ECONOMIC PRINCIPLES IMPACTING MANAGED CARE PHARMACY. Adrian Washington PharmD., MBA Vice President of Client Management United Healthcare OptumRx

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1 ECONOMIC PRINCIPLES IMPACTING MANAGED CARE PHARMACY Adrian Washington PharmD., MBA Vice President of Client Management United Healthcare OptumRx

2 As vice president, Adrian is responsible for strategic planning and development of pharmacy, supporting pharmacy growth and client retention, and account management through clinical pharmacy and medical integration. Adrian has over 24 years of pharmacy benefit, pharmacy consulting, health policy, and executive leadership experience. Adrian received his Doctorate of Pharmacy from Mercer University, College of Pharmacy and Health Sciences. He later earned his Master of Business Administration in Healthcare Administration from South University. Adrian is a registered pharmacist in Florida and Georgia and also holds a registered consultant pharmacist license in Florida. He is an active member of the Academy of Managed Care Pharmacy, the Georgia Affiliate of Managed Care Pharmacy, Florida Pharmacy Association, and has served and participated in several legislative and pharmacy benefit discussions.

3 DISCLOSURES I am employed with United HealthGroup and the information presented in this presentation does not represent the views, programs, and policies of United HealthGroup. I have no Conflicts of Interest to disclose at this time

4 ACCREDITATION STATEMENT The Institute for Wellness and Education, Inc., is accredited by the Accreditation Council for Pharmacy Education (ACPE) as a provider of continuing pharmacy education. Participants of the session who complete the evaluation and provide accurate NABP e-profile information will have their credit for 1.5 contact hours (0.15 CEU) submitted to CPE Monitor within 60 days of the event. Please know that if accurate e-profile information is not provided within 60 days of the event, credit cannot be claimed after that time. ACPE program numbers are: L04-P & L04-T Initial release date is 3/3/2018.

5 OBJECTIVES Discuss how basic economic principles apply to contemporary healthcare Recognize the importance of managed care pharmacy Explain the factors that cause a change in the demand or supply of a product or service Identify and analyze emerging issues, products, services and trends observed in managed care pharmacy Discuss formulary coverage considerations from a payer perspective

6 CONTEMPORARY ISSUES FACING HEALTHCARE Growing demand for healthcare services Prices for pharmaceuticals Competition and consolidations within healthcare organizations Expansion of reimbursement for healthcare professionals Market forces on Economics Demand impacts pricing..suppliers influence availability of product/service Inverse relationship Generally a shift to lower prices results in increased availability

7 REALITY OF HEALTHCARE

8 SUSTAINABILITY OF COSTS

9 BASIC ECONOMIC PRINCIPLES What is Economics Study of the production, distribution, and the consumption of goods and services Study of resource scarcity Study of decision making Study of how societies, governments, businesses, households, and individuals allocate their scarce resources Health Economics Concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and healthcare

10 BASIC ECONOMIC PRINCIPLES Utility Satisfaction received from goods or services Consumer market attempts to maximize utility Generally if the utility of a good is greater than costs. consumption market for that good increases Commodities Factors of production Pharmacy.. Goods and services

11 APPLICATION OF ECONOMICS Consideration of Economics What shall we produce How shall the resources be employed Who shall receive the goods and services (commodities) Supply and Demand Patients demand for goods and service at a price point influencing supplier s ability and willingness to supply products Law of Demand As costs falls demand quantity increases Economic resources allocated according to a price system More we have. less we desire it

12 IDENTIFIED EMERGING ISSUES FOR MANAGED CARE Aging population Evolving evidence based guidelines Opioid Management Proliferation of specialty and orphan pharmaceuticals Crowded therapeutic market entities Consumer awareness Evolving healthcare price transparency State and Federal regulatory pressures Reimbursement and contracting sophistication

13 PARTICIPATION QUESTION #1 The study of economics influences healthcare through which of the following: A. Consumption of goods and services B. Decision making C. Resource scarcity D. All the above

14 ROLE OF MANAGED CARE PHARMACY Establish and implement evidence-based programs Manage costs while improving outcomes Design plan designs Collaborate with patients and clinicians in shaping care delivery Ensure patient safety

15 IMPACTS OF EMERGING ISSUES FOR MANAGED CARE Continued escalation of healthcare and prescription medication costs Continued demand for health resources Improved health outcomes Consumerism and price transparency Wellness and prevention programs Benefit affordability Competitive marketplace Marketing

16 PARTICIPATION QUESTION #2 What are emerging issues facing managed care pharmacy?

17 PLAN DESIGN EVALUATION Traditional Plan Designs Largest portion of healthcare costs paid by employer/payer Copay Tiered structure designs Two tiered (generic and brand) Multiple tier (3 or more tier structures) High Deductible Benefit Designs Maximum cost sharing with sustainable affordability Combined deductibles (medical and pharmacy) Typically coinsurance plans Multiple tier design Consumer Driven Plan Designs Greater cost sharing with employees while balancing affordability Deductibles with copay and coinsurance Multiple tier (3 or more tier structures) Utilization Management Programs Prior Authorization Supply Limits Mandatory Mail Channel Management (limited networks and exclusive specialty)

18 PAYER PERSPECTIVES Rising healthcare costs Fractionated healthcare delivery Health literacy, healthy lifestyles, prevention, and wellness Price transparency Comprehensive contracting and reimbursement Employee satisfaction and retention Centers of Excellence and Site of Service Claim and trend guarantees

19 PAYER FORMULARY CONSIDERATIONS Total healthcare costs management Driving to the lowest net cost of healthcare Clinical management on total cost of care Adherence Medication adherence Evidence based guideline adherence Outcomes Lower/aggressive trend management Channel management Pharmacy vs Medical Coverage

20 PARTICIPATION QUESTION #3 Total cost of care formulary considerations should include but limited to the following: A. Medication Adherence B. Channel Management C. Total Cost Trend Management D. All of the above

21 DIABETES 9 out of 10 do not know they have prediabetes 86M American adults have prediabetes 5-10% CONVERSION PER YEAR 29.1M Americans have diabetes 1 out of 4 do not know they have diabetes Diabetes is the leading cause of kidney failure, non-injury lower limb amputations, and new cases of blindness among adults. Taking prescribed medications as directed can help slow or stop the progression of disease. WITH POOR ADHERENCE VS WITH IMPROVED ADHERENCE $87,000 annual cost of hemodialysis for kidney failure patients $40,000 average cost of amputation surgery $10,000 average cost of a hospital stay 1,082,000 fewer emergency room visits 618,000 fewer hospitalizations annually $8.3 billion in potential annual savings Centers for Disease Control and Prevention. National diabetes statistics report: estimates of diabetes and its burden in the United States, Atlanta, GA: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, 2014; American s Biopharmaceutical Research Companies. Medicines in Development: Diabetes, 2014.

22 REFERENCES Bankhead C. Payer s Perspectives: Health Economics Outcomes in Managed Care. American Health & Drug Benefits. 2015; 8(3); Centers for Disease Control and Prevention. National Diabetes Statistics Report: Estimate of Diabetes and Its Burden in the United States Atlanta, GA: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention. 2014; American s Biopharmaceuticals Research Companies. Medicines in Development: Diabetes, Large Employer s 2017 Health Plan Survey, NBGH, August 2016 Schafermeyer K. Health Economics I: Basic Economic Principles. J Managed Care Pharm. 2000; 6(1); Watkins J, Minshall M, et al. Application of Economics Analysis in U.S. Managed Care Formulary Decisions: A Private Payers Experience. J Managed Care Pharm. 2006; 12(9);