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Value-Based Medicine: Dollars and Sense

Erstad, Brian L. PharmD, MCCM, BCPS

doi: 10.1097/CCM.0000000000001559
Plenary Articles

The current approval process for new medications and high-risk devices in the United States is based primarily on efficacy and safety considerations (ie, benefits must outweigh risks) (1, 2). There is no mandate that cost considerations be a part of this approval process. However, as healthcare costs continue to escalate, there is increasing scrutiny of new technologies and therapeutics, particularly by payers that finance the costs of these scientific advances. Questions are being raised about the relative worth or value of many of these purported advances. This article discusses external drivers of value-based medicine, the impact of pharmaceutical costs on medical expenditures, and the role of critical care pharmacists in enhancing value-based medicine. The overall theme will be that all things dollars must make sense as opposed to a singular focus on dollar reductions or savings. Admittedly, the paper primarily is written from a U.S. healthcare worker perspective given that I am a pharmacist with approximately 40 years of practice experience in the United States. Possibly because of this perspective, I may at times seem hypercritical of the U.S. healthcare system compared with systems in other countries; but to be fair, there are aspects of the U.S. system such as access to innovative medications and new technologies, access to specialty care, as well as general satisfaction with care (versus countries with more governmental control), which are appreciated by its citizens (3).

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DEFINITION OF VALUE-BASED MEDICINE

A simple definition of value-based medicine is health outcomes achieved per dollar spent, but additional considerations are warranted to determine if value is being provided to our critically ill patients. These considerations have been elucidated and include the following: value is not synonymous with cost savings; outcomes should be multidimensional and be defined by context of the patient; cost determinations should include all costs and some costs may increase in order for others to decrease; and value is best considered on a long-term basis (4). The ability of most hospital and healthcare systems to assess (let alone achieve) positive multidimensional long-term outcomes in conjunction with lower overall costs is far from optimal.

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EXTERNAL DRIVERS OF VALUE-BASED MEDICINE

Health Care Costs

While value is not synonymous with low cost, clearly costs of providing health care cannot be ignored. In 2013, healthcare expenditures in the United States as a percentage of gross domestic product (GDP) was 16.4%, which is substantially higher than the expenditures listed for all other countries monitored by the Organization for Economic Co-Operation and Development (OEDC) including Canada (10.2%), France (10.9%), Germany (11%), Japan (10.2%), The Netherlands (11.1%), New Zealand (9.5%), and the United Kingdom (8.5%) (5). Healthcare expenditures continue to increase and will likely surpass $3 trillion for 2015 in the United States, which is approximately 1 out of every 6 dollars of GDP (6). Additionally, it is projected that U.S. healthcare spending will increase on average of 5.8% from 2014 to 2024, but increases in the GDP are expected to average only 4.7% (7). The potential profit associated with the provision of healthcare-related products has clearly been noticed by the private sector. In 2013, almost one half of Fortune 50 companies on the Fortune 500 list were technology and telecommunications companies that were new to the healthcare market (6). With respect to medications, there has been a shift from pharmaceuticals to novel biotechnology products that are more expensive to produce (estimated average of at least $1 billion/product) with volatile, but potentially large, returns on investment. Unfortunately, substantial investments by both government and the private sector in the healthcare arena do not necessarily correlate with high-quality, high-value care for the majority of its citizens. Despite being the most expensive healthcare system (total and per capita) in the world, in a report published in 2014 the U.S. system was ranked last overall in performance of 11 developed nations based on categories of effective, safe, coordinated, and patient-centered care (Fig. 1) (8). Key drivers of this cost differential in the United States include the cost of the healthcare infrastructure, or the cost of doing healthcare business, and perverse incentives that encourage expensive and often inappropriate or unnecessary care delivery.

Figure 1

Figure 1

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Changing Organization of U.S. Healthcare System

Attempts to control costs through healthcare reform have had substantial financial implications for hospitals, healthcare systems, and academic medical centers. Regarding the latter, one columnist stated, “With healthcare reform dramatically shifting how hospitals operate, many industry experts believe the academic titans could become dinosaurs if they don’t quickly adapt to today’s economic realities” (9). While academic medical centers comprise less than 5% of all hospitals and healthcare systems, they provide a disproportionate share of costly services such as charity care, community service, and specialty care (10). The implications of the increasing costs of running academic medical centers recently had personal significance for the practitioners in our healthcare system when in 2014, the Arizona Board of Regents authorized the University of Arizona to enter into negotiations with Banner Health, in coordination with the University of Arizona Health Network. Banner Health operates 29 hospitals and a number of other health facilities in seven states making it one of the largest nonprofit healthcare systems in the United States (11). In the agreement, Banner Health acquired our academic medical center (two local university campuses), a faculty practice plan, and other health plans previously controlled by the University of Arizona health networks and physicians (12). When the agreement went into effect in 2015, all employees, including pharmacists and nurses of the university medical center and a substantial number of its clinical physician faculty, instantly became Banner employees. Details of this historic agreement are complex and are an ongoing source of discussion that and raise issues (eg, accreditation of student and resident programs) beyond the anxiety felt by some of the healthcare personnel employed by Banner or the University (including the clinical pharmacy faculty in the Department of Pharmacy Practice & Science, which I head).

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Market Consolidation

As part of other attempts to control costs, healthcare organizations in the United States are increasingly becoming consolidated and integrated as evidenced by the influx of accountable care organizations (ACO) or Clinically Integrated Organizations (CIO). In these organizations, providers and healthcare systems coordinate in an attempt to give high-quality care to patients. In ACO/CIO healthcare delivery systems, provider (i.e., Medicare) reimbursements for care delivery are directly tied to metrics for quality and reductions in cost. These ACOs and CIOs assume more financial risk in contrast to the traditional service model fee. Strictly speaking, reimbursement standards for ACOs are set by Medicare, while reimbursement for CIOs may be provided by a number of private payer groups in addition to Medicare and Medicaid. It is estimated that large integrated systems such Kaiser Permanente and smaller systems such as Geisinger Health System currently cover 10% of the U.S. population (13).

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IMPACT OF PHARMACEUTICAL COSTS ON MEDICAL EXPENDITURES

According to data from the OECD, the expenditure on pharmaceuticals and other medical non-durables as a percentage of current expenditures on healthcare averages 16.6% (5). At 11.9%, the United States does not top the list of countries using the latter metric (although this changes when evaluated on a per capita basis). Nevertheless, the World Health Organization has found clear evidence of disparities related to medication expenditures as evidenced by the fact that 16% of the world’s population in higher-income countries account for 78% of global medication expenditures (Fig. 2) (14). It is hard to believe that these disparities will abate, especially in light of the shift from small molecule medications to biologic products that are more costly to bring to market and are more difficult to substitute with generic versions defined by terms such as “interchangeable” or “biosimilar.” Despite the fact that the top four payers (i.e., pharmacy benefit managers) in the United States control approximately 80% of prescriptions (15), it is difficult to negotiate medication cost in a “free market system” when the cost is set by the manufacturer in the absence of competitor products.

Figure 2

Figure 2

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Biologics

Until recently, small molecule medications dominated the market with clear-cut criteria for the approval of generic versions based on legislation such as the Hatch-Waxman Act of 1984. Generic currently comprises approximately 80% of prescriptions in the United States and this may explain why pharmaceutical relative to total healthcare expenditures are lower in the United States compared with many European and other industrialized countries (16). However, this pharmaceutical to total healthcare expenditure ratio for many countries is likely to change as biologic products gain an increasing portion of the global market as defined by “blockbuster” prescription sales in excess of $1 billion/year—using this definition, biologics accounted for 38% of the market in 2013 (17).

Relatively few of the biologics marketed to date are commonly used in the ICU setting, but this is likely to change in the near future with the increasing focus on development of these products. The approval, clinical use, and subsequent removal from the market of recombinant human activated protein C (drotrecogin alfa activated or Xigris) will likely temper some of the enthusiasm by critical care clinicians for newly introduced biologics purported to reduce morbidity and mortality of patients in the ICU setting. Based on the results of one randomized controlled trial, drotrecogin alfa was approved in 2001 by the U.S. Food and Drug Administration (FDA) for the treatment of patients with severe sepsis. While the estimated cost-per-course of therapy (96-hr infusion) was approximately $100 per kg of actual body weight or $8,000 for an 80 kg patient, the cost was considered to be justified in appropriately selected patients as a result of the potential reductions in overall mortality and costs associated with its use. The clinical use of drotrecogin alfa increased in conjunction with an increased awareness of the burden of severe sepsis and with recommendations in clinical practice guidelines. Post-approval studies began to raise efficacy and toxicity concerns, which eventually resulted in withdrawal of the agent from the market.

Attempts have been made to control the costs of biologics through legislation similar to the Hatch-Waxman Act that allow for versions of equivalent products known as biosimilars. The primary example in the United States is the Biologics Price Competition and Innovation Act that was passed as part of the Affordable Care Act. Regrettably, although several guidance documents concerning the Biologics Act have been distributed by the FDA, binding legislation containing the necessary details for substitution is not yet available. Such legislation can be created and effectively utilized as demonstrated by the successes of the European Union with respect to the approval of more than 15 biosimilars, to date (18).

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Drug Shortages and Generic Medications

The previous discussion largely dealt with external factors that have profound implications for the delivery and quality of patient care, but usually do not directly impact critical care practitioners on a day-to-day basis. This is not the case with medication shortages that have the potential to negatively influence patient outcomes as well as cost. Ironically, the generic medications that have fostered savings in terms of overall healthcare expenditures are also prone to shortages, particularly the intravenous generic medications used in the ICU setting. There were 120 medication shortages in 2001 and 185 in 2014 with troughs and valleys in the intervening years (19). These medications included basic staples of critical care practice such as analgesics and sedatives, vasoactive agents, anticoagulants, antimicrobials, fluids, and electrolytes. Some examples of serious adverse events associated with medication shortages have been compiled by the Institute for Safe Medication Practices are listed in Table 1 (20).

TABLE 1

TABLE 1

The introduction of generic medications has resulted in billions of dollars of savings to the U.S. healthcare system (21), but the use of generic medications in the ICU setting has the potential to influence drug costs in negative, often unexpected ways. In many cases, the introduction of generic medications leads companies to discontinue the original trade name products as profit margins decrease. When this results in a generic medication manufactured by a single company, the medication is not only prone to shortage but also to price inflation. Examples of price inflation of generic medications (often associated with shortages) that occurred at our academic medical center in 2014 are listed in Table 2. For most of the medications, there was no relatively equivalent option, but there was at least one exception to this generalization. In the case of nitroprusside, there was a newer and generally preferred alternative (ie,. nicardipine) for most uses, particularly in patients with substantial renal or hepatic dysfunction. Unless cost information was readily available and utilized by the prescribing clinician, a reasonable assumption by the clinician would have been that the newer medication was more costly. In reality, at least at one point during 2014, the newer alternative was one-sixth the cost of the older agent. Fluctuations of medication costs throughout any given year further complicate medication choice based on cost when competing alternatives are considered to be roughly equivalent for any given indication.

TABLE 2

TABLE 2

On a positive note, the FDA has taken action to mitigate the effects of medication shortages, and over a longer time frame, to prevent shortages by evaluating their root causes, but the FDA specifically points out that it cannot directly affect business or economic aspects associated with medication shortages. Some of the actions that are available to the FDA to address shortages are listed in Table 3 (22).

TABLE 3

TABLE 3

The FDA claims that its actions have prevented approximately 200 shortages in 2011 and more than 280 shortages in 2012. These actions were at least partially the result of the FDA Safety and Innovation Act signed by President Obama in 2012, which authorized the FDA to develop a task force relating to medication shortages and a strategic plan for preventing and mitigating shortages (23). This was the same act that provided the break through therapy designation for investigational medications in order to expedite the approval process for medications targeted at serious illness (24). In addition to these actions taken at the national level relative to medication shortages, there are actions that can be taken at the local level that are based on the principles of emergency preparedness: mitigation; preparedness (e.g., creative purchasing arrangements, stockpiling, electronic alerts); response (incident management system); and recovery (not only item replacement, but possible changes based on lessons learned) (25). The Society of Critical Care Medicine is also trying to help institutions and practitioners deal with critical care medication shortages via its Drug Shortage Committee.

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Assessing the Value of Expensive Medications

The field of health outcomes research, or pharmacoeconomics when referring specifically to pharmaceuticals, has the potential to provide at least partial solutions to some of the difficult economic challenges discussed in this article. Pharmacoeconomic research identifies, measures, and compares the costs (i.e., resources consumed) and consequences (i.e., outcomes) of pharmaceutical products and services. One of the goals of pharmacoeconomics is to ensure that every resource expended generates the maximum benefit in terms of patient outcomes. This is accomplished through evaluation of economic and humanistic (functional status and quality of life measurements) outcomes in addition to the usual clinical outcome measures. Types of pharmaceconomic analyses include cost minimization, cost benefit, cost consequence, cost effectiveness, and cost utility. In general, cost effectiveness and cost utility studies are most appropriate for helping to assess the value of various interventions in the ICU setting because these studies are able to express cost relative to clinical important endpoints such as reductions in morbidity or mortality, or in the case of cost utility analysis, quality-adjusted life years.

In contrast to clinical trials that evaluate efficacy or safety hypotheses under carefully controlled conditions, pharmacoeconomic studies evaluate effectiveness or real life outcomes. Analogous to statistical testing for significance in clinical trials, pharmacoeconomic studies typically include decision tree and sensitivity analyses. However, there are some caveats associated with the use of pharmacoeconomic evaluations in the clinical setting. First, pharmacoeconomics is a tool to augment decision making, not a “decision maker.” An increased (more favorable) incremental cost effectiveness ratio is not synonymous with value. The optimal threshold cost for a new medication using the metric of effectiveness known as quality-adjusted-life years likely varies depending on the perspective and there are many possible perspectives such as societal, payer, patient, or in the case of many critically ill patients who are incapable of informed decision making, a surrogate. Second, pharmacoeconomics is intended to complement evidence-based medical decisions, not replace them. While a more in-depth discussion of economic evaluations is beyond the scope of this article, other published resources are available (26).

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ROLE OF CRITICAL CARE PHARMACISTS IN ENHANCING VALUE-BASED MEDICINE

As a pharmacist with a particular interest in patient safety and outcomes, much of my service, teaching, and research efforts have been with regard to the optimal, cost-effective use of medications. There are no reliable national or international estimates of the costs (not to mention the pain and suffering) associated with medication errors and adverse drug events in critically ill patients, but in 2006 the Institute of Medicine estimated the cost of preventable adverse drug events in hospitalized patients in the United States to be at least $3.5 billion (27). The total of direct and indirect costs associated with suboptimal medication management (in addition to the basic medication costs described above) would be a staggering figure if considered on an international basis. Critical care pharmacists play an important role on the interprofessional critical care team by helping to ensure optimal use of medications necessary for value-based care.

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Pharmacists as Part of the Interprofessional Team

Critical care pharmacists are medication experts and are used to dealing with issues such as cost and shortages related to the medication use process, but the majority of ICUs worldwide do not have consistent full-time coverage of pharmacists. In a recent study of international ICU mortality, ICU pharmacists provided were “available” 24 hours-a-day in less than 40% of evaluated centers with relatively little variation between lower and higher income centers (37.1% vs. 39.2%, respectively) (28). As in medicine, there is increased credentialing of pharmacists and 2015 marked the first year when critical care pharmacists were eligible to sit for a rigorous certification examination pertaining to critical care pharmacotherapy offered by the Board of Pharmacy Specialties (BPS). Based on the Society of Critical Care Medicine and American College of Clinical Pharmacy Task Force on Critical Care Pharmacy Services categories of fundamental, desirable, and optimal levels of critical care pharmacy services, board certification of critical care pharmacists was determined to be one of the credentials necessary for defining desirable and optimal levels of care (29). Critical care practitioners will soon begin to see the acronym BCCCP, which stands for a Board Certified Critical Care Pharmacist, appearing after the names of their critical care pharmacist colleagues. This certification is one more credential that should help to ensure the critical care pharmacists’ interdisciplinary colleagues, hospital administrators, and ultimately the public, that they have the advanced practice skills necessary to add value to the care being provided to patients in the critical care setting.

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SUMMARY

With ever-increasing total healthcare expenditures and expenditures on new pharmaceuticals, there is a temptation to enact relatively simple silo-based, cost-control measures such as attempts to control a burgeoning health-system medication budget by limiting physician and ultimately patient access to medications without considering cost-effectiveness or overall value. Such an approach with a singular focus on dollars does not make sense. The challenge is to think beyond a pure dollars approach in a specialty of health care where the high cost of care is acknowledged but the dynamics are not always understood. This will take a thoughtful, coordinated effort by a team of dedicated health professionals that includes a clinical pharmacist with expertise in optimal and comprehensive medication management.

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REFERENCES

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      Keywords:

      value based; quality; patient safety; healthcare costs

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