The Official Medtipster Blog

www.Medtipster.com Source: Managed Healthcare Executive, by Mari Edlin – 7.22.10

Patients who do not follow their medication regimens cost the U.S. healthcare system an estimated $290 billion a year, or 13% of total healthcare expenditures, according to the New England Healthcare Institute. In addition, those with low levels of medication adherence spend nearly twice as much as those who have better adherence.

Non-adherence is widespread; only about half of all U.S. patients take their medications as prescribed by their physicians, according to the Congressional Budget Office.

The Patient Protection and Affordable Care Act promotes medication adherence indirectly through several provisions including incentives to establish patient-centered medical homes and accountable care organizations as well as innovative payment models, as highlighted in a recent study in the April 28 issue of The New England Journal of Medicine.

Ann Arbor, Mich.-based HealthMedia, a health coaching organization, provides behavioral support intervention digitally. The company’s recent survey found that consumers receiving a tailored cholesterol management guide resulting from personalized responses to questions related to hyperlipidemia—their understanding of the condition, perceived barriers to medication adherence and their attitudes and beliefs—fared better than a control group.

The control group received behavioral advice from one interactive-voice-response telephone call without personalization in addition to a general cholesterol management guide delivered through the mail.

The experimental group also received reminders to refill prescriptions, tips for overcoming adherence barriers and encouragement to follow up with their doctors. Adherence was based on the use of a statin.

The findings indicate that 74.4% of the experimental patients vs. 60.7% of the control group showed six-month prevalence rates. In addition, the experimental group had medication possession rates (MPRs) over 80%, which is considered optimal from a population standpoint, while the MPR for the control group is 38.9%.

CIGNA is trying to ward off non-adherence before it gets out of control. Last year, the insurer developed CoachRx, an interactive Web site that helps members using CIGNA Home Delivery Pharmacy identify their barriers to medication adherence and then provides solutions to stay on track. It is one more program in the health plan’s tool kit for finding gaps in care. Approximately 5,000 customers have used CoachRx services—either through the Web-based portal or the pharmacist consultation hotline—indicating an increase in engagement of 20% month over month.

In addition to having access to a clinical pharmacist, members can schedule automated medication reminders and record their own messages to be relayed by text, phone or email. The program also offers educational materials, discount coupons to offset drug costs and free pill boxes to organize medication, all based on a member self-assessment.

“Many programs are one-size-fits-all, but we realize that it is critical to study how different people react and what drives them,” says Yi Zheng, assistant vice president, pharmacy clinical programs for CIGNA. “If we understand barriers, then we can personalize solutions. The result is an individualized approach around their issues connected to adherence.”

CIGNA utilizes what Zheng calls “onboarding packets” to encourage proper use of a medication when it is first prescribed. They address the drug’s use, treatment goals and possible side effects to help avoid repercussions in the future.

STOP PROCRASTINATING

Express Scripts, a pharmacy benefits manager (PBM) headquartered in St. Louis attributes $106 billion in wasteful spending to non-adherence to therapy. The PBM is segmenting members into personality categories to address specific non-adherence patterns, including “sporadic forgetter,” “active decliner,” and “refill procrastinator.”

Those classified into the sporadic forgetter group, for example, perceive therapy positively but periodically forget to take medications. The active decliner group does not consider therapy effective. The refill procrastinators view therapy positively and will take their medications if they are readily available.

“People often do not respond to things rationally,” says Bob Nease, chief scientist for Express Scripts, “which is why it is important to figure out why people do what they do regarding adherence. However, we need keener instruments to understand behavior and determine how to intervene.”

Nease says that the PBM has developed strategies to address certain kinds of behavior. For refill procrastinators, mail delivery and automatic refills can potentially increase adherence. For active decliners, physician or pharmacist intervention can provide supporting education to encourage them to continue taking medication as prescribed. Adherence reminders, text messages, email and phone calls can help sporadic forgetters.

Express Scripts conducted a randomized trial of 35,000 patients to determine what kinds of messages rang true. The rate of medication possession rose from 7% for patients who received no messages to 8.8% for those who received messages containing references to negative effects of missing doses of prescribed medication, as well as information from someone who could be regarded as a respected source or authority (a chief medical officer, for example).

“The effectiveness of messages is in the wording and in gaining permission to offer advice, which is as important as incentives,” Nease says.

The PBM found that messaging is most effective for high-risk patients.

CVS Caremark, a PBM and retail pharmacy chain based in Woonsocket, R.I., also is studying the motivators behind adherence.

“We want to pinpoint barriers,” says Bari Harlam, senior vice president, member experience.

Research focuses on why prescriptions are often filled but not picked up at the pharmacy (typically forgetfulness and financial barriers), why patients prematurely stop taking medications, which medications show the highest level of non-adherence, and the relationship between behavioral science and adherence.

“We have found that the most successful communications are those that are sensitive, prevention-oriented, appeal not just to members but also to their sense of control, and utilize the most effective channel,” Harlam says. “No one communication delivery system is right for everyone.”

FINDING GAPS IN CARE

Exploring medication adherence, Prime Therapeutics, a PBM located in St. Paul, Minn., studied the adherence rate between 30-day prescriptions acquired at a local pharmacy with 90-day supply either through retail or mail and found that those receiving the three-month supply were 40% less likely to have adherence problems. Patients were on medications for hypertension, diabetes and high cholesterol and were followed for a year and a half.

“The extended supply was definitely the determining factor rather than the channel of delivery,” says Pat Gleason, director of clinical outcomes assessment for the PBM. He calls the 90-day supply an “easy, low-cost way” to help keep patients with chronic conditions on their medications. The study shows that extended-supply patients have an adherence rate from seven to 10 percentage points higher, depending on the type of medication and the follow-up period.

On the other hand, Express Scripts promotes its mail service, which increases adherence up to eight percentage points, as the most effective intervention program to reduce non-adherence.

www.Medtipster.com Source: Associated Press (AP) – by RANDOLPH E. SCHMID – 7.18.2010

WASHINGTON (AP) – One day your annual flu shot could come in the mail.

At least that’s the hope of researchers developing a new method of vaccine delivery that people could even use at home: a patch with microneedles.

Microneedles?

That’s right, tiny little needles so small you don’t even feel them. Attached to a patch like a Band-Aid, the little needles barely penetrate the skin before they dissolve and release their vaccine.

Researchers led by Mark Prausnitz of Georgia Institute of Technology reported their research on microneedles in Sunday’s edition of Nature Medicine.

The business side of the patch feels like fine sandpaper, he said. In tests of microneedles without vaccine, people rated the discomfort at one-tenth to one-twentieth that of getting a standard injection, he said. Nearly everyone said it was painless.

Some medications are already delivered by patches, such as nicotine patches for people trying to quit smoking. That’s simply absorbed through the skin. But attempts to develop patches with the flu vaccine absorbed through the skin have not been successful so far.

In the Georgia Tech work, the vaccine is still injected. But the needles are so small that they don’t hurt and it doesn’t take any special training to use this kind of patch.

So two problems are solved right away — fear of needles, and disposal of leftover hypodermic needles.

“The goal has been a means to administer the vaccine that is patient friendly,” Mark R. Prausnitz of Georgia Tech said in a telephone interview.

That means “not only not hurting or looking scary, but that patients could self-administer,” he said, and people would be more likely to get the flu vaccine.

By developing needles that dissolve, there are no leftover sharp needles, especially important for people who might give themselves the vaccine at home, he said.

The patch, which has been tested on mice, was developed in collaboration by researchers at Georgia Tech and Emory University, Prausnitz said. The work was supported by the National Institutes of Health. The researchers are now seeking funds to begin tests in people and, if all goes well, the patch could be in use in five years, he said.

Flu vaccination is recommended for nearly everyone, every year, and that’s a big burden on the public health network, Prausnitz noted. Many people don’t get the shot because it’s inconvenient, but if they could get in mail or at the pharmacy they might do so, he said.

The patch is placed on the skin and left for 5 minutes to 15 minutes, he said. It can remain longer without doing any damage, he said. In tests on mice, the miocroneedles delivered a correct dose of the flu vaccine.

The little needles are 650 microns (three-hundredths of an inch) in length and there are 100 on the patch used in the mouse study.

Asked if the term “microneedle” might still frighten some folks averse to shots, Prausnitz said he was confident that marketers would come up with a better term before any sales began.

www.Medtipster.com Source: The Post Standard – by Charley Hannagan – 7.14.2010

A study released Tuesday estimates that 35 deaths a year could be prevented in Upstate New York if more doctors sent prescriptions electronically to pharmacies.

Yet, less than a quarter of the doctors nationally, and in Upstate, e-prescribe.

The study by Excellus BlueCross Blue Shield shows that 24.3 percent of doctors and 20.6 percent of physicians assistants in Upstate electronically send prescriptions to pharmacies, called e-prescriptions. In Central New York, the number drops to 21.8 percent of doctors and 17.3 percent of physician assistants.

E-prescribing is important to keep patients safe, prevent prescription forgeries, save money and make the system more efficient, said Dr. Arthur Vercillo, of Excellus.

“You can try and write as neatly as possible on a prescription form, but the call-backs (from pharmacists seeking clarification) still come in,” he said.

The study estimates that if all doctors sent e-prescriptions, and acted on the alerts provided about drug interactions, it would prevent 35 deaths, 161 permanent disabilities, 391 emergency room visits and 449 hospitalizations.

If doctors followed the generic prescription recommendations that pop up when they e-prescribe just 1 percent of the time, it could cut health care spending in Upstate by $64 million, Vercillo said.

The federal government is encouraging doctors to computerize patient medical records to make the system more efficient. E-prescribing is one part of that.

The federal government offers incentives to doctors to e-prescribe.

Excellus also offers an incentive to doctors to e-prescribe as a part of a package of incentives, Vercillo said.

Yet only about 25 percent of doctors nationally e-prescribe even though 85 percent of the pharmacies nationwide can accept e-prescriptions, according to Excellus.

Among other advantages are it allows doctors to retrieve a patient’s prescription history, it prevents forgeries and patients from going to many different doctors for the same prescription and it allows doctors to see a patient’s insurance coverage for drugs.

www.Medtipster.com Source: Winston-Salem Journal, 7.9.2010

A group of independent local pharmacies supports Caterpillar Inc. opening a plant in Winston-Salem, but not if it costs them customers.

That’s why they are appealing to city and county officials to make equal prescription-drug access to potential Caterpillar employees a part of any incentive package with the company.

The pharmacies are concerned about a preferred prescription-drug agreement that Caterpillar has with Walgreens and Wal-Mart.

The agreement, which runs through 2011, provides for lower or no co-pays for Caterpillar employees who fill their prescriptions with Walgreens and Wal-Mart. Employees pay more if they fill their prescriptions through an online or mail-order pharmacy, other chains or independent pharmacies.

“With Caterpillar’s policy, if one of our customers gets hired by Caterpillar, we could lose them,” said Dave Marley, the president and chief executive of Marley Drug in Winston-Salem.

“This, combined with the fact that our own tax dollars were used to entice Caterpillar, and it becomes wholly unacceptable.”

Caterpillar has named Winston-Salem as one of three finalists, along with Montgomery, Ala., and Spartanburg, S.C., for a proposed $426 million manufacturing plant with 510 company and contract employees.

Last week, Winston-Salem and Forsyth County offered Caterpillar a combined $23.4 million in incentives. Caterpillar plans to make a decision in August.

Marley said that the pharmacies are “willing to accept the exact same reimbursement terms given by Walgreens and Wal-Mart.”

“We feel there is no way this would be negotiated after the fact, so if there is going to be a change in Caterpillar’s policy, it has to be raised now and discussed now,” Marley said.

Also making the request are Andrews Pharmacy, East Winston Pharmacy, Gateway Pharmacy, Jonestown Pharmacy, Lewisville Drug, Medicap Pharmacy on Liberty Street and Medicap Pharmacy on Reynolda Road.

Mayor Allen Joines said the city “will bring this concern to the company’s attention if we are lucky enough to be negotiating a contract.”

At cathealthbenefits.cat.com, Caterpillar said the “direct contracts with Wal-Mart and Walgreens use a transparent cost-plus pricing methodology that is intended to eliminate unnecessary and hidden costs in the prescription-drug supply chain.”

Caterpillar did amend its policy to allow independent pharmacies to participate at the Walgreens and Wal-Mart tier in rural areas that don’t have easy access to those stores.

A small percentage of employers have adopted similar policies regarding prescription drugs, said Steve Graybill, a senior consultant for Mercer, a human-resources consulting company.

David Howard, a spokesman for R.J. Reynolds Tobacco Co., said that in 2009, the manufacturer opened up its health-care plan to give employees access to more than 59,000 pharmacies, including national chains and many local pharmacies. Before that, Reynolds provided most medical care for its employees through company-sponsored clinics such as Winston-Salem Health Care.

The bulk of local Reynolds employees have still chosen to use Winston-Salem Health Care and its pharmacy for years, Howard said. “Employees have the option to go outside of network for health care and prescriptions, but they will have higher out-of-pocket costs,” Howard said.

Media General Inc., the parent company of the Winston-Salem Journal, has a contract with Medco, a mail-order pharmacy that provides discounts for employees, but employees can fill prescriptions elsewhere, as well.

Supplies of Pantoprazole will be gone shortly. Due to patent issues, Pantoprazole is in limited supply and is no longer being manufactured. If you do not want to pay the highest brand copayment for Protonix, you may want to consider generic Prilosec or Prevacid or even an OTC agents such as omeprazole, Prevacid 24 HOUR or Zegerid OTC.

www.Medtipster.com Source: The Boston Globe – Christoph Westphal, 6/28/2010

If we focus too much on side effects, we might forfeit important new medications

WHEN IT comes to prescription drugs, patients expect benefits but appear intolerant of risks. What would happen in a world that accepts no risks in its pharmaceuticals? We would have very empty medicine cabinets.

Every June, 200 biotech and pharmaceutical CEOs gather in Boston. This year, the deputy commissioner of the Food and Drug Administration spoke to the group on the evolving risk-benefit analysis regarding prescription drugs. Much of the ensuing dialogue with the CEOs centered on society’s changing views of drug benefits and risks.

The first “wonder drug,” aspirin, was synthesized by Bayer in 1897 and marketed in 1899. This extremely rapid path from initial experiments to market is impossible to imagine in today’s world. Now, aspirin has some wonderful properties – it reduces inflammation, prevents blood from clotting, lowers fever, and lessens pain. Millions of Americans take aspirin every year, without a doctor’s prescription. However, side effects kill roughly 10 out of 100,000 men taking aspirin. In fact, it is possible that aspirin would not be approved today by the FDA, so dramatic is the shift in society’s risk-benefit views regarding pharmaceutical products.

That shift spelled the doom a few years ago of another drug with significant benefit, but some risk, namely Vioxx. Merck had shown beneficial effects of Vioxx in severe arthritis in thousands of patients, and the drug was approved. After Vioxx reached the market, however, the risk of death from heart attack, estimated by independent academics to be on the order of 20 to 30 out of 100,000 patients taking the drug, led Merck to remove Vioxx from the market. There are likely patients with severe arthritis who would accept the risk of side effects, in order to benefit from this effective medicine. But these patients no longer are able to make their own risk-benefit calculations. Instead, society has determined on their behalf that this therapeutic option should no longer be available to them.

How dangerous, in comparison to taking aspirin or Vioxx, is driving a car? According to the National Safety Council, the risk of dying in a car accident during one year is about 155 out of 100,000. The death rate of car usage actually appears a good deal higher than the likelihood of death caused by taking Vioxx or aspirin. Nevertheless, no one is arguing that cars should be taken off the market. Instead, society has decided that the benefits of cars outweigh their risks.

As society has shifted to a view that medications should have virtually no risks, the inevitable effect has been to reduce the flow of important new drugs. It is certainly fair to rigorously test any new medication prior to approval. In addition, any new drugs should be monitored for safety and efficacy after they have reached the market.

But society must be careful to weigh the benefits of effective new drugs for diseases that until now have been poorly treated, versus the added risks of the new medications. If we focus too much on the risks of drugs, and do not balance those risks against the benefits, fewer drugs will be approved and reach patients in need. That is a risk in and of itself.

On your next drive, remember that it may be riskier to get in your car than to take the drug Vioxx, which was shown to be highly beneficial to patients with severe arthritis, but has been removed from the market.

Search the internet and you will find hundreds of companies offering pharmacy discounts cards. We looked at several and found alarming results.

All of the pharmacy discount cards we investigated boasted agressive pharmacy discounts.  Let’s define “agressive”:

Half of the discount cards offered an average 12% brand drug discount. The other half cost more than the pharmacy’s cash price.

Nearly 90% of the discount cards had a generic drug price that was higher than the pharmacy’s cash price.

The 10% that had value offered pennys in savings at best.

One of the better cards was offered by the National Association of Counties.  The example below highlights the NACO’s discounted price for frequently utilized Simvastatin 40mg (Generic Zocor).

Comparing NACO’s mail order price to the prices found on www.Medtipster.com were amusing for us, but will most likely be upsetting to anyone whom has one of these NACO discount cards.

Bottom-line: Make sure you pay nothing for these cards and perhaps consider even using them at all.

See example below:

Please send your caption ideas for the photo below to contact@medtipster.com with “Create a caption” in the subject line.

Winners will receive a $100.00 gift card to one of the following Pharmacy supporters, Kmart, Kroger or Walmart. Winner’s choice.  Winner selected monthly by www.Medtipster.com.

In this photo, Medtipster President Jason Klein (right) speaks with Compuware President, Peter Karmanos (left).

Generic Drug Delay Fight May Be Nearing Turning Point, FTC’s Leibowitz Says
06/21/2010
www.Medtipster.com Source: Bloomberg News – Washington DC Bureau

The U.S. government’s decade-long fight to limit drugmakers’ ability to keep generic medicines off the market may reach “a turning point” soon, Federal Trade Commission Chairman Jonathan Leibowitz said.

The FTC is counting on a review by an appeals court to break a deadlock over agreements made by brand-name drugmakers that it says delay the introduction of lower-priced generic medicines. The focus is on the 2nd U.S. Circuit Court of Appeals in New York, which may decide by August whether to review a deal between Bayer AG and Teva Pharmaceutical Industries Ltd.’s Barr unit on when a generic version of the antibiotic Cipro can go on the market.

The Cipro case “signals a renewed concern about these pay-for-delay deals, and hopefully it will mark a turning point towards a legal rule that prohibits brand pharmaceutical companies from paying off their generic competitors to sit it out,” Leibowitz, 52, said in an interview. The review could bring the issue of agreements before the Supreme Court.

The fight pits drugmakers against the FTC, the Justice Department, pharmacies such as CVS Caremark Corp. and President Barack Obama, who cited the greater availability of generic drugs as a way to reduce health-care costs. There also is an effort in Congress to restrict the settlements.

Licensing Deals

The FTC contends brand-name makers offer generic-drug companies licensing rights on a product or other compensation in exchange for an agreement on when cheaper drugs are introduced. The agency said it supports settlements, except when there is some sort of financial consideration.

Medicines that generate about $92 billion in sales will face generic competition through 2014 because of expiring patents, according to the research firm IMS Health Inc. Medicines accounted for $250.3 billion in U.S. sales for brand- name drugmakers in 2009 and $35.8 billion for generic firms, according to Norwalk, Connecticut-based IMS.

Defending valid patents is vital, said Jerry Pappert, general counsel of Frazer, Pennsylvania-based Cephalon Inc. “If the branded company loses, it loses its franchise.”

Cephalon is being sued by the FTC, which contends the drugmaker paid more than $200 million for generic companies to drop their challenge to patents on its sleep-disorder drug Provigil. Cephalon says the settlements are in accordance with patent law.

No Delay

In the Cipro case, CVS and other pharmacies said Bayer paid $398.1 million for Barr to drop its patent challenge. David Stark, general counsel for Teva’s North America unit, said generic-drug makers aren’t delaying marketing products as a result of financial incentives. The agreements are no different than patent deals in other industries, he said.

Leibowitz said the agreements add to health-care costs. If some settlements between companies aren’t prohibited, “you’re going to pay seven, eight, 10 times as much as you otherwise would,” he said. The FTC said the deals cost consumers $3.5 billion annually, a figure disputed by economists such as Jonathan Orszag, senior managing director at the economic consulting firm Compass Lexecon in Washington and the brother of White House Budget Director Peter Orszag.

Courts have allowed the settlements as long as they don’t prevent entry of the generic beyond a patent’s lifespan.

In the Cipro case, the agreement allowed a generic drug to be sold six months before the patent expired, said Kathleen Jaeger, chief executive officer of the Generic Pharmaceutical Association, a Washington trade group.

‘Tremendous Value’

“The FTC doesn’t see the tremendous value the patent settlements have brought to the system,” she said.

Since February, courts have thrown out antitrust lawsuits over Bristol-Myers Squibb Co.’s blood-thinner Plavix and AndroGel, a testosterone ointment now made by Abbott Laboratories. The FTC lost a case over a settlement involving Schering-Plough Corp.’s K-Dur heart medication.

A three-judge panel in April upheld the Cipro settlement, though it recommended opponents seek a review by the full court.

The potential court review, along with legislation Leibowitz predicted Congress would pass this year, add momentum to efforts to limit deals. Senators Herb Kohl, a Wisconsin Democrat, and Charles Grassley, an Iowa Republican, introduced an anti-deal measure. House legislation would bar the settlements.

‘Winds Are Shifting’

“The winds are shifting on the legal front, shifting on the commission front and on the legislative front,” said Robert Doyle, a former FTC official.

Ken Johnson, a senior vice president at the Pharmaceutical Research and Manufacturers of America, a Washington trade group, said brand-name drug companies need patent protection to justify the investments required to develop medicines. Drugmakers said the settlements also provide certainty as to when generics will enter the market.

Stark said a court review may not be significant.

“I don’t think it’s a foregone conclusion just because they take it up that they reverse the trend,” he said.

Marcy Funk, a spokeswoman for Leverkusen, Germany-based Bayer, declined to comment.

All parties are watching if the 2nd Circuit agrees to hear the Cipro case. The decision may come in August, said David Balto, a lawyer representing consumer groups.

Leibowitz said he believes the FTC has a strong hand. “I have yet to see an issue that’s as black and white,” he said.

The 2nd Circuit case is In Re Ciprofloxacin Hydrochloride Antitrust Litigation, 05-2851 and 05-2852, 2nd U.S. Circuit Court of Appeals (New York).

www.Medtipster.com Source: www.pwc.com – June 14, 2010

The nation’s employers can expect medical costs to increase by 9% in 2011, a decrease of 0.5% from the 2010 growth rate, according to the annual Behind the Numbers report published today by the PricewaterhouseCoopers LLP (PwC) Health Research Institute. For the first time, the majority of the American workforce is expected to have a health insurance deductible of $400 or more, as more employers return to “indemnity style” cost-sharing by raising out-of-pocket limits, replacing co-pays with co-insurance and adding high-deductible health plans.

The Behind the Numbers report includes findings of the PricewaterhouseCoopers’ Health and Well-Being Touchstone Survey of more than 700 employers from 30 industries, as well as interviews with health plan actuaries and other executives whose companies provide health insurance for 47 million American workers and their families.

Improving wellness programs and increased cost-sharing lead the planned changes employers will make in the benefit plan designs they will offer for next year. According to PricewaterhouseCoopers’ Touchstone research:

• Two-thirds (67%) of companies intend to expand or improve wellness programs inside the US
• 42% intend to increase employee contributions for health insurance coverage.
• 41% intend to increase medical cost-sharing, including higher deductibles and co-pays, while only 26% intend to increase prescription drug cost-sharing.
• More employers are dropping health benefits for retirees. One-third of employers with over 5,000 workers subsidize pre-65 retiree medical coverage, down from 47% in 2009. Only 22% of employers with over 5,000 employees subsidize post-65 retiree medical coverage, down from 37% in 2009.

In 2011, the Behind the Numbers report outlines three primary deflators that will help employers hold down medical costs:

• Employers are moving toward pre-managed care benefit design by increasing deductibles and replacing co-pays with co-insurance. By requiring workers to spend more out-of-pocket at the point of care, employers believe they will rein in utilization of services and drugs. The number of employers using co-insurance for physician visits has nearly doubled, and one-third use co-insurance for brand-name drugs.
• Drug costs are tempered by generics. Insurers are benefitting from the growing use of generic drugs. Drugs representing about $26 billion in annual sales are expected to go off patent in 2011, including the world’s best-selling drug, Lipitor. Generics account for as much as 80% of all prescriptions.
• COBRA costs are expected to return to more normal levels in 2011. COBRA subsidies passed by Congress in 2009 created a 1% increase in the medical cost trend, according to PricewaterhouseCoopers’ analysis. A combination of declining unemployment and expiration of the COBRA subsidies is expected to lead to reduced enrollment in COBRA.

The biggest inflators of the medical trend in 2011 will be in hospital and physician costs, which make up 81% of premium costs. 

• Hospitals shifting costs from Medicare to private payers and employers is seen as the Number One reason for higher medical costs trends. In 2011, Medicare, which is the single largest payer for hospitals, will reduce payment rates to hospitals for the first time after seven years of increases that nearly matched or exceeded inflation increases. Some hospitals that benefitted from higher payments in 2008 and 2009 may be able to manage this type of cut by tapping their reserves. Yet, more are likely to shift more costs to commercial payers during their negotiations.
• Provider consolidation is increasing, which is expected to increase their bargaining power. More physicians are getting out of private practice and joining forces with local hospitals or larger physician groups. The number of physicians involved in mergers or acquisitions in 2009 was 2,910, nearly twice that of 2008. There has been record consolidation activity in 2010, and PricewaterhouseCoopers expects the trend to accelerate in 2011. Payers expect to see more negotiating power and higher prices in the short term, though the benefits of consolidation should create efficiencies that moderate rate increases in the future.
• Spurred by stimulus funding that begins in 2011 and Medicare penalties that begin in 2015, hospitals will invest billions of dollars in certified electronic health record (EHR) systems. While many hospital systems were planning to implement EHRs in the near future, the government’s new regulations dramatically condensed their timelines to invest in technology, IT staff, training and process redesign. Healthcare CIOs surveyed by PwC said they will make their largest investments to meet the new EHR regulations in 2011. In the long term, EHRs are expected to help control costs. 

“For more than 50 years, US employers have used health benefits as a critical part of their compensation package to recruit and retain workers,” said Michael Thompson, principal, Human Resource Services, PricewaterhouseCoopers. “The value of these benefits is becoming an even more visible part of overall compensation as medical costs grow, and, by 2014, health insurance benefits will shift from being a voluntary benefit to an individual mandate, enforced by new tax levies. Companies are now working with their health plan providers for new post-recession, post-health reform strategies to sustain their programs and promote health and well-being as their next competitive advantage.” 

Each year, PricewaterhouseCoopers’ Health Research Institute provides estimates on growth of private medical costs over the next year and what the leading drivers of the trend are expected to be. Insurance companies use medical cost trends to help set health plan premiums by estimating what the same health plan this year would cost in the next year. In turn, employers use the information to make adjustments in benefit plan design to help offset any cost increases. 

“Health reform delivers only a minor impact on the underlying medical cost trends in 2011 and introduces hundreds of changes in the healthcare system designed to reduce costs and improve efficiencies in the long-term,” said Kelly A. Barnes, US health industries leader at PricewaterhouseCoopers. “These changes could bring significant new cost savings opportunities for employers and payers as well as new choices and transparency for workers buying insurance.” 

PricewaterhouseCoopers’ Behind the Numbers report and survey highlights are available at www.pwc.com/us/medicalcosts2011. The full findings of the PricewaterhouseCoopers 2010 Health and Well-being Touchstone survey are available at  www.pwc.com/us/touchstone2010.For more on the details on the implications of health reform, go to http://www.pwc.com/healthreform. 

Methodology

The 2010 Health and Well-Being Touchstone survey was completed in the first quarter of 2010. Survey participants included 700 U.S- based companies across the country from 30 different industries. Companies ranged in size from small employers with fewer than 500 employees to large companies with more than 20,000 employees. 

About PricewaterhouseCoopers’ Health Research Institute (HRI)

PricewaterhouseCoopers’ Health Research Institute (www.pwc.com/hri) is an unparalleled resource for health industry expertise. By providing cutting-edge intelligence, perspective and analysis on issues impacting the health industry, HRI assists executive decision-makers and stakeholders worldwide in navigating their most pressing business challenges. PricewaterhouseCoopers is one of the only firms with a dedicated global healthcare research unit, capitalizing on fact-based research and collaborative exchange among our network of professionals with day-to-day experience in the health industries. 

About PricewaterhouseCoopers’ Health Industries Group

 PricewaterhouseCoopers’ Health Industries Group (www.pwc.com/healthindustries) is a leading advisor to public and private organizations across the health industry, including payers, providers, academic institutions, health sciences, biotech/medical devices, pharmaceutical companies, employers and new non-traditional market participants in the dynamic healthcare space. PricewaterhouseCoopers has a network of more than 4,000 professionals worldwide and 1,200 professionals in the US dedicated to the health industries.

PricewaterhouseCoopers’ Health Industries’ clients include 40 of the top 100 hospitals in the US and 16 of the 18 best hospitals as ranked by US News & World Report; all 20 of the world’s major pharmaceutical companies; all of the top 20 commercial payers in the US; municipal, state and federal government agencies and many of the world’s preeminent medical foundations and associations. Follow PwC Health Industries at http://twitter.com/PwCHealth.

About PricewaterhouseCoopers
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

^© 2010 PricewaterhouseCoopers LLP. All rights reserved

 Lisa Stearns
The Hubbell Group, Inc.
Tel: +1 (781) 878 8882
lstearns@hubbellgroup.com