Cameron McClearn looks at how Washington State’s approach to health care value is beginning to influence the rest of the country.
Many trends start on the West Coast and migrate to the rest of the nation. The Washington State health care system is worth watching as officials evaluate the economic value of medical treatments for state workers and Medicaid patients. It’s another sign of the trend among those who pay for health care to demand proof that they are getting good value for money.
The Washington Health Technology Assessment (HTA) committee is holding public hearings to collect data on the effectiveness of medical treatments. These hearings, as The New York Times recently noted, represent a public policy laboratory in which medical providers, drug companies and patients testify about the merits of various treatments—to determine which procedures, drugs, devices and therapies will be covered by state health care dollars. A recent hearing by the committee drew participants from as far away as Australia.
The HTA committee —which is composed of seven doctors, a nurse, a speech pathologist, a chiropractor and a naturopathic physician—uses public testimonies as well as clinical trial reports to make its decisions, the main criteria for which are patient safety, therapeutic efficacy, and total direct cost per year. Note that the cost of treatment is a key factor, “akin to Britain’s National Institute for Health and Clinical Excellence (NICE),” as The Times notes.
Although Washington State’s program only affects the coverage of state employees, Medicaid patients and injured workers—a total of 750,000 people—it is not an isolated policy move. The Drug Effectiveness Review Project (DERP), an alliance of 11 states and two private organizations (the Oregon Evidence-Based Practice Center and the Center for Evidence-Based Policy), has been gaining significant traction since 2006 in its mission to “produce systematic, evidence-based reviews of the comparative effectiveness and safety of drugs in many widely used drug classes, and to apply the findings to inform public policy and related activities in local settings.”
The DERP was started in 2000, when the state of Oregon saw its Medicaid drug spending rise 60 percent in one year. In an effort to limit pharmacy expenditures, Oregon passed legislation instituting a preferred drug list “for which effectiveness of drugs was to be considered first,” the DERP website explains. “If drugs were found to be equally effective, considerations would then be given to cost.”
Now with 11 state agencies participating—stretching from the Oregon Health Plan in the West to New York Medicaid in the Northeast—it’s clear that the push for value in health care, amplified by tightening state budgets, puts more pressure on pharmaceutical companies and medical device makers to demonstrate that their offerings are safe, effective and give good value for money. (Check out Idaho’s public list of preferred and non-preferred prescription medications for ailments from Alzheimer’s to ulcerative colitis.)
Of course, European health care authorities, led by Britain’s NICE, have been making these evaluations for years. And the U.S. made a small but symbolically important step in this direction, when the health care reform law included $1.1 billion to fund clinical trials and systematic reviews of published scientific studies to compare the effectiveness of different treatments.
The private sector tends to act more quickly than government when it comes to saving money, and insurance plans regularly use cost effectiveness data to ration expenditures, or make drug and device coverage determinations. Last year, Medco Health Solutions bought United BioSource—a company that evaluates the comparative effectiveness of drugs—for $730 million. WellPoint released its own comparative effectiveness guidelines last May.
Looking at drugs in terms of cost and benefit isn’t going away, and that presents challeges for executives in the pharmaceutical and medical device industries. Successfully communicating the impact of a new product with multiple audiences, including non-experts, will be a key skill for executives hoping to keep their drugs on formularies and state Medicaid preferred drug lists.
Cameron McClearn is a partner at Monitor and co-leader of Monitor’s Global Market Access initiative. He is based in Monitor’s New York office and can be reached via e-mail at Cameron_McClearn@Monitor.com