| |
HCV Cures Result in Long-Term Savings & Improved Quality of Life
|
| |
| |
"costly new cures today could result in long-term savings and improved quality of life. No drug category has gotten more attention in recent months than the new Hepatitis C therapies, which are expected to increase total Hepatitis C drug spending 209% by 2015[1]. Yet long-term savings for treatment of chronic conditions, liver transplants and lost productivity may ultimately offset the cost of the specialty drugs. In the most serious cases, for example, compare the $270,000 in treatment over a decade for patients with compensated cirrhosis, or scarring of the liver, to the average $86,000 for a course of the new medication, believed to be a cure[2]."
"Payers, physicians and patients have all wanted drugs that make a real difference, drugs that provide real VALUE. They are less interested in paying tens of thousands of dollars for a drug that simply extends life by a few months. As companies develop life-saving medications and cures, compounds that truly make a difference, they need to be rewarded with favorable pricing. Without this, the biopharmaceutical industry will continue to contract and fewer such breakthroughs will be discovered"..... http://www.forbes.com/sites/johnlamattina/2014/06/25/forgotten-in-the-sovaldi-price-debate-hep-c-patients-and-healthcare-savings/
The Long and Short of Health Numbers
By Ceci Connolly and Rick Judy
The notable five-year contraction in healthcare spending growth comes to an end next year, but not in a way that marks a dramatic reversal-at least, not yet. The Medical Cost Trend: Behind the Numbers 2015 report released today from PwC's Health Research Institute (HRI) projects a medical cost trend of 6.8% for 2015, up only slightly from the 6.5% projected for this year. Our analysis, which measures growth in the employer-based market, incorporates input from health policy analysts, industry executives, earnings statements, government data and actuaries from more than a dozen insurance companies, whose companies cover a combined 93 million members.
Much of this is simple and not surprising based on historical analysis: the healthcare "economic recovery" lags behind the broader economy. So we are now beginning to see the recovery-with more employed workers and more disposable income-loosen up spending on things such as doctor visits and diagnostic tests. Many Americans, after postponing care, are once again spending on their health needs.
Some underlying nuances in the health numbers are more complex and uncertain: greater total spending on health services is not the same as higher costs per person. Even as private health spending ticks upward, evidence reveals that structural changes over the past few years have produced greater efficiency in the $2.8 trillion US health industry. As with any evolution, there is uncertainty. Some of our big healthcare investments today are a financial gamble. Most notably, the burst of high-cost "specialty" drugs could result in lower treatment costs on chronic conditions in future years or signal the start of painfully expensive pharmaceutical bills.
The most durable long-term factors holding down costs are those that instill a new philosophy about care delivery. For instance, health systems and hospitals striving for "systemness," in which care teams seek to achieve more by working together. They are focusing specifically in two areas: streamlining administrative work and consolidating and standardizing clinical programs, which can provide higher quality care through consistent processes and outcomes.
With about 60% of hospital budgets spent on labor, personnel costs are a top priority. Since 2012, hospital employment growth has slowed and is projected to continue on this trend-evidence that providers are achieving improved efficiency with fewer resources.
More price savvy consumers shopping for value are also redefining the health economy. With many employers choosing health plans that include cost-sharing and high deductibles, price has become a top priority for consumers and affects their health choices. These individuals now demand more transparency from the industry, and some assurance of value for their health dollars.
The short-term trends are more prone to shifts in the economy or consumer attitudes. Five years post-recession, more confident consumers - many newly insured - are revisiting doctors and driving up US health spending. But this surge is a temporary activity that should level out with few lingering effects on price or usage habits.
Similarly, costly new cures today could result in long-term savings and improved quality of life. No drug category has gotten more attention in recent months than the new Hepatitis C therapies, which are expected to increase total Hepatitis C drug spending 209% by 2015[1]. Yet long-term savings for treatment of chronic conditions, liver transplants and lost productivity may ultimately offset the cost of the specialty drugs. In the most serious cases, for example, compare the $270,000 in treatment over a decade for patients with compensated cirrhosis, or scarring of the liver, to the average $86,000 for a course of the new medication, believed to be a cure[2]. The challenge may lie in targeting the patients most in need of the more expensive course of therapy.
Even the large IT investments required by merged health systems may eventually lead to savings through greater efficiency. Technology investments can be daunting for health systems. Vendor selection, hardware costs, and outside support all require significant money and time. According to PwC's HRI analysis, the cost for a comprehensive integration for clinical and business systems can run between $70,000 and $100,000 per hospital bed. For a 1,500-bed system, that translates into an additional 2% increase in annual operating costs during implementation. By connecting clinical care, business operations and technology and improving the consumer's experience, the investment should have large, albeit long-term payoffs.
Will we again see the double-digit health spending growth that marked the late 1990s and early 2000s? Just as the sluggish recovery from the Great Recession played a large role in slowing medical inflation, a strong economic recovery with low unemployment could shuffle us in the opposite direction. However there appear to be safeguards in place to prevent runaway inflation. All players in the healthcare system are thinking bottom line: consumers are choosing more frugal options; the delivery of care is being better managed and coordinated; employers and providers are pursuing cost-cutting strategies; and, to keep premiums low, insurers are using high performance and narrow networks to steer patients to lower cost, higher quality providers.
Yet-the long and short of it-health spending continues to outpace GDP. This underscores the need for a renewed focus on productivity, innovation, efficiency and ultimately, delivering better value for purchasers. The real story behind the health numbers is that the industry is striving to be more competitive and more consumer-centered, but there is still work to be done. Our work will not be done until we can bend the cost curve to the negative.
Ceci Connolly is the Managing Director of PwC's Health Research Institute, a research organization dedicated to objective analysis on the issues, policies and trends important to health organizations and policymakers. Ceci is a veteran journalist and co-authored Landmark: The Inside Story of America's New Health Care Law and What It Means for Us All.
Rick Judy is a Principal in PwC's Health Industries practice. During his 19 years with PwC, Rick has consulted many segments of health care, including payers, employers, hospitals, health systems, long-term care facilities, and community and government organizations. Rick is a frequent speaker at healthcare industry events on a range of topics.
[1] The Express Scripts Drug Trend Report, Express Scripts. (October 2013) http://lab.express-scripts.com (accessed April 2014).
[2] Nancy S. Reau, MD and Donald M. Jensen, MD. "Sticker shock and the price of new therapies for Hepatitis C: Is it worth it?" Hepatology. Vol 59: 1246 -1249. March 1, 2014.
|
|
| |
| |
|
|
|
