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Having a Broader Conversation About Healthcare Spending

Healthcare stakeholders must evaluate how to use resources more efficiently as it has become clear that driving down prices in one segment of care has not improved medical outcomes for the majority of patients.
Published Online: Feb 02,2018
Dan Leonard, President, National Pharmaceutical Council
Innovation has certainly improved prospects for patients. Therapeutic advances between 1991 and 2011 contributed to a 22% decline in overall cancer deaths during that period.3 I believe this positive trend will continue. Over time, we should see fewer deaths from liver cancer (thanks to drugs that cure hepatitis C), lower mortality from blood malignancies (thanks to gene therapies that prime the immune system), and fewer cases of cervical cancer (as more young people are vaccinated to prevent human papillomavirus infections). Someday we will see sophisticated economic impact analyses of these trends. At the very least, preventing some forms of cancers can lead to stunning reductions in costs linked to hospitalization, surgery, radiation therapy, and conventional chemotherapy.

But as I said, innovation isn’t limited to breakthroughs in treatment. The 21st Century Cures Act puts a spotlight on game-changing uses of real-world evidence, a process innovation involving flows of data from electronic health records, insurance claims, and wearable monitoring devices, among other sources of information. These data streams are able to provide a much clearer picture of how medical treatments help patients in their daily lives. Armed with that information, payers and biopharmaceutical companies are better prepared to design value-based contracts in which reimbursement for medicines is tied more closely to how well the drugs perform in a patient’s daily life.

Innovation is also the key to reaping more value from each healthcare dollar spent. Witness the many successful experiments in structuring healthcare benefits to encourage the use of high-value care and discourage low-value care. These experiments include mechanisms that reward medication adherence in patients with diabetes to avoid crises that result in visits to hospital emergency departments (EDs). Overuse of EDs already accounts for $38 billion annually in wasteful spending.4

The emergence of tools such as value-based insurance design, which shifts the focus from how many dollars are spent to how well they are used, is critical. Under this same rubric, we should make sure patients aren’t penalized financially for using a drug from a different formulary tier if that drug is proven most effective in treating the patient’s specific condition.

Whatever trend lines emerge on the computer screens of economists, sociologists, and other healthcare prognosticators, it’s clear that driving down prices in one segment of healthcare won’t improve medical outcomes for the majority of patients. The challenge is in learning how we can use our resources more wisely. Developing a holistic view of value will help us recognize the impact of today’s treatments and it will provide insights that can help direct discovery efforts toward areas of greatest need. The NPC will be talking about these trends throughout 2018, and we invite stakeholders across the healthcare system to join the conversation.

  1. Keehan, SP, Stone, DA, Poisal, JA, et al. National health expenditure projections, 2016–25: price increases, aging push sector to 20 percent of economy. Health Affairs (Millwood). 2017; 36(3), 553-563. doi:10.1377/hlthaff.2016.1627. Accessed December 10, 2017.
  2. Transformation of health system needed to improve care and reduce costs [press release]. Washington, DC: National Academies of Sciences, Engineering, and Medicine; September 6, 2012. Accessed November 29, 2017.
  3. Siegel, RL, Miller, KD and Jemal, A. (2017), Cancer statistics, 2017. CA Cancer J Clin, 67: 7–30. doi:10.3322/caac.21387. Accessed November 9, 2017.
  4. New England Healthcare Institute. A matter of urgency: reducing emergency department overuse: a NEHI research brief - March 2010. NEHI website. Accessed November 29, 2017.