As was noted last year, crystal ball gazing is a perilous activity in this unpredictable world of ours. No-one can say with any degree of certainty how international conflicts will unfold, what will happen politically, and whether the economy will plunge into recession.
Generally, as a social science, economics has poor predictive power. And, economists have the usual suspects to blame; exogenous shocks to economic systems and irrational behavior.
But, 2020 is here. And, inevitably questions crop up about what health economists predict will happen in 2020; with prescription drug prices, the overall healthcare market, and the political realm which invariably has influence on all things healthcare.
On drug prices, a wait-and-see approach is warranted as there’s been far more chatter than action in 2019. Even though H.R. 3, or the Elijah E. Cummings Lower Drug Costs Now Act, was passed in the House, the likelihood of this far-reaching legislation getting the Senate’s approval is very slim. And, despite all the talk in 2018 and 2019 about restructuring the system of pharmacy benefit manager (PBM) rebates, which in turn would impact pricing and reimbursement of pharmaceuticals, nothing material was done by government to change the system.
While I expect the status quo to continue in 2020 regarding drug price reform, as the end of the year approaches there will be considerable uneasiness in the pharmaceutical and health insurance industries about imminent changes in 2021 and 2022.
One source of uneasiness may be passage of the Prescription Drug Pricing Reduction Act (PDPRA). For those who hope for action on the drug pricing front it’s a consolation prize of sorts, as one of its key provisions is capping drug prices at inflation. Many of the bill’s core components, including the inflation cap on pricing, are slated to go into effect in 2022. But, one feature, which is intended to reform the average sale price plus 6% reimbursement of physician-administered drugs (Medicare Part B), is scheduled to begin on January 1, 2021: Namely, a maximum add-on (the 6% portion of reimbursement) payment of $1,000 per drug, biologic, or biosimilar, in order to mitigate the financial incentive for physicians to prescribe higher-priced Part B drugs.
Also, regarding Medicare Part B, the Department of Health and Human Services controversial demonstration project looks set for November 2020 implementation. It has the potential to fundamentally reform the way Part B prices are determined – by introducing international reference pricing.
If the PDPRA passes, Medicare Part D plans and PBMs will be forced to be more proactive when it comes to managing costs in the catastrophic phase of Part D coverage, as the government will no longer pick up 80% of the tab as re-insurer of last resort. Rather, it will pay for 20% of catastrophic costs.
In addition, legislatively, there will be the usual tinkering around the edges that typically characterizes U.S. policy, with states taking on a key role. On drug price transparency, for example, more than 25 states now have laws requiring drug companies to provide information on the list prices of drugs and planned price increases. Several laws specifically focus on identifying drugs with price increases above 10% per year.
State legislators hope more transparency will enable them to take regulatory action, including the creation of drug affordability review boards, such as those established in Maine and Maryland in 2019. These boards can set upper payment limits or impose spending targets on drugs. Expect more states to follow suit with establishment of drug affordability review boards in 2020.
Continuing on the hot button issue of transparency, in relation to pricing and surprise billing, I anticipate continued state-level changes which may make hospitals begin to feel the heat. States have been well ahead of the curve on this issue. More than 25 states have passed legislation, with another 20 states considering proposals in 2020.
In spite of record numbers of biosimilar approvals in 2019, and more expected in 2020, the wrench that continues to impede uptake is an anti-competitive U.S. market that translates into stubborn legal delays, patent disputes, and exclusionary contracts for originator biologics, effectively locking out biosimilars in some instances. I anticipate federal legislative proposals, as well as regulatory initiatives, targeting rebate traps, patent thickets, and other anti-competitive tactics.
I predict a comfortable re-election victory for Trump. In spite of the President’s self-destructive tendencies, history tells us it’s very hard to dislodge an incumbent when the economy is doing reasonably well. The employment numbers, in particular, will boost the President’s chances.
I believe that structurally there are problems in the economy that will have negative repercussions down the road, beyond 2020. These include explosive growth in the federal budget deficit, a persistent and increasing trade imbalance coupled with a deteriorating manufacturing sector, aging and ailing infrastructure, decline in the rate of business investment, and an over-reliance on consumption as an engine of economic growth.
A stagnating economy could have negative implications for patient access to healthcare as the numbers of un- and underinsured continue to increase. This amalgam of factors will put further upward pressure on premiums for those who are insured. And, the spill-over effect on community hospitals’ solvency should not be underestimated.