Life Science Compliance Update

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February 20, 2013

CBO Report: Improved Patient Adherence Benefits Medicare

Prescription medicines help people avoid the disability and death caused by disease, and help lower overall treatment costs. In fact, medical advances, including prescription medicines, have lowered death rates for heart disease, stroke, cancer, and other deadly diseases.  Two years ago, a report from Eli Lilly noted how if it were not for the declines in death rates from heart disease and stroke, we would lose 1 million more Americans every year.  

In addition, the 5-year survival rates for cancer have risen by 26% just since 1984.  And while HIV/AIDS was the 8th leading cause of death in the US in 1996, today, it’s not even ranked in the top 15.  Moreover, every $1 spent on statin therapy for heart attack survivors produced as much as $9.44 in health gains and routine use of beta-blockers for acute heart attack sufferers produced as high as $38.44 in health gains. 

While it is clear that people who take their drugs have enormous success in achieving better health outcomes, what is also clear is that patients who do not adhere to their medications may suffer adverse effects, thereby imposing increased and additional costs on our healthcare system.  For example, taking an antibiotic may prevent a more severe infection, and adhering to a drug regimen for a chronic condition such as diabetes or high blood pressure may prevent complications.  In either of those circumstances, taking the medication may avert hospital admissions and thus reduce the use of medical services. 

Policy changes that influence Medicare beneficiaries’ use of prescription drugs, such as those altering the cost-sharing structure of the Part D prescription drug benefit, “probably affect federal spending on their medical services.”  Consequently, the Congressional Budget Office (CBO) recently reviewed research and released a report showing that a 1% increase in the number of prescriptions filled by beneficiaries would cause Medicare’s spending on medical services to fall by roughly one-fifth of 1 percent.   

That estimate, which applies only to policies that directly affect the quantity of prescriptions filled, represents a change in the agency’s estimating methodology.  Likewise, a 1 percent decrease in prescription drug use would cause medical spending to increase by roughly one-fifth of 1 percent. 

For example, a policy that increased prescription drug copayments for certain Medicare beneficiaries might save $4 billion in federal drug costs in a given year but reduce the number of prescriptions filled that year by 1 percent.  That reduction in use would result in a one-fifth of 1 percent increase in the affected population’s total spending for medical services.  If that total spending would otherwise be $250 billion in that year, then those costs would increase by $0.5 billion. 

The net effect of the policy, combining the savings on drug costs and the costs of increased use of medical services, would be a savings for the federal government of $3.5 billion in that year. 

Forbes reported that “Pharmaceutical companies lose an estimated $188 billion annually in revenues in the U.S. because patients fail to take their prescribed medications, according to a study by consulting firm Capgemini.”   Moreover, the pharma industry could add a whopping $564 billion per year to global sales if patients stuck to their drug regimens as prescribed, the report found.  The loss represents 59% of all pharma revenues, which were $320 billion in the USA and $956 billion globally in 2011 according to IMS figures, PharmaTimes reported. 

Non-adherence is a problem across almost all chronic conditions, not only for diabetes, hypertension, and high cholesterol, but also for HIV, oncology, transplant, and glaucoma.  In the US diabetes market alone, revenue loss is estimated to be $11.4 billion. 

CBO Report  

Medicare’s Part D program—which was created in 2003 with the passage of the Medicare Prescription Drug, Improvement, and Modernization Act and implemented in 2006—the number of prescriptions filled by Medicare beneficiaries increased by more than 10 percent, according to one estimate.  More recently, the Part D benefit was expanded by the Affordable Care Act—which, between 2011 and 2020, is gradually closing the gap in coverage in which beneficiaries were responsible for all of the costs for their prescription drugs.4 That change is expected to further boost the use of prescription drugs. 

A substantial body of evidence indicates that people respond to changes in cost sharing by changing their consumption of prescription drugs.  From beneficiaries’ perspective, the price of a prescription drug is the portion of the prescription’s cost that they bear. The use of prescription drugs—or number of prescriptions filled—increases in response to price reductions and falls in response to price increases. That response is widespread, found within both the elderly population and the nonelderly population, and among both enrollees in public health care plans and people with private health insurance. 

Numerous studies have demonstrated the effect of price changes on the use of prescription drugs overall, and several others have found that lower prices for drugs used to treat chronic conditions improve the likelihood that patients take their medication as prescribed. 

Under its new assumption, spending on Medicare services will drop by roughly 1%. That's a savings of $35 billion out of an estimated $5.6 trillion from 2013 to 2022.

With Part D spending set to increase by $86 billion from the increased use in the next decade, the net increase in federal spending would actually be $51 billion after the $35 billion in reduced Medicare services is taken into account. 

The National Community Pharmacists Association (NPCA) commended CBO for acknowledging “the growing body of evidence verifying what community pharmacists have known for some time. Namely, that the more patients have their prescriptions filled and adhere to medications their doctors prescribe, the healthier they will be and the likelihood of costlier interventions including hospitalisations diminishes - reducing health care costs,” reported PharmaTimes.

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To put this article in perspective, most drug treatments are still secondary or tertiary prevention and should be balanced with primary prevention approaches. Primary prevention through health education and behavior change are still more cost effective. More incentives are needed in private and public health plans to drive health plans and individuals towards primary prevention. There are some good examples out there -- disease management programs, U.S. Preventive Medicine, some of the Affordable Care Act provisions, etc. -- but more is needed. It's even better to remove the need the drugs in the first place when possible.

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