LONG-TERM VALUE IN A SHORT-TERM MARKET: IS EXCHANGE BUSINESS TURNOVER IMPACTING THE PHARMACEUTICAL VALUE EQUATION? SCAN TO DOWNLOAD Capuano C1, Curran K1, Meinkow E2, Suponcic S1 Navigant Life Sciences, USA, 2Navigant Healthcare, USA 1 BACKGROUND The Affordable Care Act established federal and state health insurance exchanges to expand access to affordable medical coverage in the US. This research examines rates of switching among re-enrollees on the health insurance exchanges and compares to other lines of business. We then consider the time horizon over which US payers are willing to consider pharmacoeconomic value in formulary decision-making; the extent to which expectations pertaining to accrual of value differ for exchange as compared to other lines of business; and implications for manufacturers of products whose health gains or costs offsets accrue over the longer term. METHODOLOGY Secondary Research: Review of publicly available reports from federal and state health authorities which include information and figures on rates of switching among exchange re-enrollees for the federally facilitated marketplace (FFM) and select state-based marketplaces (SBM). Primary Research: Rapid web survey of US health care payers (N=27) responsible for pharmacy benefit management. Survey instrument designed to: (1) obtain self-reported plan-level data on rate of turnover by line of business, (2) quantify the time horizon over which cost offsets and health gains are considered by US payers when evaluating pharmaceuticals, and (3) explore implications for manufacturers in markets with high or increasing turnover. Sample Design: Respondents represented managed care organizations (MCO), pharmacy benefit managers (PBM), and integrated payer/ provider systems (IPPS) covering 107mn lives in total with a pharmacy benefit (excluding PBMs); including organizations both with (n=21) and without (n=6) exchange business (for comparative purposes). N=19 identified as Pharmacy Director; 8 as Medical Director. Organizations Represented Lives Represented National MCO Commercial: Off-Exchange Regional MCO - national formulary Commercial: Exchange Stand Alone PDP Regional MCO - formulary autonomy Medicare Advantage: MA-PD Independent regional plan Managed Medicaid PBM Federal Employee Health Plan IDN/IHS DoD/Tricare RESULTS SECONDARY RESEARCH RESULTS Table 1. Switching of Plans or Insurers by Exchange Re-enrollees FFM Average FFM State Range Table 2. Historical Benchmarks for Other Lines of Business SBM (Available Data) 20142015Open Enrollment 29%2 11-37% 3 CA: 6% Insurers 2 CO: 18% Insurers 2 RI: 62% Plan or Insurer2 20152016Open Enrollment 43% 3 19-73% 3 OR: 28% Plan 1 Employee Sponsored Insurance (2010) 2.8% 3 Federal Employee Health Benefits Program (2001) 12% 3 Medicare Drug Plans (4 Enrollment Periods) 13% 3 Federal and state data indicates higher rates of switching of insurer/plan by exchange re-enrollees as compared to other lines of business. There is wide variation in turnover of exchange members at the state level. PRIMARY RESEARCH RESULTS Figure 1. Self-reported plan turnover (2015-2016), by line of business 75% 25% 50% 0% 25% Percent Responses Percent Responses 50% 100% 50% 75% 25% 50% 0% Off-Exchange 25% <10% Stand Alone Stand Alone Managed Off-Exchange Exchange Exchange MA-PDPDP MA-PD PDP Medicaid Managed FEHPMedicaidDoD/Tricare FEHP 10-15% <10% 16-20% 10-15% 21-25% 16-20% 26-30% 21-25% 31-35% 26-30% 36-40% 31-35% DoD/Tricare There<10% is wide variation in21-25% exchange turnover at the plan36-40% level 10-15% 16-20% 21-25% 26-30% 31-35% 10-15% <10% 16-20% 26-30% 31-35% 36-40% 50% 75% 25% 50% 0% 25% 75% 100% 50% 75% 25% 50% 0% Off-Exchange 25% Slowing 25% 50% 0% 25% 25% 50% 0% Off-Exchange 25% <1 Year 0% Stand Alone Stand Alone Managed Off-Exchange Exchange Exchange MA-PD MA-PD PDP PDP Medicaid Managed FEHPMedicaidDoD/Tricare FEHP <1 Year3 Years 2 Years5 Years 3 Years7 Years 5 Years10 Years 7 Years 2 Years DoD/Tricare <1 Year Stand AloneManaged Stand Exchange Alone Off-Exchange MA-PD Exchange MA-PDPDP PDP Medicaid Managed FEHP FEHPMedicaidDoD/Tricare <1 Year3 Years 2 Years5 Years 3 Years7 Years 5 Years10 Years 7 Years 2 Years 75% 25% 50% 0% 25% 10 Years 0% DoD/Tricare 10 Years Except for federal employee and military plans, more than seventy-five percent (75%) of respondents indicate that cost/resource offsets and health gains must accrue within three years in order to be relevant or meaningful for formulary decision-making SlowingStatic StaticIncreasing Increasing 50% 75% 25% 50% 0% Off-Exchange 25% Stand Alone Stand Alone Managed Off-Exchange Exchange MA-PD Exchange MA-PD PDP PDP Medicaid More Willing 0% Off-Exchange 50% Percent Responses Percent Responses 100% Percent Responses Percent Responses 75% 100% Percent Responses Percent Responses 75% 100% 50% DoD/Tricare Increasing Figure 4. Trend in willingness to pay today for long-term cost/ resource offsets and health gains, by line of business 100% 75% StaticIncreasing 100% 100% 75% 75% SlowingStatic Managed FEHPMedicaidDoD/Tricare FEHP Twenty-nine percent 0% (29%) of surveyed payers with an exchange line of 0% Stand AloneManaged Managed Stand Exchange Alone Off-Exchange business indicate an Exchange increasing trendMA-PD in exchange turnover; FEHP DoD/Tricare Off-Exchange MA-PDbusiness FEHPMedicaidDoD/Tricare PDP PDP Medicaid surpassed only by DoD/Tricare (40%) 75% 50% Stand Alone Stand Alone Managed Off-Exchange Exchange Exchange MA-PD MA-PD PDP PDP Medicaid Slowing 100% Figure 3. Time period over which cost/resource offsets and health gains are considered meaningful, by line of business Percent Responses Percent Responses 100% 36-40% 0%Plan-level 0%data confirms higher turnover for exchange as compared to Stand AloneManaged Managed Stand Exchange Alone other lines Exchange of business; surpassed only by Managed Medicaid Off-Exchange FEHP DoD/Tricare Off-Exchange MA-PD FEHPMedicaidDoD/Tricare MA-PDPDP PDP Medicaid 100% 100% 75% 75% Percent Responses Percent Responses Percent Responses Percent Responses 75% 100% 100% 100% Percent Responses Percent Responses 100% Figure 2. Self-reported trend in turnover, by line of business 0% Off-Exchange More Willing No Change Stand AloneManaged Stand Exchange Alone Off-Exchange MA-PD Exchange MA-PDPDP PDP Medicaid More Willing More Willing No Change Managed FEHP FEHPMedicaidDoD/Tricare No Change Less Willing Managed FEHP FEHPMedicaidDoD/Tricare No Change Less Willing DoD/Tricare Less Willing DoD/Tricare Less Willing Thirty-three percent (33%) of surveyed payers with an exchange line of business indicate that their organization is becoming less willing to pay today for long-term value; surpassed only by Managed Medicaid (43%) CONCLUSIONS It can be challenging for manufacturers to substantiate the long-term value of treatment innovation to US payers due to turnover of insured populations. Across lines of business, the majority of US payers consider cost offsets and health gains meaningful only if accrued within three years or sooner. There is variability in exchange business turnover at a state and plan level, with relatively high rates in some markets vs. other lines of business and more comparable rates in other markets. In markets with relatively high exchange turnover, there may be an impact on willingness to pay today for long-term pharmaceutical value on the part of some payers. We suggest that the issue may be addressed locally. Strategic options for manufacturers will depend on the differential characteristics of the disease; linking the intervention to nearer-term offsets and health gains is a preferred approach. Sources: OR Health Insurance 2016 Report Addendum (2016), Ahn S. Six State Experiences with Marketplace Renewals (2015) , Dleire T. APSE Issue Brief 2015 navigant.com/LifeSciences ©2016 Navigant Consulting, Inc. All rights reserved. 00005464. Navigant Consulting is not a certified public accounting firm and does not provide audit, attest, or public accounting services. 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