Remarks of CMS Acting Administrator Andy Slavitt at the HHS Pharmaceutical Forum: Innovation, Access, Affordability and Better Health

The following are comments prepared for delivery by CMS Acting Administrator Andy Slavitt at the HHS Pharmaceutical Forum on Friday, November 20, 2015. The forum is bringing together consumers, providers, employers, manufacturers, health insurance issuers, representatives from state and federal government, and other stakeholders to share information and discuss ideas to increase access to information, drive innovation, strengthen incentives and promote competition. For more information on the forum, visit the forum’s website at http://www.hhs.gov/hhspharmaceuticalforum.

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Thank you all for being here today. We have leaders from patient groups, health plans, providers and manufacturers, and remarkably, everyone is here to come together around the same opportunity: to ensure Americans have and maintain access to life-changing and life-saving treatments. Through innovations in life sciences and genomics, we have unprecedented opportunity to cure and manage disease like never before. I thank you for your commitment to the discovery and development of these vital treatments, and also your growing cognizance of public concerns regarding the accessibility of these medicines.  Let me do my best to frame both the challenge and the opportunity and where I believe we most need your input into the challenges we are discussing today.

At CMS, we start this discussion the same place we start everything– with the 140 million beneficiaries and consumers we serve. Millions of our consumers – whether Medicare, Medicaid, CHIP or Marketplace — rely on prescription medications to manage chronic illnesses and treat acute conditions. The science and innovation engine that are creating the medicines of the future will be an instrumental component of the quality of life of today’s and tomorrow’s beneficiaries. But surveys also tell us that as costs go up, so does everyone’s anxiety about their continued access to their prescription medicine.  And because we all plan to use the Medicare program one day, it’s not just today’s beneficiaries, but all of us who have a stake in the long term accessibility of new therapies.
Today’s discussion is designed to begin a dialogue that allows everyone in this room and beyond to chart a path that continues to encourage scientific discovery and ensures those discoveries are accessible to those that need it. As we encourage the development of new generations of highly targeted, personalized therapies, we need strategies for ensuring access to these innovations.  It is in all of our interest to find ways to improve affordability and access for patients, support and increase innovation in the industry, and – most importantly – make people healthier.

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In 2014, CMS spent $140 billion on prescription drugs for seniors, the working poor, children, and FOR PEOPLE WITH DISABILITIES in the Medicare and Medicaid programs. This doesn’t include prescription drug spending for the Children’s Health Insurance Program and the Marketplaces, where monthly premiums are highly influenced by prescription drug costs.  Spending on medicines increased 13 percent in 2014, compared to 5 percent for health care spending growth overall, the highest rate of drug spending growth since 2001.

Drug costs are not just the states and federal government’s fastest growing cost, but through Part B and D premiums, co-insurance and deductibles, our beneficiaries pay 16 percent of the bill, making this a real kitchen table issue for working families and retirees. Per capita Part D costs increased by 11 percent in 2014, driven by increased spending on high cost drugs in the catastrophic phase of the benefit.

Given these costs, consumers’ access is already under threat. Surveys suggest that as many as 1 in 4 Americans cannot afford and, therefore, do not fill the prescriptions on which their health depends. State Medicaid agencies in some cases are in the difficult position of withholding vital therapies for people in need. The reality is cures and improvements in the quality of life are not available to everyone. Access isn’t a problem of the future – it’s a problem of today and evidence suggests that this trend of diminishing access will continue if we do not work together to find viable solutions.

One element of the challenge is specialty drugs, which are a small fraction of prescriptions but nearly a third of all costs, and growing very rapidly. These therapies are expensive to develop, and for every great cure, there are many failed investments; but we need discussions and solutions that allow us to bear the cost of development fairly and reasonably and not have it threaten access to the very people the drugs are developed for. Hepatitis C and the new drugs available to treat the disease shine a light on this issue. We have the potential to cure the disease however, tight state Medicaid budgets struggle to provide broad access to this cure.

Generic medications have been one element of this affordability strategy. Each year, the use of FDA-approved generics save the country $200 billion. However, in some instances, the prices of generics available for years have increased substantially without any additional health benefits for patients. This is a concern across the country, but particularly for consumers on fixed incomes. We need better insights and visibility as generic medication prices begin to grow.

So how do we make sure our beneficiaries have access to the best quality medications so we can keep them healthier? And how can we do this not only today but into the future – when more people are gaining coverage  by aging into Medicare or under expanded Medicaid – and the pipeline of high cost specialty drugs continues to grow?
I have had a number of conversations recently with innovative manufacturers, health plans, patients, and other stakeholders in this room and out of it, and I can report, as you’re hearing today, a great interest in finding a strategy which gives broader access to the innovations being created today and in the future. The right ideas will in turn create bigger markets for innovators and should serve to create a more predictable climate for investors to support the innovation we need. We shouldn’t have to choose between innovation and access. As a country we can work together to find strategies to achieve both.

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Understanding how to approach this challenge begins with an open dialogue, a shared set of facts and a search for the best ideas. Different interests may have different views but we believe there are a common set of objectives we are working towards.

We believe patients, manufacturers, providers, insurers and government all share a common goal to foster a health care system that leads in innovation, delivers affordable, high quality medicines, and results in healthier people with access to the care they need.

As we continue to engage with many of you, my hope is that we continue to hear real, practical ideas to maintaining innovation while finding ways to improve access.  We are particularly interested in continuing to hear your ideas across a few important domains.

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The first is the domain of value and value-based payments. Our scorecard for customers and taxpayers can be summed up by the word value.  As a purchaser, a logical question to start with is are we getting good value for the consumers and taxpayers dollar? Over the last year, we at CMS have moved strategically towards rewarding physicians, hospitals and other care providers who deliver better health care, spend our money more wisely and most importantly, keep people healthier. We have committed that within the next two years, paying through these alternative payment models will be the dominant way we reimburse for care. We’ve done this in close partnership with care providers, experimenting with new models, taking feedback, improving the models and publishing the results transparently.

And just as we pay for quality in care delivery, how should we create incentives which take the entire health and outcomes for an individual into account? How do we create rewards for therapies that reduce disease, keep people in their homes and out of hospitals or other institutions and control chronic diseases while improving outcomes? What’s the best way to pay for targeted therapies when they work for some patients, but not others? How do we think in terms of episodes of effective treatment, rather than just the cost of a pill? This dialogue on value we are having today presents an important opportunity to understand how to invest in innovation and improve access. We need to learn more.

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 The second domain is in information transparency and availability. We don’t have a common understanding of the data and know that drug costs are often unclear. There are list prices, wholesale prices, average wholesale prices, rebates, supplemental rebates, markups from hospitals, markups for physicians, different costs when a drug is administered outpatient than inpatient, formulary tiers, mail order prices, biosimilars prices and of course patent expirations, compounds, samples, and many other ways that end up obscuring the reality of the price paid, who pays it, and how all of it influences treatment decisions. And most of that information is not available or well-understood by the public, making it hard to have confidence that we have a truly functional and transparent market that delivers good value for patients.

The truth is we don’t have enough public information on the effectiveness of new drugs in the real world or about prices and rebate structures. As a result, anecdotes– whether about pervasive generic price increases or other things– draw significant attention.  And in order to avoid reacting to misinformation, we must increase the transparency of the information available about drug pricing and value.

How do we make public the information that will allow us to understand prices and value? How do we educate the public on the cost of these medicines, the value chain, the measures of effectiveness? How do we create visibility into price increase? How do we help the public have an informed debate over the size of Federal and State expenditures or the unit costs or patient value created? We want ideas on the best way to take steps to improve transparency.

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 The third domain is incentives and hurdles. We have to understand what has gotten us here in order to make progress. Are there rules and regulations across government getting in the way of affordability and access? What should we look at across CMS, other parts of HHS, or other areas that will allow us to improve affordability? What other hurdles are there? Also what incentives are inadvertently driving up costs? What could be changed about how incentives are created for physicians, hospitals, and pharmacies?

In each of these domains– value-based purchasing, transparency and barriers and incentives– and others, we are committed to taking in all ideas and working collaboratively. We know everyone won’t always agree on every step, but we plan to take these issues on transparently and with public input so we can move forward, learn and improve.  In an effort to work towards solutions that will address the challenges spoken about today and uphold our obligations, we ask everyone in the room to use this forum as a way to better understand the positive role we can all play in this process and consider how we all can contribute to constructive solutions over the coming years.

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I hope that today’s public dialogue kicks off a commitment to listening and working together to advance ideas that improve access, affordability and innovation so all Americans have access to the breakthroughs ahead. There are no easy answers to these multifaceted challenges, but there is a significant benefit – to all of us – of working together to find a solution. We want to work together to explore the best ideas, and we are committed to making progress as the public is relying on our ability to find solutions.

We look forward to working with you in the weeks and months ahead. Thank you.

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