Amick Study Guide Material Health Systems 1

who finances the majority of prescription drugs

third party payers

how do patients contribute to financing prescription drugs

1. cash purchases

2. deductibles

3. copayments

4. coinsurance

Direct patient payments have ________ over the last several decades and now represent about __________ of prescription drug exenditures

decreased, 10-15%

brand name prescription drugs are characterized by

1. high initial investment

2. relatively low marginal cost

developing a new drug typically requires

large initial investment

price discrimination occurs when

seller charges different prices to different buyers for the same product for reasons beyond differences in the cost of serving them

what are examples of things that can separate pharmaceutical markets

1. countries

2. insurance arrangements

3. purchasing channels

4. eligibility rules

what is the primary prerequisite for price discrimination

market segmentation

sustaining different prices also requires

limiting resale between those groups

why may groups accept different prices for the same product

1. different willingness to pay

2. difference in bargaining power

what is arbitrage

The practice of earning a profit by buying a good at a low price and reselling the good at a higher price.

what can erode price differences

arbitrage

what can help maintain market segmentation

1. legal

2. regulatory

3. contractual

4. logistical barriers

A seller charges $40 in market A and $100 in market B. If buyers can freely resell products from A into B at a lower price, sustaining the $100 price in market B becomes difficult. in this example, what represents market segmentation

Market A and B

A seller charges $40 in market A and $100 in market B. If buyers can freely resell products from A into B at a lower price, sustaining the $100 price in market B becomes difficult. in this example, what represents price discrimination

the difference in prices between A and B

A seller charges $40 in market A and $100 in market B. If buyers can freely resell products from A into B at a lower price, sustaining the $100 price in market B becomes difficult. in this example, what represents arbitrage

buyer purchasing from A and selling to B

what limits the entry of generic alternative to brand drugs

1. patents

2. regulatory exclusivities

a protected drug can still face competition from

different molecule treating the same condition

generic entry results in

lower prices

the magnitude of the discount when generic drug enter the market is generally correlate with

the number of generic manufacturers

how might a manufacturer justify a premium

1. improved efficacy

2. better safety

3. convenience

4. avoided downstream care

new treatments may improve health without

saving money

the first entrant into a drug class generally has an

influential role in establishing the value of therapies in that drug class

payer net claim cost =

total allowed pharmacy reimbursement - patient cost share - rebates passed to the payer

for most branded drugs, the federal medicaid basic rebate is the greater of what two options?

1. 23.1% of the average manufacturer price

2. average manufacturer price - best price

340B ceiling price =

AMP - medicaid unit rebate amount

eligible covered entities purchase at

discounted prices

a co-payment is a

fixed payment

a drug price increase may leave a patient's copayment

unchanged

how do payers respond to increased drug prices

1. changes in purchasing

2. formulary placement

3. coverage decisions

A rebate generally

reduces a payer's net cost without reducing the patient's payment

a manufacturer coupon generally

reduces a patient's cost sharing without lowering the plan's payment

on average, US brand name prescription drug prices are ________ than those in comparable high income countries

higher

on average, US generic name prescription drug prices are ________ than those in comparable high income countries

lower

what are two methods internationally that demonstrate formal assessment methods of added benefit or cost effectiveness with coverage and price negotiation

1. NICE in England

2. added benefit approach in Germany

the US lacks has value assessment and substantial pooled purchasing, but lacks

one uniform national process binding all purchasers

resources are ________ and have _______

limited, have alternative uses

opportunity cost is

the value of the best alternative forgone

a _________ plan that expands drug coverage must consider what else it could fund

fixed-budget plan, what else it could fund

clinical effectiveness does not

eliminate scarcity

shifting payment to someone else does not

eliminate the underlying resource use

what is the Fuchs framework

asks how to balance health against other social goals

what are different goals of the Fuchs framework

1. equality of access

2. spending

3. outcomes

targeting benefit design changes what

patient coverage or financial exposure

targeting price setting changes what

an allowed or negotiated drug price

targeting pharmacy reimbursement changes what

payment to the dispensing pharmacy

targeting broader provider payment changes what

how providers receive payment and bear responsibility

targeting manufacturer payment changes what

timing or risk structure beyond the conventional unit price

a lower copayment or out of pocket cap is an example of

benefit desgin

medicare MFPs or international reference pricing is an example of

price setting

an acquisition-cost benchmark plus a professional dispensing fee is an example of

pharmacy reimbursement

payment per service, performance incentives, or population payments are examples of

broader provider payment

an outcomes rebate, installment arrangement, or subscription are examples of

manufacturer payment

what are MFPs

1. maximum fair prices

2. negotiated under the inflation reduction act for selected drugs

what is MFN

1. most favored nation

2. prices using prices in other countries as reference points for US prices

What models fit the MFN policy family

1. GLOBE

2. GENEROUS

PBM reforms can require

1. transparency

2. reporting

3. audit rights

4. appeal proesses

_____________ policies directly address the minimum payment to pharmacies

reimbursement-floor

how is the reimbursement-floor set

NADAC plus a professional dispensing fee

what is NADAC

acquisition-cost benchmark that is formulated as the average invoice costs from a survey of pharmacies

what best describes the fee for service approach

1. pays for billable activity

2. can support needed services

3. rewards additional volume rather than outcomes directly

what best describes the pay for performance

1. change payment according to selected measures

2. value depends on measure quality, attribution, and whether rewarded activities improve care

what best describes population payment or sub-capitation

1. pays for a defined population and scope of responsibility

2. can support coordination

3. may create incentives to reduce services or avoid costly patients

outcome rebates depend on

achieving an agreed outcome

outcomes rebate does not guarantee

1. clinical success

2. refund after every individual failure

__________ spreads payment across time

installments or annuity

installments/annuity does not guarantee

1. lower total price

2. transfer of performance risk

_________ provides specified protection if agreed conditions occur

warranty

warranty does not guarantee

1. coverage of every failure

2. coverage of every downstream cost

___________ has less dependence on units sold

subscription/delinkage

subscription/delinkage does not guarantee

1. appropriate use

2. adequate supply without supporting contract terms

what is a good example of why sales volume may be a poor reward for innovation

novel antimicrobials

how can novel antimicrobials be rewarded while reducing dependence on high sales volume

delinkage