Healthcare reform and the quality of care

One of the most significant aspects of healthcare reform is its emphasis on improving the quality of care.  Many aspects of the law seek to improve the quality of care as a way of reducing cost.  The healthier we all are, the less we’ll spend on doctors and tests.  Now, if only the law could help every American lose 10 pounds!!  That would be the best ways to reduce the cost of care.

We cannot really discuss the quality of care until we know how to measure it.  There needs to be a consensus as to what constitutes good care.  The simpler these measures are to understand, the more providers and patients can focus on them and achieve success.

We also need a system for measuring the quality of care.  Quality measures also need to be simple so that they can be implemented and data collected cost effectively.  Of course, to do that, we need widespread use of electronic health records.

The U.S. government announced in February of 2009, the American Recovery and Reinvestment Act (ARRA). The ARRA act included $19 billion under the portion of its HITECH Act to promote the adoption of Electronic Health Record (EHR) technology in healthcare. Starting in 2011, medical providers can receive up to $44,000 or more by demonstrating what has termed as “meaningful use” of certified EHR technology to be eligible for government funds. 

Back to healthcare reform — the Patient Protection and Affordable Care Act (PPACA).  To drive improved quality of care, PPACA requires the identification and publication of a core set of quality measures for Medicare and Medicaid adults.   PPACA also requires Medicaid to establish a quality measurement program. 

PPACA requires the integration of reporting on quality measures with reporting for the meaningful use of electronic health records.  By focusing on the effective use of EHRs with certain capabilities, the HITECH Act makes clear that the adoption of records is not a goal in itself:   it is the use of EHRs to achieve health and efficiency goals that matters.  HITECH’s incentives and assistance programs seek to improve the health of Americans and the performance of their health care system through “meaningful use” of EHRs to achieve five health care goals:

• To improve the quality, safety, and efficiency of care while reducing disparities;
• To engage patients and families in their care;
• To promote public and population health;
• To improve care coordination; and
• To promote the privacy and security of EHRs.

In the context of the EHR incentive programs, “demonstrating meaningful use” is the key to receiving the incentive payments. It means meeting a series of objectives that make use of EHRs’ potential and related to the improvement of quality, efficiency and patient safety in the healthcare system through the use of certified EHR technology.

Stage 1, which begins in 2011, the criteria for meaningful use focus on electronically capturing health information in a coded format, using that information to track key clinical conditions, communicating that information for care coordination purposes, and initiating the reporting of clinical quality measures and public health information.

The final rule reflects significant changes to the proposed rule while retaining the intent and structure of the incentive programs.  Key provisions in the final rule include:  

• For Stage 1, CMS’s proposed rule called on physicians and other eligible professionals to meet 25 objectives (23 for hospitals) in reporting their meaningful use of EHRs. The final rule divides the objectives into a “core” group of required objectives and a “menu set” of procedures from which providers can choose.  This “two track” approach ensures that the most basic elements of meaningful EHR use will be met by all providers qualifying for incentive payments, while at the same time allowing latitude in other areas to reflect providers’ varying needs and their individual paths to full EHR use.
•  In line with recommendations of the Health Information Technology Policy Committee, the final rule includes the objective of providing patient-specific educational resources for both EPs and eligible hospitals and the objective of recording advance directives for eligible hospitals.

Healthcare reform will fund the implementation of medication management services by pharmacists.  Medication therapy management (MTM) is a partnership of the pharmacist, the patient or their caregiver and other health professionals that promotes the safe and effective use of medications and helps patients achieve the targeted outcomes from medication therapy.  MTM includes the analytical, consultative, educational and monitoring services provided by pharmacists to help consumers get the best results from medications through enhancing consumer understanding of medication therapy, increasing consumer adherence to medications, controlling costs, and preventing drug complications, conflicts, and interactions.

Healthcare reform requires the public reporting of physician performance on quality and patient-experience measures through a website that will be called Physician Compare.  What begins with the implementation of EHR and the development of quality measures that are evaluated through data supplied by the EHR ends in public reporting of the results.  This will enable patients and hospitals to work with the physicians that provide the highest quality of care.  While high-quality of care might cost more up front, the (hoped for) decrease in hospital readmissions, adverse events and co-morbidities will (hopefully) reduce costs in the long term.

Implications for Healthcare Manufacturers

The emphasis on quality measures will more and better opportunities for healthcare manufacturers to demonstrate how their products and applications drive improvements in the quality of care.  Such demonstrates need to be based on clinical data that demonstrate how the product or application performs compared to the quality measures that Medicaid and Medicare adopt.  Medical groups and hospitals will look to healthcare manufacturers and government agencies to provide data that cut across multiple settings of care.  However, the growing availability of sophisticated EHR systems could enable medical groups and hospitals to develop data that are specific to their own patient demographics and mix.  It is in the best interest of healthcare manufacturers and government agencies to help coordinate these efforts.  Healthcare manufacturers will be encouraged to develop data for patient niches so that they are ready to address data that medical groups and hospitals gather that might demonstrate different results than those generated by the healthcare manufacturers.

The government and healthcare community (ie, providers and payers) will develop the quality measures.  The medical groups, hospitals and other payers will implement the EHR systems required to collect data relevant to those measures.  There is an opportunity for healthcare manufacturers to play a role in connecting the two endpoints.  That is, healthcare manufacturers can develop algorithms for analyzing the data so that the results comply in an appropriate way with the outcomes measures that Medicare and Medicaid establish.

Today, retail pharmacies are a secondary or tertiary contact for those drug companies and medical device suppliers that distribute product through this channel.  The growing importance of MTM programs will increase the importance of retail pharmacies for select disease states (eg, hypertension, dyslipidemia, diabetes).   Healthcare manufacturers will need to develop programs at the corporate levels of the retail pharmacy companies as well as the neighborhood pharmacies to educate the pharmacists and encourage and support the appropriate implementation of the MTM programs.  More effective MTM programs will encourage therapy compliance and higher quality care.

As the above evaluation demonstrates, the ARRA and PPACA will provide numerous new avenues for healthcare manufacturers to work with physicians, hospitals and other providers to drive an improved level of care.  The time is now to plan for these initiatives and start their development.

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Expansion towards Universal Coverage and Lifecycle Management

Healthcare reform is a 2000+-page legislation that could have a significant impact on the lifecycle management of pharmaceuticals, medical devices, and diagnostic imaging procedures.  Reading the legislation indicates that the following aspects of healthcare reform are of particular interest to healthcare manufacturers.

• Expansion towards universal coverage
• Funding expanded coverage
• Biosimilars
• Enhancing the quality of care
• Comparative effectiveness research
• Episodic and bundled payments
• Funding preventive care

Over the next few days, we’ll examine the various aspects of healthcare reform that fall into each category.  We’ll evaluate their impact on lifecycle management of pharmaceuticals, medical devices and diagnostic imaging procedures.  Our analysis will show that healthcare reform offers healthcare manufacturers many new levers to pull in their quest to maximize their return on investment.

Expansion towards Universal Coverage

In many ways, healthcare reform will move us towards universal coverage of all US citizens. 

• Medicaid expansion – Healthcare reform requires all states to expand coverage to everyone below 133% federal poverty limit (FPL).  This includes providing coverage for childless adults who meet the income limit.
• National insurance exchange – Healthcare reform will establish non-profit co-operatives where the uninsured and those who prefer to not use their employer-provided plans can purchase coverage.  Premiums will be set by the market.  The federal government will subsidize the cost of premiums for citizens who qualify based on income considerations.  Citizens with income up to four times the FPL will qualify.
• Elimination of preexisting condition exclusions – After 2013, health plans will not be able to deny coverage to applicants based on preexisting conditions.
• Coverage of all dependent children until 26 – All children, regardless of income or place of residency or marital status will qualify for coverage under their parent’s policy.
• Prohibit lifetime limits and annual limits on the dollar value of benefits for all beneficiaries – In today’s market, most health plans place an annual and lifetime limit on the benefits they will provide for medical and pharmacy coverage.  Healthcare reform will terminate those limits. 

These aspects of healthcare reform will have a significant impact on the lifecycle management of pharmaceuticals, medical devices, diagnostic imaging procedures and more.

• Increase in number of covered US citizens – The most obvious impact of healthcare reform is that almost all US citizens will have coverage for their healthcare costs.  Moving towards universal coverage leads to increased utilization of healthcare resources and a greater revenue opportunity for manufacturers. 

  However, on the flip side of the coin, the increase in the number of covered lives and healthcare resource utilization will drive health plans and the Centers for Medicare and Medicaid Services (CMS) to more closely manage costs.  For example, health plans will feel an increase in pressure to reduce the number of hospital admissions and emergency room visits, utilization of diagnostic imaging procedures and access to select drug therapies.

  The movement towards universal coverage, in conjunction with the wave of mergers and acquisitions among health plans, will increase the number of covered lives per health plan.  The increase in the number of covered lives per health plan increases each organization’s negotiation leverage with healthcare manufacturers.  That leads to downward pricing pressure for healthcare manufacturers.

  Moving towards universal coverage will increase the workload for physicians, hospitals and other providers.  Any pharmaceutical, medical device, diagnostic imaging procedure that saves time for the manufacturer will enable the provider to manage their workload.  This is a benefit that healthcare manufacturers can market to the extent that labor savings are documented by compelling data.

• Change in commercial plan demographics – Healthcare reform will lead to a change in the demographics of the lives that commercial plans cover.  For example, there will be an increase in the number of young adults who become covered by their parent’s policies.  Patients who previously were denied coverage due to a chronic disease will now have coverage.  Patients who suffer from diseases that are costly to treat, such as cancer, and exceed their annual or lifetime limits will now have continuous coverage.  These changes in demographics could affect the priorities that health plans assign to select disease states and how they manage the products and procedures used to diagnose and treat them. 

  This could enhance access to some healthcare procedures and products and, therefore, increase their utilization.  Conversely, changes in the demographics could reduce access to procedures and products and, therefore, increase their utilization.

• Change in Medicaid demographics – Raising the income limit to qualify for Medicaid coverage and allowing coverage of childless adults will change the demographics of Medicaid plans.  A significant number of new beneficiaries who previously were uninsured will be older and sicker than those currently covered by Medicaid.  Today’s Medicaid beneficiaries are primarily younger women and children. 

  For the same reason and with the same implications, some people currently covered by commercial plans will qualify for Medicaid coverage and convert.  Converting to Medicaid coverage will reduce the cost of coverage.

  Changing the demographics of Medicaid beneficiaries could lead to a change in priorities of for managing diseases and the emphasis on negotiating rebate contracts and managing access to products and procedures.  For example, after 2013, Medicaid plans could place a higher priority on managing cardiovascular and chronic diseases and a lower priority on managing schizophrenia.  Changing priorities for negotiating contracts could exert downward pricing pressure on some healthcare products and lessen pricing pressure for others.

  Covering older and sicker patients could improve the overall, historically-low Medicaid compliance rates.  This could enhance the utilization of products among Medicaid populations.

• Uninterrupted coverage – Upon implementation of healthcare reform in 2014, there will be uninterrupted coverage for patients receiving high-cost therapies due to elimination of lifetime and annual limits.  This is likely to increase the utilization of products and procedures associated with diseases that are very costly to treat.
• Elimination of the Medicare Part D coverage gap – Healthcare reform will gradually eliminate the Medicare Part D coverage gap by 2019.  This will enhance access to therapies for Medicare Advantage beneficiaries, which will drive their increased utilization.

In our next blog post, we’ll look at how healthcare reform will be funded and how that could affect lifecycle management of healthcare products and procedures.

Pharmaceutical Lifecycle Management Prior to Healthcare Reform

Each part of the lifecycle presents marketers with unique challenges.  The chart below illustrates the most important lifecycle management (LCM) challenges and how they vary by stage of the lifecycle.

hen selecting LCM strategies to pursue, pharmaceutical marketers will examine the strategies impact on return on investment (ROI).  An LCM strategy’s impact on the following aspects of a drug’s position will determine its ROI.  For example, the greater an LCM strategy’s impact on market share, the greater the ROI.

• Most important factors – An LCM strategy’s impact on a drug’s:
  • Market size
  • Differentiation from competing drugs
  • Duration of patent life
  • Size of the target patient population
  • Physician, patient and payer preferences between competing drugs
  • Drug portfolio revenue (in contrast to the individual drug’s revenue)
• Somewhat less important factors –  An LCM strategy’s impact on a drug’s:
  • Rate of therapy compliance
  • Level of formulary access or medical policy restrictions
  • Product awareness among physicians, patients and payers
  • Manufacturing costs

Even before healthcare reform, there are many strategies that fall under the rubric of lifecycle management.  The strategy that offers the greatest potential impact on ROI, by far, is a new indication.  A new indication will increase the size of the target market by expanding into a new target patient population.  It also could increase the size of the target market within the current patient population if a sub-segment suffers from both the current indication and the new indication.  A new indication could potentially differentiate the drug from its competitors, affect patient, physician and payer preferences and create synergies with other drugs in the manufacturer’s drug portfolio.

However, a new indication is also the riskiest strategy.  Conducting the clinical trials required to earn a new indication is a costly endeavor.  However, only a small percentage of new indications receive marketing approval from the Food and Drug Administration.

Examples of other LCM strategies include new formulations, new delivery devices for injectable drugs, publication strategies, new pricing and contracting strategies or line extensions.  These strategies are less costly and risky than seeking to earn FDA approval of a new indication.  However, the potential ROI also is much less.

As we will demonstrate in future blog posts, healthcare reform offers drug companies many new levers to pull to increase ROI.  These new opportunities will bear fruit for those who manage them appropriately.

Pharmaceutical Lifecycle Management and Healthcare Reform

Healthcare reform will have a significant impact on lifecycle management of pharmaceuticals.  As we will demonstrate over the next few days, healthcare reform will offer drug companies many new levers to pull to support the appropriate use of their drugs.  Healthcare reform is much, much more than expanding towards universal coverage.

First, let’s start with a definition of lifecycle management (LCM).    Based on conversations with many drug company marketers, lifecycle management is defined as maximizing a drug’s profits during its commercial life.  Almost all marketers suggest that a drug’s commercial life begins at launch and ends due to one or more of the following factors…

• Patent expiration of the branded drug and the launch of multiple generic competitors that cost significantly less than the branded drug.
• The launch of branded alternatives that offer a significant clinical and/or economic advantage.
• A change in treatment algorithm that shifts preference away from a branded drug.

LCM planning begins during Phase II or, more likely, early Phase III trials.  However, implementation of LCM strategies and tactics begins after the drug’s launch.   Implementation begins at that time as, after launch, a drug demonstrates its commercial viability, the potential return on investment (ROI) from additional investments and the needs of clinicians and patients outside of a controlled environment (ie, clinical trials). 

Most LCM strategies and tactics are implemented within a few years after a drug’s launch as that provides time to generate a sufficient ROI.  Many LCM strategies (eg, clinical trials) take many years to plan, implement and yield an acceptable ROI. 

Many attributes of LCM differ significantly from those of day-to-day marketing

Lifecycle Management	Day-to-Day Marketing
Starts years prior to drug launch	Starts one year prior to drug launch
LCM focuses on long-term strategic positioning	Day-to-day marketing focuses on such short-term issues as… n  Increasing quarter-to-quarter sales. n  Driving increased awareness of a drug. n  Sales training. n  Supporting sales as it addresses day-to-day customer issues. n  Developing educational programs that facilitate utilization of the drug. n  Positioning a drug compared to therapeutic alternatives.
Multi-disciplinary	Mostly self-contained within the marketing department
Global focus to maximize ROI	Regional focus (eg, U.S., Europe) to meet local healthcare needs

 

Lifecycle management is a complex initiative and some drug companies dedicate staff to planning and implementing LCM initiatives.  Other drug companies assign LCM responsibilities as part of a marketer’s overall responsibilities.  With either approach, the long-term success of a product requires spending sufficient time and creativity to develop winning LCM strategies.