily impact producers of cell and gene therapies, hosts impact manufacturers that don't produce those type of therapies?

43:52

Scott, can you take this one?

43:54

Sure. So, that's a great question.

43:58

I think the PMIs is right that a lot of what we're talking about is specific to companies who are selling these kinds of very high cost therapies, gene therapies, and so on.

44:08

So, if the government carves out gene therapies and says, these trigger Medicare coverage. if you, if you're indicated one of these, then it's covered under CMS.

44:17

That's only going to directly affect the manufacturers of those products and that they now have CMS as their only payer.

44:24

And the same applies to all of these government options that we've been talking about, so long as they're limited to extremely high dose therapy.

44:30

So, if you have CMS negotiation, all drugs, then that affects everything. But if it's limited, if it's if it's a policy that's specifically designed to address the rise of these Lightening Strike therapies, then that will be limited.

44:46

Equally, what you were saying, Jason about contracting as a potential solution, that's something, you know, for coffee manufacturers and so forth to think about.

44:56

All these new stakeholders, we've talked about lakes. Subcommittee's who are going to be handling gene therapy, carve out programs like the ... Program you mentioned, with full insurance. That's all, only really applicable to the companies who are making those drugs.

45:11

But there are some general implications, I think of of all this for other companies who aren't necessarily producing very high cost therapies. We're talking about patients becoming a more important stakeholder, and about the value of engaging directly with employers in some cases.

45:26

And these are things that two o'clock do apply across the board.

45:32

And to the extent that solutions are found to the risks posed by these very high cost therapies, to the extent that, you know, if government does carve things out, then that will act as a pressure valve for the rest of the market to some extent.

45:45

So, maybe the status quo for everything else, We'll be able to tick along as it has been for a little longer than it otherwise would if if that issue didn't get solved in some way.

46:00

OK, all right, thank you. I think we have time for two more questions.

46:06

Next is, you touched on employee mobility.

46:11

How does that impact employer preferences for the various solutions that we discussed?

46:18

I'll take that one.

46:21

I think yeah, so I think we touched on this, that employee mobility is a large challenge in this country.

46:25

The idea that, you know the concern is if you're a patient or employee, something happens you need a high cost or curative therapy you get. That's your employer.

46:35

He's pasteboard and then you move on to your next employer while your principle is still I still painful that payers are paying last claim.

46:46

So, you know, given that that risk and dynamic, an employer standpoint, you know, you're best off if the option of is carving this out.

46:55

So, you just eliminate the risk Entirely.

46:56

Where in Medicare, we're like, Medicare for all like solution for a subset of the market works, were government just pays for that.

47:06

And that eliminates the risks and the budget impact, but also just helps spread the risk across such as the larger pool of the US population, in the absence of that option for mobility.

47:22

There's talk between what's better, the pay upfront versus pure time model.

47:28

And so if it's a condition where, it's, again, the idea that's an unknown or unexpected event that leads to the need for a therapy, something like a child born, you have a child born to need some genes now. Or something like that was completely unpredictable.

47:42

Then the upfront model is better because the stop loss would pick that up.

47:47

As employer, you're not on the grass, the hammer time model, that play may leave and they're still paying for no pain.

47:58

I think we would need a model where for these therapies, these plans that an appeal over time, that as employees shift between plants, are payers, employers, that the script almost follows them from each from one to the next.

48:17

All right, I think we have the last question.

48:22

What are your thoughts on employers defamed more restrictive customized formularies in the future?

48:28

Scott, let you take that one.

48:32

So well, I guess to back up a minute.

48:36

So I think when we took to pairs, they seem very unclear, very uncertain as to whether there will be some kind of change in how coverage is determined in the future, where the payers will start to have to say no to proven therapies in a way that they haven't been doing today.

48:57

But even if that does happen, we don't think that that's likely to lead to like a patchwork of custom formularies administered.

49:07

You know, within a given the administrator that there'll be this patchwork of different different custom formulas for different points.

49:13

Instead we'd expect that to manifest through administrators themselves changing how they approach policy questions.

49:21

And the reason is that, fundamentally, that's what they're there to do. That's their job. They have the expertise, the infrastructure, the connections with, with cowell's, the knowledge base, and just the capacity to be making those decisions.

49:37

And, know, and those decisions that have to be made on a, on a regular basis, every time product comes to market, or an indication expansion goes through, or what have you.

49:47

So, employers, with a few exceptions that we mentioned, don't, they just aren't able to, to deal with that.

49:53

So, yes, from time to time, they do, for example, already they, you know, they may ask to cut something out of their benefits specifically, but it doesn't seem like employers are planning to start managing their own formulary wholesale. If a big change in February thinking is needed, than we think that that's going to be, they, they may, it may come from employers. That it's going to be them applying pressure to the administrators to change the types of decisions that they're making.

50:21

And it will be the administrators who, who actually do that.

50:30

I think we're at the questions. Think about time. So Ellen over equity.

50:38

Fabulous, great. I just really want to thank Jason and Scott for today's really detailed presentation, and thank you, everyone, for joining us today.

50:49

As a reminder, you will receive an e-mail with a direct link to today's recorded presentation, and that should be available by very early next week.

50:58

That now concludes today's webinar.

51:00

Have a wonderful day, everyone!

51:04

Thank you, everyone.

The author(s)

  • Jason Boller Partner Advisory Services Market Access & HEOR
  • Scott Freeman Senior Consultant, Health CS&F

Consumer & Shopper