Worcester Business Journal

28 2016 Central Mass By The Numbers • Worcester Business Journal • www.wbjournal.com Health Care *Cigna reported data under the following reporting entities: (1) Cigna Health and Life Insurance Company and (2) Connecticut General Life Insurance Co. Source: Mass Center for Health Information & Analysis Prescription drug spending by commercially-insured members rises 42% % Change % Change Payer Name 2013 2014 2015 2014-2015 2013-2015 Aetna Inc. $4,222,484.00 $7,003,663.66 $11,343,015.00 61.96% 168.63% Blue Cross Blue Shield of Massachusetts $696,109,802.00 $513,676,695.00 $843,470,396.00 64.20% 21.17% BMC HealthNet Plan - $485,355.45 $16,931,938.00 3388.56% Celticare Health Plan of Massachusetts $74,945.00 $49,052.84 $838,577.00 1609.54% 1018.92% Cigna* $2,467,921.00 $3,218,606.00 30.42% Fallon Health $46,741,923.00 $56,680,707.00 $59,078,550.00 4.23% 26.39% Harvard Pilgrim Health Care $60,634,136.00 $245,358,959.00 $270,997,749.00 10.45% 346.94% Health New England $233,584,247.00 $71,884,989.00 $91,077,144.00 26.70% -61.01% Minuteman Health Inc. - - $1,390,310.00 Neighborhood Health Plan - $52,593,072.00 $101,026,012.00 92.09% Tufts Health Plan $175,257,939.00 $202,380,696.00 $196,074,501.00 -3.12% 11.88% Tufts Health Public Plans $67,033.00 $1,215,596.00 $43,122,659.00 3447.45% 64230.49% UniCare Life and Health Insurance Company $26,196.69 -100.00% UnitedHealthcare $9,706,568.00 $9,535,834.55 $14,655,978.00 53.69% 50.99% F or two out of the past three years, healthcare spending in Massachusetts has exceeded benchmarks put in place by the state. This year's growth was largely driven by an increase in spending on prescription drugs at the pharmacy. According to the state Center for Health Information and Analysis, growth in pharmacy spending account- ed for a third of the overall growth in total healthcare expenses for 2015, grow- ing 10.2 percent to $8.1 billion that year alone. While prescription drug spending grew at a slower rate than it did in 2014 (13.5 percent), it still represents substan- tial growth, according to CHIA. Massachusetts health insurers argue that drug companies and the pharmaceu- tical industry as a whole have to be more transparent, but the pharmaceutical industry says a large portion of profits from drug sales go back into spending on research and development for potentially life-saving therapies – and that the cur- rent insurance model isn't equipped to keep up with scientific advances. "The true cost of innovative medi- cines and cures cannot be calculated in a vacuum," said Robert Coughlin, presi- dent and CEO of the Massachusetts Biotechnology Council, an industry advocacy organization. "Biotechnology has revolutionized the delivery of health- care and has meaningful impact on both patient well-being and public health." Trying to rein in prices Drug pricing was one of the topics discussed at the Massachusetts Health Policy Commission's annual Health Care Cost Trends hearing in mid-October at Suffolk University Law School in Boston. According to the State House News Service, health insurance executives and policymakers, including Harvard Pilgrim Health Care President and CEO Eric Schultz, said they were concerned about the mounting costs of prescription drugs and called on the biotechnology industry to rein in their prices. In early October, Attorney General Maura Healey's office released a report concluding despite efforts to slow phar- maceutical spending, drug costs contin- ue to rise, even when manufacturer rebates are taken into consideration. The report found spending on specialty drugs, which treat chronic and complex conditions, was the primary driver behind pharmacy spending. Specialty drugs account for less than 1 percent of all private insurance prescrip- tions written nationally, according to Healey's office, but they account for over 30 percent of prescription drug spending. The study recommended reporting requirements for drug rebates in order to understand actual prescription drug spending. It also recommended continu- ing to foster competitive business envi- ronments – including the availability of generic and biosimilar drugs – and a greater focus on the comparative value of different drugs. Making generic and biosimilar drugs more readily available is also one of the solutions that has been put forward by the pharmaceutical industry. Greater competition between companies making U.S. Food & Drug Administration approved biosimilars will help lower costs over time, Coughlin said. "If only one company is making a drug, and no other generic companies have FDA approval to improve it, [prices will be high]," he said. "We need to fund the FDA so it can create more competition." Understanding the reason behind the prices Insurers, on the other hand, are calling for increased transparency. If a large por- tion of drug sales go back into further research and development at drug com- panies – as biotechs claim – that needs to be accounted for, said Eric Linzer, senior vice president for public affairs and oper- ations at the Massachusetts Association of Health Plans. Insurers reported exponential increas- es in pharmacy spending even over a one-year period, according to CHIA data. Aetna, Inc. reported a 61.9-percent increase in pharmacy spending between 2014 and 2015, and Blue Cross Blue Shield of Massachusetts reported a 64.2-percent increase. "One of the issues we've been pushing for in the last couple of years is greater transparency. What's the justification, and how are these prices being devel- oped?" Linzer said. "If the expectation is that prices are intended to fund further research and development, there should be a way to verify that." On the federal level, Senators John McCain (R-AZ) and Tammy Baldwin (D-WI), and U.S. Representative Jan Schakowsky (D-IL) last month proposed federal legislation requiring drug manu- facturers to disclose information about scheduled drug price increases, includ- ing factors influencing research and development costs. Companies looking to increase the pric- es of certain drugs by more than 10 per- cent would have to submit a transparency and justification report 30 days before the scheduled increase to the U.S. Department of Health and Human Services. Price increases would not be banned, but this would be a step towards bringing transparency to the prescription drug market, according to Baldwin's office. Coughlin said the insurance model, as it's currently structured, isn't designed to keep up with the level of productivity of the biotechnology sector. "Our current system – where insurers project and prepare on very short-term horizons – cannot accurately measure the longer-term benefits of innovative therapies, including costs avoided through decreased hospitalizations or the societal benefits of increased pro- ductivity," he said. As drug prices skyrocket, insurers call for transparency A report from Attorney General Maura Healey's office found while efforts have been made to control pharmaceutical spending, drug costs continue to rise, even when taking manufacturer rebates into account. BY LAURA FINALDI Worcester Business Journal Staff Writer W

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