The cost of medication has long been a topic of debate. One key question is whether, high-priced medications truly provide value by reducing the disease burden and offering financial benefits in the long run. This ‘return on investment’ concept becomes especially critical in value-based payment contracts, where the focus often shifts towards controlling short-term spending rather than addressing the root causes of health issues. The challenge, however, lies in creating a payment structure that acknowledges financial benefits that may not materialize within a single year, as the financial model is based on a yearly savings.
Take, for example, the current conversation around new anti-obesity medications. These drugs have significantly increased pharmacy benefit costs for insurers and risk-bearing entities. Despite strong economic data supporting their cost-saving potential in the right populations, these savings often don’t align with the timing of the incurred costs. In value-based payment models or medical expense ratio calculations, which measure the proportion of premium revenue spent on medical claims, the financial benefits may not be realized within the same year that the medication expenses are recorded. Similarly, statins, which reduce cardiovascular disease, demonstrate their value years after they are prescribed. If a 60-year-old starts taking a statin under their employer’s insurance its highly possible, Medicare—not the private insurer—will reap the financial benefits.
Instead of focusing on restricting the use of high-cost drugs that have demonstrated long-term value, we need to rethink our payment models. This requires a collaborative effort. Each stakeholder, including Medicare, insurers, employers, and individuals, has a role to play. Several questions arise: Should Medicare cover specific medications for individuals under 65 who are only eligible for Medicare pharmacy benefits? Should insurers carve out certain medications from medical expense ratios? Could employers fund a resource pool that provides coverage regardless of the insurer, given that employees often switch jobs? Should private insurance become portable? Should Medicaid and Medicare be merged into a single program? Could Medicare Advantage plans be offered to those under 65 at different price points, potentially covered by employers or individuals? These are questions that need collective consideration and resolution.
No matter the approach, the core issue is evaluating whether a drug offers value in terms of both quality and cost within specific clinical conditions. This evaluation must be precise and thorough. If a drug offers value, we must determine the most effective payment methodology for that drug. The shift needs to be from avoiding payments to instead, addressing the root problems of our payment models and the realities of the diseases we are treating. This is not just a matter of choice, but a pressing need. If we spent as much energy on tackling these issues as we do on finding creative ways to avoid payments, we could develop solutions that enable appropriate treatments supported by sustainable financial models.