The 2015-2016 Marketplace: ACA & Public Exchanges Shaping the - - PowerPoint PPT Presentation

Pharmaceuticals Strategy-Solutions

Joel Owerbach, Pharm.D.

November, 2015

Former VP, Chief Pharmacy Officer, Excellus Health Plans VP, Health Policy-Strategy, Alliance Life Sciences

The 2015-2016 Marketplace: ACA & Public Exchanges Shaping the New Pharmaceutical Benefit and Management Evolution

Market Reforms-Transformation

The new “disruptive” health care markets being shaped by multiple simultaneous and inter-related reforms:

• ACA Reforms
• Insurance Reform
• Benefits Reform
• Treatment/Therapy Reform
• Health Care Delivery Reform
• Financing/Payment Reform
• Medical Practice Reform-Transformation (Technology, People)

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Topics Framing Our Discussion

• The New Marketplace:
• Where ACA and the employer health benefit evolution intersect
• ACA and Medicaid
• Public Exchanges (2015-2016) Updates: The Numbers, The States, the

Insurers

• Insights and Market Observations:
• Benefit designs and comparisons
• Pharmaceutical benefit details
• Specialty Drugs
• Formulary opportunities and challenges
• The Marketplace as a Window to insurance/ drug coverage

transformations ahead:

• The 2015-2016+ Marketplace
• Commercial insurance/drug coverage transformation potential
• Implications for Pharmaceutical Companies and Insurers - Moving up the

learning Curve

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The Reality Drivers of Health Benefits Transformation

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Health Benefit Evolution:

The new retail Health Insurance Marketplace

Employers: Shifting choice and cost to employees

Defined Benefit Retirement Pensions

Starting late 80s 401K Contribution Plans

Defined Health Care Benefit

Starting late 2000s Defined Benefit Contribution, HDHPs

Key Points:

• 67% of employers offer HDHPs (2014)
• 60% of employees choose lowest cost Plans when options

available

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ACA – 5.5 years in from March 23, 2010

• Insurance/Coverage enhancements:

– Age 26 coverage on parent’s policy – No Exclusion for children with pre-existing (2010) – Preventative Services (2011-2012) – Medical Loss Ratio Rules – and Consumer Rebates (2012)

• New Insurance Marketplace (2014)

– New Individual, Small, Large Group Insurance requirements (2014-2016)

• Access Impact:

– Medicaid expansion (many states) – Increase primary care provider support (loan repayment) – Increase access to home and community based service (alt to long term care).

• Medicare:

– Filling in the donut hole (starting 2011)

• Testing Delivery and Payment Reform

– ACO pilots – Programs (2011) – Center for Medicaid and Medicare Innovation: Grants

Goal:

Increase Access Improve Affordability Improve Quality

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ACA and Medicaid

ACA Implementation Impact on Medicaid

• Expand Eligibility
• Simplify/modernize enrollment

process

• Create coordinated enrollment with

MA, CHP and Exchange Plans

• Promoting/Fund system delivery, and

payment reform opportunities

• Improve quality of care
• Expand services offered (Essential

Health Benefits – to expanded group)

• Create options to reduce LTC
• Increase fees to primary care

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Medicaid Reforms to Expand Coverage, Control Costs and Improve Care: Results from a 50- State Medicaid Budget Survey for State Fiscal Years 2015-2016. Kaiser Family Foundation, October, 15, 2015

Medicaid Moving Forward. KFF, Fact Sheet, January 2015

The Marketplace – 4thQ 2013

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The Marketplace - 2ndQ 2014

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8,019,763 (revised down to 6 - 7 M) (9.2M in 2015)

• 4/19/14 Marketplace “Plan selection” enrollment per HHS 5/1/14

85 282 (>330 in 2015)

• Number of insurers offering Qualified Health Plans on the marketplace exchanges in 2014

250 (>280 in 2015)

• Approx. Number of new formularies being applied through the Qualified Health Plans in 2014

>3,200 $4,410 (2015: Advanced premium credit avg. -$268/month) $26 Billon

• 85% selected a Bronze (20%) or Silver Plan (65%). 86% of those enrolling: financial assistance
• Number of different benefit designs being offered in the 2014 marketplace exchanges
• Additional retail drug spend in 2021 anticipated due to Health Care Reform
• Average exchange subsidy per subsidized enrollee (CBO, April 2014)

The 2014-2015 Public Marketplace- By the Numbers

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Public Marketplace: New Benefit Requirements - EHBs

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Exchanges Prescription Drug Benefits Rules

Finalized – 2/20/13

• Health exchange plans must provide the greater of:
• One drug in every United States Pharmacopeia (USP) category and

class OR….

• The same number of prescription drugs in each category and class

as the EHB benchmark plan; AND

• Submit its drug list to the exchange, the state, or the Office of

Personnel Management (OPM)

• Additional drug benefit guidance:
• There are no protected drug classes in the exchanges
• A health plan must have procedures in place that allow an enrollee

to request clinically appropriate drugs not covered by the health plan

• Plans may implement tiering and other utilization management

tools

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The New Marketplace – Additional State Requirements

Impacting the Rx Benefit

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• Must allow 90 days at retail with a max of 1 copay per 30 days

supply

• AR, DE, MD, ME, NE, NH, SD, TN, VT, NJ, MS
• Must cover oral contraceptives and devices
• CA, CT, DE, GA, IA, ME, MD, NV, NH, NC, RI, TX, VT, WA, AZ, MA, NY, HI, VA, NM, IL,

NJ, WI. MO – must cover at 1st or 2nd tier.

• Formulary must remain unchanged during member’s plan year
• LA, TX
• Must cover Oral Fertility Drugs
• MD, NY, NJ, IL, MA, TX, CT, RI
• Specialty Pharmacy – cannot have home delivery exclusive
• AL, AZ, CT, DE, GA, ID, IN, MS, NC, NE, KS, KY, MO, ME, MD, MS, ND, NJ, NY, OK, RI,

SD, TN, TX, VA, VT, WV, WI, MA, WA, LA

• Smoking cessation product coverage mandate
• MD, RI

Examples (from 2014)

State Benchmark Formulary Variability

Drug Class

Benchmark low

Benchmark High

• HMG CoA Reductase Inhibitor (High Cholesterol) 3 7 USP, 7 HIOS
• Angiotensin II Receptor antagonists

1 7 USP, 8 HIOS

• Antidementia- Anticholinesterase Inhib.

1 4 USP, 3 HIOS

• Immune Suppressants

3 24

• Multiple Sclerosis Agents

(1) 7

• Platelet Modifying Agent

4 8

• Antidiabetic Agents

5 21

• Insulins

(1) 10

• Sleep Disorders – other

1 5

• Ophthalmic anti-inflammatory

6 11

• Bronchodilators, sympathomimetic

5 10

Health exchange plans must provide the greater of:

• One drug in every United States Pharmacopeia (USP) category and class OR….
• The same number of prescription drugs in each category and class as the EHB benchmark plan.

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EHB Requirements: Formulary Challenge or Opportunity?

Formulary Challenge (green): QHPs in these States need to add the drug to meet the required number in the category if they didn’t have it included already. Formulary Opportunity (red): QHPs only required to have a number less than the max number available on the market.

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Public Marketplace-Exchanges: New Benefits and Rules

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Marketplace Subsidized Coverage and Assistance

 Premium Credit: Income-based tax credits for purchasing coverage from a health care exchange (sliding scale: 100% to 400% of FPL)  Cost-Sharing Assistance: Cost sharing subsidies available on silver plans only. Lowers out of pocket max (sliding scale: 100% to 250% FPL)

400% FPL

Cost Sharing Assistance

FPL Out of Pocket Max Act. Value 100-150% $2,116 94% 151-200% $2,116 87% 201-250% $3,175 73%

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The GAP Reality: No Medicaid - No Insurance

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ACA Timetable: 2014+

Adapted from PWC, Sept 2014 Pharmaceuticals Strategy-Solutions

ACA – Membership Distribution Impacts

Insurance Type 2014 2015 2016 2017 2018 2020 2025 Medicaid/CHIP +7M +10M +12M +12M +12M +14M +14M Employment Based coverage

• <1M
• 1M
• 6M
• 7M
• 8M
• 7M
• 7M

Individual Exchange - Subsidy +5M +8M +15M +18M +18M +17M +16M Individual Exchange- No subsidy +1M +3M +6M +6M +6M +6M +6M Exchange Total +6M +11M +21M +24M +24M +23M +22M Employer SHOP <1M +1M +2M +3M +3M +3M +3M Uninsured

• 12M
• 17M -23M
• 24M -24M
• 25M
• 25M

CBO Baseline update: March, 2015

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Yellow: Key Impact Year

2014 - 2015 Marketplace Enrollment- Top 10

National Enrollment Capture (2014): Top 3 States: 39% Top 10 States: 65% Top 20 States: 84%

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1,217,111* 1,600,006 1,189,316 512,968* 559,473 471,930 536,929 340,905 347,300 384,612

* As of 1/26/15 (CA) 2/4/15 (NY)

Marketplace Enrollment – The Top Insurers in 2014

Top Insurers – Projected Enrollment in Public Exchanges

National Enrollment Capture (projected) Top 3 Insurers: 17% Top 10 Insurers: 38% Top 20 Insurers: 53%

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The 2015-2016 Public Marketplace – No Surprise

We shouldn’t be surprised by:

• New/different benefit designs in the 2014 + Marketplace
• Higher medical deductibles, separate pharmacy deductibles
• Higher copays and coinsurance for drugs
• More coinsurance designs
• Limited, smaller networks (medical and pharmacy)
• Stricter coverage rules on pharmaceuticals (more prior auth, step)
• Sicker, older early enrollees who use more specialty drugs (i.e. Cancer,

HIV)

• The prospect of higher premiums each year

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Essential Health Benefits Impact on Premium

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Actuarial Value – The New Reality in Defining Cost Sharing

The benefits people were used to

The new reality

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Metal Level Benefit Medical Deductible 2014 2015 Pharmacy Deductible 2014 2015 Out of Pocket Max 2014 2015 Bronze

$4,980 $5,363 $1,300 $783 $6,289 $6,345

Silver

$2,700 $3,055 $ 777 $711 $5,747 $5,760

Gold

$1,142 $1,323 $ 385 $367 $4,389 $4,421

Platinum

$ 321 $ 547 $ 479 $424 $2,121 $2,138

Commercial 2014-15

(Kaiser/HRET Survey)

$1,217 $1,318 $2,265 (HDHP) 2015: $231 $3,825 (HDHP)

• Pharmacy Deductible Only reflects about 400 benefits that list a separate pharmacy deductible
• In 2015: Approx. 25% of Silver benefits and 22% of Gold Benefits had a separate pharmacy deductible

Rx Benefit Tiers

4 or more tiers: Substantial penetration into the Marketplace benefits

• 2014 Marketplace:

80% of benefits (20% are 5 tier)

• Commercial Insurance (2014):

20% of workers had 4 or more tier benefits (increased to 23% in 2015)

The 2014-2015 Marketplace – Benefit Design Comparison

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2014-2015 Marketplace Drug Copay Comparison

Alliance Exchanges360 Benefit Assessment on 1758 Generic, 1599 Preferred, 1166 Non-Preferred, 393 Specialty copay benefits

Formulary Positioning – Benefit Copay Averages

Drug Position Commercial* (2014) Commercial* (2015) Copay Coins. Medicare (MAPD) (2012) Marketplace Exchanges (2014)*** Generic

$11 $11 17% $6 $13

Preferred Brand

$31 $31 27% $42 $44

Non-Preferred Brand

$53 $54 43% $84 $82

Specialty

$83 $93 32% 33% $163

*Kaiser/HRET (2014, 2015), ** Pharmaceutical Guide- AMCP (2013), ***Alliance’s Exchanges360

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Specialty Drug Tiers and Copays - 2014

Marketplace Specialty copay: Single Tier (393 benefits), Multiple tiers (18-47 benefits): Alliance Exchanges360 Commercial specialty: 33 insurers (Multi-tier from 19 Insurers) from EMD Serono Specialty Digest, 10th edition 2014 Pharmaceuticals Strategy-Solutions

2015: No specialty tier: 2% 1 Specialty tier: 81%, 2 Specialty tiers: 14%, 3 Tiers: 3%

Avalere, Jan 13, 2015 , based on 1,231 benefits reviewed

2014 Marketplace Coinsurance Drug Benefits

Coinsurance Benefits

Drug Position Commercial Benefits 2014* % employees with coinsurance Market Place 2014* % of benefits

Generic

11% 17%

Preferred Brand

22% 28%

Non-Preferred Brand

25% 44%

Specialty

49% 75%

*Kaiser/HRET (2014), **Alliance’s Exchanges360 Exchanges360 Benefit Assessment on 358 Generic, 617 Preferred, 913 Non-Preferred, 1165 Specialty coinsurance benefits Pharmaceuticals Strategy-Solutions

Specialty Drug Coinsurance Trends - 2015

Avalere, Exchange Plans Increase Costs of Specialty Drugs for Patients in 2015 12/2/14 Pharmaceuticals Strategy-Solutions

Specialty Drugs and the 2014 - 2015 Marketplace

EMD Serono Specialty Digest-10th Edition 2014 Pharmaceuticals Strategy-Solutions 42% 34% 30% 20% 10% 18% 24% 16% 26% 28%

0% 10% 20% 30% 40% 50% 60% 70%

More restrictive drug formulary Create Non-Covered Drug List More restrictive SP Network Limit site of care to lower cost providers More restricted Infusion network

Comparison of Exchange Benefits to Current Commercial Benefits

Impliment 1/1/14 Plan to Implement in next 12 months

N= 50 Plans participating in the 2014 Public Marketplace Exchanges

Medicaid Priorities -Cost Control Focus on Drug Costs

States have a renewed focus on controlling rising prescription drug costs.

• Since 2014, rising drug prices and increasing

program costs have refocused state attention on pharmacy reimbursement and coverage policies.

• The majority of states identified high-cost and

specialty drugs (e.g., hepatitis C antivirals among

• thers) as a significant cost driver for state

Medicaid programs as well as increased costs for generics among other factors.

• Over two-thirds of the states in FY

2015 (35) and half in FY 2016 (25) reported actions to refine and enhance their pharmacy programs in response to new and emerging specialty and high-cost drug therapies.

Medicaid Reforms to Expand Coverage, Control Costs and Improve Care: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2015-2016. Kaiser Family Foundation, October, 15, 2015

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A new 2015 Term: “Adverse Tiering”

Methodology:

• Analyzed adverse tiering in 12 states using the federal marketplace: 6 states with insurers

mentioned in the HHS complaint (Delaware, Florida, Louisiana, Michigan, South Carolina, and Utah) and the 6 most populous states without any of those insurers (Illinois, New Jersey, Ohio, Pennsylvania, Texas, and Virginia)

Results:

• Evidence of adverse tiering in 12 of the 48 plans —7 of the 24 plans in the states

with insurers listed in the HHS complaint and 5 of the 24 plans in the other six states.

• Fifty percent of ATPs had a drug-specific deductible, as compared with only 19% of
• ther plans.

Authors Comment: Adverse tiering will most likely lead to adverse selection over time, with sicker people clustering in plans that don’t use adverse tiering for their medical conditions. Using Drugs to Discriminate — Adverse Selection in the Insurance Marketplace NEJM January 29, 2015

Definition: adverse tiering is placement of all NRTIs (nucleoside reverse-transcriptase inhibitors) in tiers with a coinsurance or copayment level of at least 30%

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Audience History Question

What was the first “Specialty Drug” in the US?

and…how was it covered/reimbursed?

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First Specialty Drug Reimbursement Challenge INSULIN

• Discovered by Banting and Best in Toronto Canada
• First Toronto patient: January 12, 1922
• First US Patient to get treated (1922): Rochester NY (James Havens,

age 22)

Early Insulin:

• 30 units (30 cc) required 75 pounds of fresh hog pancreas
• Cost: Estimated at $360/30 units (expressed in 2006 adjusted dollars)

Important Breakthrough Specialty Drug! How was it managed -covered?

1929: Ross Loos Medical Plan (Southern CA): Prepaid Health Plan LA County Employees Association Plan Cost: $2.00 per employee per month Included Medication

(Excluded Insulin!)

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Formulary Positioning - Oral MS Drug Example 2014- 2015

Tier – Tier Description 2015 2014

Formulary Sample 178 155

Tier 0 (Non-Formulary)

22 26

• Not listed in Formulary

21 24

• Specified as Not Covered

1 2 Tier 2:

10 12

• Tier 2: Covered Brand

8 8

• Tier 2: Preferred Brand

2 4 Tier 3:

32 30

• Tier 3: Non-Preferred Brand

24 26

• Tier 3: Specialty Drug

6 3

• Tier 3: Preferred Brand

1 1

• Tier 3: Preferred Specialty

1

• Tier 4:

78 62

• Tier 4: Preferred Specialty

5 3

• Tier 4: Specialty

71 58

• Tier 4: Non-Preferred Specialty

2

• Tier 4: Non-Preferred Brand

1

Tier 5:

36 25

• Tier 5/ Specialty

17 12

• Tier 5/ Non-Preferred Specialty

14 13

• Tier 5/Non-Preferred Brand

5

• Assessment 1/1/15
• A slight decrease in non-

listings from 16% to 12%

• There is a higher percent

designation in tier 5 (23% vs 19% and in tier 4/5: 73% vs 67% in 2015.

• Across tier 3-5

designations, has over a 90% prior-authorization requirement. Observational Summary

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Medical Drugs – Increasing Formulary Integration

Hemophilia Product Profile Example 2015

Review Summary:

• Listing in 56 Formularies/Top 21 States
• No listing in 122 of the formularies reviewed (69%)

Tier – Tier Designation Drug 1 Drug 2

Formulary Sample 56 56 O/Non-Formulary 31 (55%) 37 (66%) Not Covered 1 1 Tier 2: Preferred Brand 1 1 Tier 3: Non-Preferred Brand 1 1 Tier 4: Preferred Specialty 1 (1 w PA) Tier 4: Specialty 7 (2 w PA) 6 (2 w PA) Tier 4: Non-Preferred Specialty 1 (1 w PA) 1 (1 w PA) Tier 4: Medical Benefit 1 1 Tier 5: Non-Preferred Specialty 8 (7 w PA) 8 (7 w PA) Tier 5: Specialty 4 ( 4 w PA)

Snapshot: 1/1/15

Positioning Drug 1 Drug 2 Drug 3 Drug 4 Drug 5 Drug 6

Non-Formulary (%)

55% 66% 0% 34% 9% 45%

Preferred (#)

2 1 5 3 5 4

Non-Preferred (#)

10 10 19 5 19 5

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The Marketplace:

The Window on the Futur e Window on the Future of e of Commer Commercial Plans ial Plans and and Benef Benefits its

• Transparency
• Benefit design evolution
• Acceptability of narrow networks
• Stricter formularies – Use Management (it’s ok to say NO)
• Deductibles- racing to the ceiling
• Transformation of employer sponsored health insurance to defined

contribution

• Private Exchange alternative if not willing to send employees to public exchange
• Employers will reduce cost and risk
• Quality ratings: Medicare and the Marketplace will require – Employers may transition to

including as selection criteria for their health plan offerings.

• Specialty Drug utilization and management
• Will be key in defining the ultimate risk/success potential for Insures
• Will likely accelerate employer benefit changes (cost shift) - ahead of 2018 Cadillac Tax
• Likely to become the first indication selection risk and cost at the insurer
• Will escalate the public discussion on cost-value and access (i.e. Hep C).

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2015-2016 Marketplace Formulary-Benefits

Based on experience in the first 2 years, we can expect to see:

• Continued consolidation in drug classes or categories. We will see

increased access restrictions on branded drugs, particularly shifting them to non-preferred positions or non-formulary and through the use of prior authorization and step therapy programs.

• Additional tiers will be added to 3 tier benefits, causing an increase in

the number of benefits with 4-5+ drug tiers.

• Copay and coinsurance levels will increase for all branded and specialty

products.

• The addition of prescription deductibles applied only to branded drugs

across an increasing number of benefits.

• An expansion of limited pharmacy networks including retail access

restriction as well as increase in mandatory mail and mandatory specialty networks (where allowed by law).

• 2017 Unknown: ? new State Benchmark Plan designations?

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The Marketplace Implications for Insurers:

Challenges Ahead

• Health Insurance literacy
• The future of the small and large group market
• Creating and deploying an Exchange Strategy (public and Private)
• Growing impact of Government programs and mandates
• The shift to and succeeding in the individual-consumer market
• Leveraging the “Brand” with tomorrow’s consumers/purchasers
• Affordability and Value – in a transparent business model
• Population and individual care management and outcomes-

impacting margin and differentiating the players

• Creating networks and benefits that work
• Specialty Drugs

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The 2014-2016 Marketplace: Implications for Pharma

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An increase in the number of people insured with drug coverage

The rules of the game and the playing field are changing:

Jan 2015: All Plans required to limit out of pocket costs Good News! $6,600/individual Max OOP in 2015 New Insurers playing in the market Insurers positioning to gain specific market-share and manage risk New rules and compliance requirements EHB rules, including formulary, QA program Limited Networks, New Benefit Designs Limited pharmacies, 4-6 Tier, Coinsurance Over 280 new formularies in the market Changes/variability in formulary coverage New out-of-pocket drug cost realities Re-think Access Strategy – Copay subsidies

Q & A

The 2015-2016 Marketplace:

ACA & Public Exchanges Shaping the New Pharmaceutical Benefit and Management Evolution

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