PharmExec Blog

How Will Accountable Care Organizations Hit Drug Sales?

It’s not yet clear whether physicians will rush to form accountable care organizations (ACOs) in light of newly proposed Centers for Medicare and Medicaid Services (CMS) guidelines, which are lengthy, but pharmaceutical companies hoping to do business with ACOs will have to show that expensive brand drugs can offer not just better health outcomes, but also system-wide savings.

In order to incentivize the formation of ACOs, the CMS guidelines for the Medicare Shared Savings Program would reward ACOs that treat Medicare Part A and Part B beneficiary populations at or under a pre-determined cost benchmark; for those ACOs that keep costs below the benchmark, as much as 60% of the money saved would be distributed back to ACO members. Benchmarks for specific ACOs would be determined by average per capita Medicare Parts A and B expenditures, according to the proposed guidelines. Exceeding the benchmark, however, means being held accountable, or paying the government for overage costs.

Are physicians ready to take on that kind of risk? “Frankly I think that [risk] is one of the things that will limit the number of institutions or organizations that are interested in playing here,” said Dan Mendelson, CEO of Avalere Health, a consulting firm. “If you have excellent data systems, and you understand risk, and you have control over your providers in terms of utilization, you’re probably a managed care company already,” he said. Managed care organizations are not eligible for the Shared Savings Program. Jeremy Lazarus, speaker for the American Medical Association (AMA) House of Delegates, said in a statement that “ACPs offer great promise for improving care coordination and quality while reducing cost, but only if all physicians who wish to are able to lead and participate in them.” A spokesperson for the AMA said more time was needed to digest the guidelines, before making additional comment on whether a critical mass of physicians would join or create ACOs.

Regarding the impact of ACOs on drug sales, Mendelson noted a “broad flexibility for ACOs to introduce concepts like step therapy,” or the practice of beginning treatment with the safest and cheapest drug therapy. With ACOs, the “organization controlling the spend is no longer the physician, it’s now the system,” said Mendelson. “From that perspective, [ACOs] look more like Kaiser [Permanente] than like selling into an oncology practice.”

John Kamp, executive director of the Coalition for Healthcare Communication, said ACOs represent additional pressure toward the use of generics and other cheap alternatives. In order to cope with those pressures, drug marketers will need to become more sophisticated in “talking about the system economics of using specific new drugs, as well as the individual patient outcome,” said Kamp. “The short-term cost pressures are much more acute than long-term cost savings.”

To participate in the Shared Savings Program, an ACO will need at least 5,000 beneficiaries on its roster, healthy and sick, according to the guidelines. “One of the things that emerges here is that if you can enroll patients who do not have multiple sclerosis or cancer or other biotech-targeted conditions, you’re going to do better,” said Mendelson. “There’s an incentive for the selection of healthy patients that the government will need to mitigate over time.” According to the guidelines, ACOs taking steps to avoid “patients at risk in order to reduce the likelihood of increasing costs” will face sanctions, which could include “termination from the program.”

Health providers eligible for participating in the Shared Savings Program include physicians in group practices, networks of individual practices, partnerships or joint venture arrangements between hospitals and physicians, hospitals employing physicians, and “other groups of providers of services and suppliers as the Secretary determines appropriate,” according to the guidelines. ACOs must enter into a three-year agreement with CMS to be eligible for the savings incentives, using one of two proposed models described in the guidelines.

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