CEO Power Panel: Healthcare leaders back feds stepping in to restrain drug prices

Nearly seven-eighths of the country's top healthcare leaders favor the government taking a bigger role in curbing the rising cost of prescription drugs, while nearly all say that the two-year runup in drug prices has hurt their bottom lines.

A whopping 90% of CEOs responding to Modern Healthcare's latest CEO Power Panel survey said rising drug costs were undermining their finances. Nearly half (45%) said the impact was “very negative.”

To deal with the issue, a surprising 86% of survey respondents supported giving the federal government the authority to negotiate drug prices on behalf of Medicare and Medicaid beneficiaries.

“Historically I'm not a big fan of government intervention in business,” said Matthew Aug, CEO of Cox HealthPlans, a Springfield, Mo.-based insurer and affiliate of integrated health network Cox Health. “But I think some intervention on the part of government—whether it is on price-setting or price increases—I think could definitely help people out.”

“It's one of those issues that are really frustrating because we can't get our arms around it,” added Randy Oostra, CEO of northwest Ohio-based health system ProMedica. “Staffing we can address, as well as other issues. But drug costs are one of those areas that seem unstoppable, unapproachable, and really, we're somewhat at a loss on how to address some of it.”

The CEO Power Panel includes the leaders of 100 hospital systems, insurance companies, large physician practices, trade groups and not-for-profits.

The early November survey generated responses from 80 healthcare leaders.

Several recent polls have suggested drug prices are now the general public's No. 1 healthcare concern. Most media scrutiny has focused on new, specialty brand-name medications like Gilead Sciences' hepatitis C treatment Sovaldi, which was initially priced at $1,000 a pill, and oncology drugs that have come on the market at prices well above $100,000 per patient per year.

“There is a contagion of public concern that could result in a shift in congressional attitudes toward drugs and drug pricing,” said Dr. David Blumenthal, president of the Commonwealth Fund.

But a more pressing issue for many healthcare leaders are the high prices being placed on generic medications, including some that were long available at much lower costs. In the past, wider use of generics offered the savings that helped offset the high costs of brand-name therapies.

“We're all used to the new brand-name drugs being priced out of this world,” said Dr. Joseph Vasile, CEO of the Greater Rochester (N.Y.) Independent Practice Association, a 1,225-member physician group. “But now all of a sudden in that safe haven—the generics—the prices are skyrocketing, too. So it's like you're getting hit from all different fronts.”

For many health providers and insurers, the rising cost of generics coupled with the high prices on new specialty medications means drug spending is taking an increasing share of their overall budgets. “The increasing pricing in branded pharmaceuticals and in some of the generics combined with a long approval process to get new generics in the market have been creating cost problems for our health systems,” said Susan DeVore, CEO of Premier.

But unlike most respondents, DeVore opposes regulatory interventions such as price controls, instead favoring government action to create a more competitive environment by allowing more drugmakers to get more products onto the market at a faster rate. “Competitive friction is really important to try to keep the cost of pharma as contained as possible,” she said.

To justify the higher prices, drugmakers or their supporters frequently claim the prices reflect high research and development costs. Most experimental drugs never make it to the market.

But nearly 6 in 10 CEOs rejected that argument, although a third of the group felt R&D costs “sometimes” justified such prices. Many leaders said the companies ought to be required to reveal how much it actually costs to develop a drug.

The nation's top healthcare leaders also rejected the argument that the prices companies set on new drugs are based on the clinical value they bring to patients and the healthcare system. More than three-quarters of Power Panel CEO respondents (76%) felt prices either did not reflect or rarely reflected their clinical value, while only 10% said they did.

The CEOs indicated many are moving to revamp how they make decisions when purchasing drugs. An overwhelming 84% support using clinical pathways, or standardized, evidence-based practices, to reduce doctors' reliance on high-cost drugs that offer limited clinical value.

For the most part, physicians are currently responsible for determining drug utilization patterns. But a plurality of respondents (42%) said physicians in combination with hospitals and health systems should be primarily responsible for assessing the clinical value of prescription drugs. A whopping 83% supported value-based pricing, which links drug reimbursement to evidence of clinical value.

But as a way of addressing one of the hot-button topics of the current presidential campaign—high drug prices—healthcare leaders rejected allowing people and systems to purchase drugs abroad. Only 32% of Power Panel respondents supported that step.

Paul Kusserow, CEO of leading home healthcare services provider Amedisys, is in that minority. “If there is access and affordability elsewhere and it's a free market, consumers should be able to work the free market and optimize the use of their dollar,” he said.