Unbiased Analysis of Today's Healthcare Issues

“An astonishingly naïve approach”

Written By: Jason Shafrin - Sep• 27•15

That was Amitabh Chandra’s comment on Hillary Clinton’s plan to reign in drug prices and I don’t disagree.

According to the N.Y. Times, her plan:

…includes regulating the percentage of revenues pharmaceutical companies must spend on research and development, instituting a cap on the cost of many out-of-pocket drugs for chronic and serious health conditions, and allocating additional funding to put more generic versions of drugs on the market…

That plan includes a monthly cap on the amount insurers could ask people to pay out of pocket for specialty drugs, and increased competition for generic versions of specialty drugs.

The plan would also allow Americans to import lower-cost drugs from abroad, within the confines of Food and Drug Administration safety regulations, and prohibit drug companies from keeping generics off the market, which would save an estimated $10 billion, according to her campaign.

Capping out-of-pocket costs will reduce payments for sick patients but will raise premiums for everyone since insurers will need to cover costs. Allowing patients to buy drugs abroad could reduce drug safety. Even if US patients are able to import safe drugs, this policy could increase drug prices worldwide if innovators are not able to earn sufficient worldwide returns on investment due to reduced returns in the US.

Friday Links

Written By: Jason Shafrin - Sep• 24•15

Health Wonk Review: Fall Edition

Written By: Jason Shafrin - Sep• 24•15

Louise Norris ushers in the change of season with her Fall Colors Health Wonk Review over at Colorado Health Insurance Insider.  Check it out.

Insider vs. Outsider

Written By: Jason Shafrin - Sep• 23•15

A post from Ben Casnocha has some really good insights about the pros and cons of being an insider vs. an outsider. I excerpt a parts of the post below:

A striking section of Elizabeth Warren’s memoir is about advice she says Larry Summers once offered her:

After dinner, “Larry leaned back in his chair and offered me some advice,” Ms. Warren writes. “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.

…As an outsider, I relish the opportunity to think independently and speak my mind. But as Summers suggests, my outsider status relegates me to the margins of the “conversation.” As an insider, I tend to feel muzzled — i.e. countless blog posts drafted and then deleted. But I have the most impact on the world when I’m on the inside of a power structure, exerting influence.

Clearly, this is a challenge many economists face when looking for jobs after graduate school. The prototypical “outsider” is the academic who has the opportunity to be critical of nearly all parties. Academics, however, are often seen as “ivory tower” and aloof from the on the ground details necessary for successful implementation of policy. Insiders, on the other hand, could be people working on behalf of industry. There is more power to make change as an insider, but one must be aware of potential conflicts of interest. Outsiders often view insider as corrupt; insiders often view outsiders as detached from reality or insufficiently detail oriented. There is no clear “optimal” career path, but there exciting avenues for both the insider and outsider perspective.

Risk Sharing Agreements in the US

Written By: Jason Shafrin - Sep• 22•15

Outcomes-based risk sharing agreements tie reimbursement for medical goods or services to patient outcomes.  Despite the increasing demand from policymakers for value-based payment mechanism, risk-sharing agreements are not that comment.  A paper by Garrison et al. (2015) found that there were only 148 risk sharing agreements (RSAs) worldwide between the late 1990s and 2013 and only 18 of the 148 RSAs occured in the U.S.

RSAs were most often considered when there are treatment alternatives in a given drug therapeutic class. The benefits of RSAs include that:

…they allow payers to ensure that the price of a drug is more closely aligned to its value…payers indicated interest in RSAs for products that are more costly (eg, specialty drugs, biologics, combination products) and for disease areas for which cost consequences are substantial.

If RSAs are selected, RSAs of length 18-36 months are idea because the enable sufficient time for follow-up data collection without committing payers to significant unknown long-term risks.

What are the barriers to adopting outcomes-based RSAs?  Garrison and co-authors interview 16 key stakeholders and found that implementing RSAs is often difficult.

Roughly half of manufacturers and payers expressed interest in outcomes-based RSAs and see value in their use; almost all were optimistic about the use of financial-based RSAs…Outcomes-based agreements…were perceived by interviewees to be difficult to execute and as having high transaction costs. Interview respondents were skeptical about being able to use outcomes-based RSAs, citing challenges in implementing and executing outcomes-based RSAs that would mitigate their potential in the United States, particularly given the fragmented payer system with patient movement across plans, as well as the current lack of data infrastructure that limits feasibility and, to some extent, interest in measuring long-term outcomes.

The authors list the top barriers to RSA use in the US as follows:

  1. Significant additional effort required to establish/execute RSAs (eg, compared to traditional rebates/discounts)
  2. Challenges in identifying/defining meaningful outcomes
  3. Challenges in measuring relevant real-world outcomes
  4. Data infrastructure inadequate for measuring/monitoring relevant outcomes
  5. Difficulty in reaching contractual agreement (eg, on the selection of outcomes, patients, data collection methods)
  6. Implications for federal (Medicaid) best price
  7. Payer concerns about adverse patient selection
  8. Fragmented multi-payer insurance market with and significant patient switching among plans
  9. Challenges in assessing risk upfront due to uncertainties in real-world performance
  10. Lack of control over how product will be used
  11. Significant resources and/or costs associated with ongoing adjudication

Although the US has few RSAs, countries such as Italy and Sweden have a number of RSAs. As payers and provider continue to consolidate, however, the US may have more RSAs in the upcoming years.


Life Expectancy Inequality

Written By: Jason Shafrin - Sep• 21•15

Numerous media outlets and academic studies have demonstrated that in the last few decades, income inequality has grown. However, not only are poor Americans making relatively less money compared to their richer peers in recent years, but poor individuals also have not experienced the same survival gains as the rich.

Louise Sheiner reports on a the findings of a National Academy of Sciences panel that found that “virtually all of the gains in life expectancy between the 1930 and 1960 cohorts are enjoyed by the top 60% of the income distribution.”

Whereas two thirds of individuals born in 1960 that were in the richest quintile survive to age 85, only one quarter of individuals in the poorest quartile survived to age 85.

survival inequality

Racial Disparities in Pain Management

Written By: Jason Shafrin - Sep• 20•15

JAMA Pediatrics study of children being treated for appendicitis found that “Black children are less likely to receive any pain medication for moderate pain and less likely to receive opioids for severe pain, suggesting a different threshold for treatment.”

Aaron Carroll from the Incidental Economist weighs in with his thoughts:



The Cost of Adherence Mismeasurement: A Claims-Based Analysis

Written By: Jason Shafrin - Sep• 17•15

If you are attending AMCP Nexus in October, I am a co-author on a poster presentation titled “The Cost of Adherence Mismeasurement: A Claims-Based Analysis” co-authored with Felicia Forma, Ethan Scherer, Ainslie Hatch and Darius Lakdawalla.  The presentation abstract is below and here.


Payers often wish to measure how adherence to prescription drugs affects downstream medical costs. Although payers typically rely on claims-based metrics metrics—such as the proportion of days covered (PDC)—these measures overestimate patient adherence when patients do not ingest all doses purchased and underestimate adherence when patients purchase prescriptions out-of-pocket. This study quantifies the effect of these adherence measurement errors on inferences about the benefits of adherence among patients with serious mental illness (SMI)



Measure the effect of improved adherence to oral atypical antipsychotic medications on inpatient cost after accounting for adherence inaccuracies in claims data.



We derived the statistical bias that occurs in adherence-utilization studies when adherence measurement is inaccurate and conducted a literature review to identify the key bias parameter: the correlation between true and claims-based adherence measures. Using data from Truven MarketScan Commercial and Medicaid databases (2007-2013), we applied our bias-correction methodology to a case study of patients diagnosed with bipolar disorder, major depressive disorder or schizophrenia who initiated atypical antipsychotic therapies. Adherence to oral atypicals was measured using PDC. We calculated the naïve and bias-adjusted effect of adherence on inpatient costs controlling for patient demographics, comorbidities, and prior spending.



Among the 231,526 SMI patients who initiated atypical therapy, a ten percentage point increase in PDC lowered annual inpatient costs for all patients by $42 (95% CI: -$65 to -$19) per person and for patients with schizophrenia in particular by $86 (95% CI: -$147 to -$25). After adjusting for bias due to mismeasurement, we found that this same increase in PDC decreased inpatient costs by $223 (95%

CI: -$359 to -$106) and $458 (95% CI: -$815 to -$141) per person, respectively. Extrapolating these results to the entire U.S. population of patients with schizophrenia, the effect of a 10% increase in adherence is $0.3 billion using the naïve approach and the $1.5 billion after adjusting for bias.



Payers may underestimate the effect of improved adherence on inpatient cost by a factor of 5 or more due to mismeasured adherence in claims data. Improving the accuracy of adherence data—through electronic pillboxes, smart caps, or ingestible sensors—could help provide clearer insight into the full value of improving adherence.



Otsuka America Pharmaceutical

AMCP Nexus Poster: Adherence Patterns for Oral Atypical Antipsychotics in Patients Diagnosed with Schizophrenia

Written By: Jason Shafrin - Sep• 16•15

If you are attending AMCP Nexus in October, I am a co-author on a poster presentation titled “Adherence Patterns for Oral Atypical Antipsychotics in Patients Diagnosed with Schizophrenia” co-authored with Joanna MacEwan, Felicia Forma, Ainslie Hatch and Darius Lakdawalla.  The presentation abstract is below and here.



Many payers rely on claims-based metrics—such as those from Healthcare Effectiveness Data and Information Set—that measure adherence over a lengthy 1-year period. For patients with schizophrenia, however, missing 25% of the prescribed oral antipsychotic dose over just a 2-week period results in a clinically meaningful risk of psychotic exacerbation.



This study describes how schizophrenia patients’ adherence to atypical antipsychotics varies over a range of time periods using a group-based trajectory model (GBTM).



Using the Truven Health MarketScan Commercial Claims and Medicaid Databases, as well as Humana’s Medicare database (2007-2013), we identified patients with a schizophrenia diagnosis initiating oral atypical antipsychotics. We required continuous enrollment for 12 months after the initial prescription and no atypical antipsychotic prescriptions in the 6 months prior to index. We applied GBTM using a third-order polynomial to fit adherence trends and multinomial logistic regression to model a patient’s probability of belonging to each adherence group. We controlled for patient demographics, comorbidities, and prior substance abuse.



The 39,746 patients with schizophrenia meeting our inclusion criteria were divided into 6 adherence groups, as this grouping produced the best model fit. The 6 adherence trajectory groups were best described as: adherent (10%), discontinuation after 3 months (15%) and 6 months (24%), stop-start after 6 months (10%) and 3 months (30%), and discontinuation after one month (11%). Compared

to patients in the adherent group, patients displaying a stop-start pattern after 3 months were more likely to have a history of drug abuse (OR: 1.56, 95% CI 1.34-1.78) and alcohol abuse (OR: 1.75, 95% CI: 1.55-1.95), have a higher Charlson comorbidity index (OR: 1.24, 95% CI: 1.16-1.42), and less likely to be 35-54 years of age (OR 0.48, CI 0.41- 0.55).



Diagnosed schizophrenia patients’ adherence to antipsychotic therapy exhibits three broad patterns: adherent, discontinuing, and stop-start, but the timing of changes in adherence varied within the discontinuation and stop-start groups. Trajectory modeling could be used to identify patients likely to benefit from a variety of new adherence interventions including digital pill-boxes, ingestible sensors, provider messaging, and mobile pill reminders.



Otsuka America Pharmaceutical.

Quality measurement: Where are we?

Written By: Jason Shafrin - Sep• 15•15

Leaders from two of the nations top quality organization–Christine Kassel from NQF and Rick Kronick from AHRQ–weigh in on the topic.  In a recent JAMA article, they first note some concerns:

These concerns were underscored by the recent Institute of Medicine report on core metrics for health and healthcare progress,which noted the need to align around a common framework to focus improvement and reduce the effort required for measurement.  Similarly, a recent study by Pronovost et al. found substantial variation in public ratings—with little agreement on which organizations were top performers.

They suggest the following three key steps be taken:

  • Measure alignment: “there is a need to make greater advances in aligning measures and focusing on measures that matter. This will help ensure that clinicians’ efforts on measurement produce a consistent signal that leads to improvement and reduces unnecessary data collection and reporting work.”
  • Focus less on P4P and more on giving accurate, real-time data.  The authors note that the focus of quality measurement has relied too much on extrinsic motivation through monetary rewards for high quality.  Although not stated by the authors, paying for quality also incentivizes physicians to inaccurately report quality in ways that will make them appear better or to pick their patients selectively to improve their quality measures.  Kassel and Kronick recommend giving accurate, real-time data access to providers so that they can find their own ways to improve care.
  • Make measures meaningful to users.  The authors wisely recommend that consulting with different stakeholders is vital to insure the measures captured and communicate represent the metrics of most interest to each stakeholder.

Although there has been a lot of progess made on improving quality and quality measurement, there is clearly a long way to go.