Auditing the prescription drug consumer price index in a changing marketplace.

Changes in the dynamics of prescription drug markets have raised issues regarding whether the United States Bureau of Labor Statistics' (BLS') Prescription Drug Consumer Price Index (CPI-Rx) has adequately kept up with the evolving marketplace. The CPI-Rx limits its sampling frame to retail outpatient outlets and excludes prescription pharmaceuticals dispensed in non-retail settings such as hospitals, physician/clinic outpatient facilities, and nursing homes. Thus, the CPI-Rx overlooks the increasingly important specialty pharmaceuticals dispensed in non-retail settings, whose transactions are instead captured in the overall hospital and professional services component of the medical care CPI. Specialty drugs now account for about 55% of all U.S. drug spending, double the share of a decade earlier. To the extent specialty drug price growth differs from that of traditional pharmaceuticals, the CPI-Rx could provide an inaccurate measure of overall drug price inflation. We calculate a chained Laspeyres CPI using data from the Merative™ MarketScan® Databases for the years 2010-2019 and IQVIA-designated specialty drugs and offer evidence showing that by not sampling specialty drugs in non-retail settings, the CPI-Rx has understated overall U.S. prescription drug inflation by just under 75 basis points annually. We discuss implications for health care policy and suggest the BLS examine the feasibility of publishing an overall pharmaceutical price index incorporating both traditional and specialty pharmaceuticals dispensed in retail and non-retail settings.

Biosimilar competition: Early learning.

Biologics accounted for roughly $145 billion in spending in 2018. They are also the fastest growing segment of the pharmaceutical industry. The Biological Price Competition and Innovation Act (BPCIA) of 2010 created an abbreviated pathway for biosimilar products to promote price competition in the market for biological drugs. There was great anticipation that the BPCIA would lead to a moderation in drug prices driven by market competition. The observed levels of competition and the accompanying savings have not reached those expected levels. We investigate the early impacts of biosimilar competition on the use and pricing of biological products. We focus especially on the ways in which altered market structures stemming from the implementation of the BPCIA have affected the prices for biological products subject to biosimilar competition. We do so by studying seven products that have recently faced biosimilar competition. We estimate fixed effects and Instrumental Variables models to estimate the impact of market competition on prices. Our results indicate that in the range of one to three entrants each additional marketed product results in a reduction in weighted average market prices of between 5.4% and 7% points. These are the result of a combination of reductions in originator prices and shifting in demand to biosimilar products.

The Evolution of Supply and Demand in Markets for Generic Drugs.

Policy Points Much concern about generic drug markets has emerged in recent policy debates. Important changes in regulations, the structure of purchasing, and the length of the drug supply chain have affected generic drug markets. Effective price competition remains the rule in generic markets for large-selling drugs. Smaller markets and those for injectable products often have less price competition and are more susceptible to supply disruptions. CONTEXT: The image of generic drugs as a commodity sold in competitive markets is an oversimplification, as evidenced by increasing accounts of price spikes, sustained high price-cost margins, and market disruptions. The mismatch between the canonical economic model of generic drug markets and reality motivated our empirical project. METHODS: To explore recent changes in those factors impacting the supply and demand for generic drugs, we studied, from a variety of sources, the data on price, competition, supply disruptions and recalls, changes to the supply chain, and buy-side concentration. We examined quarterly data through 2018 for a cohort of 77 molecules that lost patent protection during the so-called patent cliff between 2010 and 2013. FINDINGS: On the supply side, we found that for large-market oral solids, generic entry and price declines were consistent with past studies showing a significant number of market entrants and substantial reductions in the average price of a molecule. In smaller markets for oral solids and injectable products, we observed fewer entrants, higher rates of exit, smaller price reductions, and, in some cases, considerable price instability. The number of reported shortages increased across all generic market types over time, with the rate of shortage increases especially pronounced in markets for injectable products. The number of product recalls also rose over our study period. Although we did not estimate causal effects, we did find several changes in the market environment for generic drugs that may contribute to these phenomena. The demand side for generics has become more concentrated. Supply chains rely more on producers outside the United States (particularly from China and India). Contracting practices have undergone changes that may inhibit competition in product supply. FDA regulatory scruitiny has increased. CONCLUSIONS: Competition in generic drug markets varies widely by market size and product form. Recent changes in demand-side market structure imply more downward pressure on prices stemming from buy-side concentration. The FDA's greater regulatory oversight puts upward pressure on costs, and the lengthening of the supply chain increases production uncertainty for producers. Demand and supply-side changes point to further market instabilities across all generic markets due to producers' changing economic position.

COMMENTARY: Medicaid Expansion and Mental Health Care and Coverage.

No abstract available.

Policy Responses to the Addiction Crisis.

The COVID-19 pandemic is just one of two public health crises the new Biden administration will confront. The addiction crisis is the other. The opioid epidemic has already killed more Americans than World Wars I and II combined. And it is but the most visible sign of a broader population health challenge that includes methamphetamine, cocaine, benzodiazepines, and alcohol. This article presents practical legislative and executive actions that are required for addressing these challenges. The authors focus on two broad policy challenges: (1) improving financing and delivery of treatment for substance use disorders, and (2) reducing population exposure to addictive and lethal substances. Through both of these channels, a portfolio of well-implemented, evidence-informed policies can save many thousands of lives every year.

Making Choice and Competition Work in Individual Insurance in Health Reform Proposals.

Issue: Republicans and Democrats agree on prioritizing choice in health insurance, but disagree on what it entails and how to achieve it. Choice and competition can create negative consequences, including adverse selection and consumer confusion. Goals: Examine the experiences of the Affordable Care Act's marketplaces and recommend ways policymakers can harness choice and competition to improve coverage, satisfaction, and affordability. Methods: Review of existing evidence. Key Findings: There are multiple areas where insurance design could promote efficient competition and consumer choice. Experiences with the ACA have shown that health insurance marketplaces should include an urban area with adjacent rural and suburban communities to promote competition among insurers. Other recommendations include allowing smaller insurance carriers to base medical loss ratio rates on past years' data; allowing insurers to bid against each other for contracts to serve a population; providing resources to allow consumers to make informed choices; and including features like essential health benefits to counteract adverse selection. Conclusion: Markets can deliver efficient premiums, access to care, and consumer satisfaction but only when they are carefully designed and actively managed through regulation.

Market Concentration and Potential Competition in Medicare Advantage.

Issue: Medicare Advantage (MA), the private option to traditional Medicare, now serves roughly 37 percent of beneficiaries. Congress intended MA plans to achieve efficiencies in the provision of health care that lead to savings for Medicare through managed competition among private health plans. Goal: Two elements are needed for savings to accrue: a sound payment policy and effective competition among the private plans. This brief examines the latter. Methods: We use data from 2009­17 to describe market structure in MA, including the insurers offering plans and enrollment in each U.S. county. We measure both actual and potential competitors for each county for each year. Key Findings and Conclusions: MA markets are highly concentrated and have become more concentrated since 2009. From 2009­17, 70 percent or more of enrollees were in highly concentrated markets, dominated by two or three insurers. Since the payment system used to reimburse insurers selling in the MA market relies on competition to spur efficiency and premiums that more closely reflect insurers' actual costs, these developments suggest that taxpayers and beneficiaries will overpay. We also find an average of six potential entrants into MA markets, which points to a source of competition that may be activated in MA. To tap into potential competition, further research is needed to understand the factors affecting entry into MA markets.

Economics and the Transformation of the Mental Health System.

Mental illnesses provide a difficult set of challenges to American health and social institutions. Those challenges have been a continuous concern of David Mechanic's over the course of his career. In this article we trace the development of modern economic and organizational structures that drive the delivery of mental health care in the early part of the twenty-first century. We show how the nature of mental disorders themselves and the treatment for addressing those illnesses pose fundamental difficulties to health care organizational and financing structures. We analyze the factors that have caused the dramatic changes in how American society has addressed mental illnesses over the past fifty years. Specifically, we note the central influence that mainstream health, income support, and disability programs have had in shaping mental health care. We argue that the interaction of the unique features of mental illnesses and changes in mainstream health and social policy led mental health care to evolve so differently from general medical care.

Thirty-Day Hospital Readmission for Medicaid Enrollees with Schizophrenia: The Role of Local Health Care Systems.

BACKGROUND: Examining health care system characteristics possibly associated with 30-day readmission may reveal opportunities to improve healthcare quality as well as reduce costs. AIMS OF THE STUDY: Examine the relationship between 30-day mental health readmission for persons with schizophrenia and county-level community treatment characteristics. METHODS: Observational study of 18 state Medicaid programs (N=274 counties, representing 103,967 enrollees with schizophrenia 28,083 of whom received more than 1 mental health hospitalization) using Medicaid administrative and United States Area Health Resource File data from 2005. Medicaid is a federal-state program and major health insurance provider for low income and disabled individuals, and the predominant provider of insurance for individuals with schizophrenia. The Area Health Resource File provides county-level estimates of providers. We first fit a regression model examining the relationship between 30-day mental health readmission and enrollee characteristics (e.g., demographics, substance use disorder [SUD], and general medical comorbidity) from which we created a county-level demographic and comorbidity case-mix adjuster. The case-mix adjuster was included in a second regression model examining the relationship between 30-day readmission and county-level factors: (i) quality (antipsychotic/visit continuity, post-hospital follow-up); (ii) mental health hospitalization (length of stay, admission rates); and (iii) treatment capacity (e.g., population-based estimates of outpatient providers/clinics). We calculated predicted probabilities of readmission for significant patient and county-level variables. RESULTS: Higher county rates of mental health visits within 7-days post-hospitalization were associated with lower readmission probabilities (e.g., county rates of 7-day follow up of 55% versus 85%, readmission predicted probability (PP) [95%CI]=16.1% [15.8%-16.4%] versus 13.3% [12.9%-13.6%]). In contrast, higher county rates of mental health hospitalization were associated with higher readmission probabilities (e.g., country admission rates 10% versus 30%, readmission predicted probability=11.3% [11.0%-11.6%] versus 16.7% [16.4%-17.0%]). Although not our primary focus, enrollee comorbidity was associated with higher predicted probability of 30-day mental health readmission: PP [95%CI] for enrollees with SUD=23.9% [21.5%-26.3%] versus 14.7% [13.9%-15.4%] for those without; PP [95% CI] for those with=three chronic medical conditions=25.1% [22.1%-28.2%] versus none=17.7% [16.3%-19.1]. DISCUSSION: County rates of hospitalization and 7-day follow-up post hospital discharge were associated with readmission, along with patient SUD and general medical comorbidity. This observational design limits causal inference and utilization patterns may have changed since 2005. However, overall funding for U.S. Medicaid programs remained constant since 2005, reducing the likelihood significant changes. Last, our inability to identify community capacity variables associated with readmission may reflect imprecision of some variables as measured in the Area Health Resource File. IMPLICATIONS FOR HEALTH CARE PROVISION AND USE AND FOR HEALTH POLICIES: Healthcare policy and programming to reduce 30-day mental health readmissions should focus on county-level factors that contribute to hospitalization in general and improving transitions to community care, as well as patient comorbidity. IMPLICATIONS FOR FURTHER RESEARCH: Given the likely importance of local care systems, to reduce readmission future research is needed to refine community-level capacity variables that are associated with reduced readmissions; and to evaluate models of care coordination in this population.