The ACA and the Myth of Increasing Drug Costs

With significant uncertainty surrounding health insurance and increasing scrutiny regarding high drug costs, specialty pharmacy is poised to play a vital role in providing value and superior patient care in the years ahead.
 
During the National Association of Specialty Pharmacy (NASP) Annual Meeting and Educational Conference on September 19, 2017, keynote speaker Alex M. Azar II, JD, presented the speech “Specialty Pharmacy: The Bridge to the Patient in a Rapidly Evolving Healthcare Ecosystem.”
 
Azar, formerly president of Eli Lilly USA and deputy secretary and general counsel of the US Department of Health and Human Services under President George W. Bush, discussed the myriad issues with the Affordable Care Act (ACA) and its effect on the health care market.
 
“Many of the problems that Obamacare is suffering from right now were entirely predictable as a matter of economic and individual behavior,” Azar said.
 
He noted that 47% of counties in the United States will have just a single insurance carrier next year, while citing billion dollar losses for insurers fleeing the individual market. As a result, premiums have jumped 105% since 2013.
 
“That is an increase that would make drug companies hold their head in shame,” Azar said.
 
Azar noted that Aetna’s CEO described the ACA as being in a “death spiral” that will require statutory changes to recover from. He stated that original estimates by the Congressional Budget Office of 38 million people insured under the ACA by 2016 fell well short, with approximately 10 million people currently insured on the individual market and another 10 million insured under Medicaid.
 
“I don’t know all the data from within specialty pharmacy, but I would guess the expansion in Medicaid lives have not necessarily been high specialty pharmacy users given the restricted formularies in Medicaid,” Azar said.
 
Azar added that Lilly and other manufacturers did not benefit financially from the growth in the insured population. Meanwhile, premiums increased 44% in young populations compared with only 7% in older populations.
 
“Young, healthy moderate and above income individuals have been progressively driven out of the marketplace by structural and implementation decisions made under Obamacare,” Azar said.
 
While significant concerns have surrounded coverage for preexisting conditions under health care reform packages proposed by Republicans, Azar noted that prior to the ACA, HIPAA prohibited the denial of insurance for a preexisting condition; however, the ACA additionally banned price discrimination based on that preexisting condition.
 
Azar said this action allowed price discrimination based upon age, but the provision also made a fundamental error that immediately doomed the ACA by setting community ratings of premiums at a 3-to-1 ratio.
 
“When you look at the actual cost of insurance, the market is more like 5-to-1,” he said. “That choice was made as an act of redistribution from young healthy individuals to pre-Medicare population individuals. A fairly massive transfer of wealth was envisioned there with the 1-to-3. This is what happens when you make policy choices, but don’t actually think about economic laws and human behavior in connection with those laws and where that will lead.”
 


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