Xpectives News

DTC in Perspective: New HHS Secretary Vows Value Driven Care

March 9, 2018 by Bob Ehrlich0

Alex Azar the new HHS Secretary has promised to make healthcare value a top goal. Azar says he will shake up the healthcare system to deliver value to patients. He delivered that message this week to hospital executives at a convention in Washington. Azar said that America is not getting enough for the money spent on health services.

In his speech he outlined ways he plans to encourage better bang for the buck. Azar wants patients to have control of their online health records so they are easier to access across providers. He also wants much greater price transparency so patients know how much they are spending. This is because patient deductibles and co-pays have risen so much that patients, not insurers, are the payers for much of their care. Azar said the fee for service model must change to encourage delivery of outcomes rather than just encourage more tests and procedures.

Bob Ehrlich
“It is likely we will see government…intercede on drug pricing.”
-Bob Ehrlich

Citing the Trump philosophy that shaking things up is necessary, Azar promised that innovation will be encouraged through the Medicare system. He vowed to remove regulation that impedes innovative approaches. Although he was talking to hospital executives, Azar said drug companies and doctors also must also deliver value.

Drug companies will be under intense pressure to justify the value of newer and often much more expensive treatments. From Azar’s speech and Trump’s past criticism of drug prices, it is likely we will see government be more willing to intercede on drug pricing. Whether that is through Medicare price negotiation, reimportation, or pressure on patents, it is clear drug companies will feel pressure.

What does all this mean for DTC? It makes it more likely drug companies will advertise branded drugs. They want to raise awareness among the public and doctors of new treatments. By doing so that keeps pressure on payers to cover the newer drugs that are generally much more expensive than older alternatives. While advertising drugs that cost $100k a year might annoy insurance companies it does force them to decide faster on formulary status. They have to respond to their consumer and physician base about why a life saving drug is not covered. Insurers are justified in demanding outcome research but it is hard to refuse covering a drug that extends the lives of patients, particularly if it is advertised widely.

What is clear is American consumers cannot keep paying higher premiums, deductibles, and co-pays that are well above their wage increases. That is not sustainable and the public will demand action. Azar saying a shake up will occur is not bluster. It has to happen or else the single payer advocates will get what they want, a government run healthcare system.

Bob Ehrlich

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