Health Highlights

As the Healthcare Landscape Shifts, Four Issues Are Critical to Build Effective Market Access Strategies

Author: Nancy McGee, Managing Director, Manatt Health Solutions

In this time of high growth and fast change for the healthcare industry, pharmaceutical, biotechnology and medical device manufacturers need to plan strategically for both reform and market-driven initiatives. As the healthcare landscape transforms, products both on the market and in the pipeline will be affected. By conducting alternative scenario planning and modeling possible initiatives, manufacturers can help ensure patients will continue to have access to their products, as new channels emerge and a new market takes shape.

Four Key Focus Areas for Pharmaceutical, Biotech and Device Manufacturers

To sustain success, pharmaceutical, biotechnology and medical device leaders not only need to understand the new trends and models re-inventing healthcare but also play a role in creating them. There are four key areas most critical to consider in building access plans and determining how to participate in a re-invented healthcare system:

  • The Growing Insured Patient Population. The main objective of the ACA is to increase access to health insurance. By eliminating pre-existing conditions as a reason to deny coverage or justify higher premiums, the ACA opens options to consumers who previously either were unable to obtain insurance or couldn’t afford it. While details of the state Exchanges are still emerging, we can already see that, although there may be similarities in Exchange approaches among states, there also can be significant variations. It will be important for manufacturers to be aware of local differences.

    States have chosen among three government Exchange models—state-based, federally facilitated and partnership—and are creating implementation approaches for communicating their plan options to new consumers. Encouraging new patient enrollments will help to expand the risk pools. For manufacturers to build effective market access strategies, they must understand how Exchanges are developing across geographies and the corresponding choices available to patients in each state. They also need to gain insight into how patients will select the plan that is right for them.
  • Growth of the Underinsured Population. Even with Exchanges in place, there will continue to be individuals who, although they technically have health insurance, are unable to access their benefits due to affordability issues. Sometimes referred to as the “functionally uninsured,” these patients have coverage but can’t afford the deductible or copay. As more individuals purchase health insurance, it is possible that we will see this underinsured segment grow—particularly for certain disease states. Manufacturers already play an important role in assisting underinsured patients. Moving forward, they will need to re-examine the payer mixes for their product portfolios to identify where coverage gaps might emerge and determine new ways they can support patients with affordability challenges. In addition, they will have to assess the influence the underinsured will have in the new market--and understand what that means for access strategies.
  • Integrated Payer and Provider Models.The goals of integrated models are to drive better health outcomes and improve care quality while managing costs. There are financial incentives for delivering cost-effective patient care. To ensure their brands are available to patients in integrated environments, it’s essential that manufacturers demonstrate both the clinical and the economic value of their products. They must understand the evolving definition of “value”—and ensure they create value stories that communicate their products’ ability to deliver both better health results and greater cost efficiency. This dual focus is critical to keeping access pathways open to patients who participate in integrated care models.
  • New Types of Caregivers and New Sites of Care. Challenges to physician reimbursement will continue in 2014. The percentage of medical school students choosing a career in primary care is declining. Fewer than 1 in 5 medical school graduates are now choosing primary care specialties, and the percent of PCPs in the U.S. has dropped from 50% (where it is in most countries) to less than 30%. Instead, today’s graduates are gravitating toward more lucrative specialties. As a result, the American Association of Medical Colleges projects a shortage of 45,000 primary care physicians by 2020. At the same time, there will be a 36% increase in the number of Americans over 65—the very segment with the greatest healthcare needs. Physicians are aging, as well, with almost a third planning to retire in the next decade, contributing to the shortfall. For new physicians, the high cost of medical education makes primary care a difficult choice, since PCPs earn less than other specialties.

    With health reform bringing an additional 32 million Americans into the system, there will be a pressing need to fill the care gap. As a result, the importance of physician assistants, nurse practitioners and pharmacists as care providers will grow. In addition, new sites for care delivery--from pharmacies to airports to schools--will continue to emerge. Manufacturers will need to create different types of access models for these new providers and sites.


When open enrollment begins in October, it will be a landmark event for healthcare delivery in the United States. The start of health reform implementation will signal the rise of new patients, providers, delivery models and sites of care. Manufacturers have the opportunity to take an active role in creating the new healthcare system. To maintain access for existing brands—and establish it for new ones--they will need to understand and adapt to the needs and demands of new delivery systems. Key to their success will be developing and communicating credible evidence that their products deliver both components of value—positive outcomes and cost effectiveness.

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Premium Rate Variations in Exchanges Is an Eye Opener

Authors: Joel Ario, Managing Director, Manatt Health Solutions; Adam Block, Manager, Manatt Health Solutions; Ian Spatz, Advisor, Manatt Health Solutions

NOTE: Manatt’s recent post on the Health Affairs Blog takes a detailed look at the dramatic rate differences in state-based Exchanges and the reasons behind them, including a table showing sample variations. A summary of the key points is below. You can access the full post by clicking here.

The 2014 premiums for state health insurance Exchanges represent nothing short of a referendum on the “affordable” in Affordable Care Act. As premiums are unveiled, however, one fact is instantly obvious. With the very big exception of California, the variance among plans is startling.

To understand the differences, we looked at rates for silver plans, the ones most closely watched, as they form the basis for computing premium subsidies. We also examined variations among the second-highest and second-lowest cost silver plans.

Focusing on four major US cities representing three different state-based marketplaces, we determined what a non-smoking 40- year-old would pay—and found wide swings in rates. For example, in New York City, premiums for the 40-year-old vary by more than 75%, a total of $292 per month. (New York State requires a full community rating, meaning everyone buying the plan pays the same premium, regardless of age.) In Baltimore, there is a 40% difference in premiums--$119 per month--between the second-highest and second-lowest cost silver plans.

The outlier is California, where premium rates show far less variance. For instance, in San Diego, the difference between the second-highest and second-lowest cost silver plan is just 6%--only $20 a month. In San Francisco, the difference is a mere 3%--a minimal $10 a month. (California requires all plans to offer a standard benefits package, which for silver plans includes a $2,000 deductible, $65 for specialist visits and $25 for generic drugs.)

Why Are We Seeing Such Dramatic Differences?

While it is not surprising that rates vary among states and regions within a large state, it is surprising to see the large variance of rates within the same regional market at the same metal level. All plans in the same metal level within a state are required to offer the same ten essential benefits and have the same actuarial value. They also must play by the same Minimum Loss Ratio rules that limit administrative costs and profits. So why do rates vary so dramatically? And why is California different? There are five key reasons:

  1. Plan actuaries are working in the dark. With the Exchanges, there are huge uncertainties around who is going to sign up and what their health history has been. As a result, actuaries must make more assumptions than usual to estimate prices, leading to the wide variations in results. Understanding the issue, insurance executives may prefer a range of pricing estimates, so they can make strategic decisions. As might be expected, some leaders have been conservative, some have taken on more risk, and some even have decided to set different prices in different areas, based on where they want to grow business.
  2. Plan members are loyal. Based on years of experience with private insurance, Medicare Advantage and Medicare Part D, insurers know that once people choose a plan they stick with it—whether due to satisfaction or inertia. This “stickiness” can make pricing below the expected cost a potentially smart strategy for year one. Plans could accept early losses to win a large number of new, loyal members—then raise rates in 2015, trusting many members will re-enroll.
  3. Plan sponsors are not all the same. Some plan sponsors are large players that already may have attractive contracts in place with providers they can build on to create Exchange plans. In contrast, new or small players may not have the same leverage. Medicaid MCOs bring a third dimension, with the option of using their Medicaid reimbursement rates—typically lower than commercial rates—to gain a competitive advantage in Exchanges. Overall, plan sponsors may charge different rates, because they have different costs for providing the same benefits.
  4. Plans are not all the same. While much may appear the same when comparing plans within the same metal level, there can be real differences that impact costs. For example, one plan may have a narrower provider network than another. (While the ACA has access requirements, it allows for offerings with limited networks that can be more closely managed for price and quality.) There also may be differences in prescription drug benefits among plans that impact cost, such as having fewer brand name medicines.
  5. Active purchasing works. There’s a good reason California is not seeing the same rate variations as other states. In contrast to the 34 states where the federal government will accept all insurers who meet minimal standards, Covered California negotiated rates with each insurer, with the implicit threat that the Exchange would exclude insurers not offering acceptable rates.


The rate variations are likely a positive sign for the future of the ACA. Plans with relatively high premiums may choose to lower their rates—or may find a niche offering premium products to a target segment of the population. Both outcomes indicate success for market-based competition.

Plans with lower premiums help balance the Exchange risk pool by attracting young, healthy lives. The improved risk pool can lead to better pricing in 2015, further enhancing the risk pool and leading to even better rates in 2016 and beyond.

As we saw with Medicare Part D, we expect plans with low premiums to attract the lion’s share of enrollment. If these plans can sustain low premiums, they will maintain their high share over time. Competitors will need to reduce premiums, exit the market or pursue strategies that let them maintain profitability in spite of low market shares.

If other states follow California’s lead and begin playing an active role in negotiating premiums, they will speed these market forces by eliminating rate outliers upfront. We will have to wait and see if this strategy will result in lower rates than allowing the market to operate on its own.

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Joel Ario Guests on BioCentury This Week, Examining Drug Access under the ACA

Joel Ario, Managing Director at Manatt Health Solutions, was a featured expert on the August 4th edition of BioCentury This Week, a weekly news show that airs on WUSA in Washington, D.C., Maryland and Virginia, as well as on PBS and CBS affiliates nationwide and on the internet globally. Joel opened the program—Heavy Metal: Drug Access under the ACA—with an overview of the state health insurance Exchanges created by the Affordable Care Act.

Joel calls the state Exchanges a “revolutionary” change for the millions of Americans who will be eligible to enroll beginning in October. He explains some of the key benefits Exchanges will bring, including greater ease, with questions about health status and pre-existing conditions now prohibited…increased affordability, with help now available to those making up to 400% of the Federal Poverty Level…and more choice, with consumers having hundreds of options.

Joel also discusses how the four “metal levels” in the new marketplace—platinum, gold, silver and bronze—help simplify consumer decisions by providing standardization. He goes on to clarify the tradeoffs people need to consider when selecting the right plan for their needs. The information he provides is the foundation for the segment that follows, exploring why—when it comes to drugs—picking a metal of choice will be more complicated than simply looking at premiums and copays.

When the Exchanges go into effect, each state will have different rules about the number of drugs available. In addition, some states will offer more than one drug plan for each coverage level. The discussion delves into the issues around access and choice that will accompany the roll out of health reform. To view the full program, click here.

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Register FREE Now for What to Expect from Exchanges: A New Webinar from Manatt and Bloomberg BNA (CLE Available)

Join Us September 19 from 1:00 – 2:30 p.m. ET—and Find out How One-Stop Shopping Will Shape Healthcare’s Future. (Enter Code LGAUSFC3 to Sign up Free.)

Exchanges will become the public face of the Affordable Care Act (ACA) when they open for business in 2014. The ultimate vision is to create an Amazon-like experience, leading to a health insurance system that is easier to navigate and more responsive to consumers’ needs. On our path to that goal, both public and private Exchanges are experimenting with a variety of approaches and models—and all of the healthcare stakeholders are re-thinking how they’ll operate in a changing environment.

In a new webinar, Manatt and Bloomberg BNA will guide you through the emerging Exchange marketplaces—and reveal how they are transforming health insurance and the broader patient care landscape. Register FREE now to:

  • Gain a full understanding of the Exchange marketplace, its regulations and requirements—as well as the responsibilities of relevant players.
  • Explore the models states are implementing and the range of different versions, from single payer to privatization.
  • Discover the roles the Exchanges will play in the healthcare system across key functions, from providing access to affordability programs to managing funds to monitoring QHP (Qualified Health Plan) performance to assisting consumers.
  • Learn the latest information on certification and enforcement issues.
  • Delve into the details of premium stability programs, including risk adjustment, reinsurance and risk corridors.
  • Examine how Exchanges will interact with other key players, including Medicaid and state insurance departments—as well as how public Exchanges may relate, both competitively and cooperatively, with private Exchanges in the market.

Don’t miss this chance to get a close-up look at the regulatory requirements defining Exchanges and how they are playing out in the real world. Our expert presenters include:

  • Joel Ario, Managing Director, Manatt Health Solutions
  • Melinda Dutton, Partner, Healthcare Industry, Manatt
  • Scott Falk, Executive Editor, Bloomberg BNA
  • Lisa Rockelli, Managing Editor, Bloomberg BNA

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Don’t Miss Fraud and Abuse 2013: A New Webinar from Manatt and BNA Bloomberg to Help You Map Trends, Strengthen Compliance and Avoid FCA Actions (CLE Available)

Join Us September 26 from 1:00 – 2:30 p.m. ET to Understand Today’s Complex Enforcement Environment--and How You Can Protect Your Organization. (Enter Code LGAUEBR3 for a 20% Discount.)

Heightened government scrutiny, driven by increasingly strict fraud and abuse provisions, has raised the bar—and the risks—for life sciences companies. In 2012, the Department of Justice recovered $4.96 billion under the False Claims Act—more than $3 billion from healthcare cases. Clearly, healthcare is under a microscope—and the attention is growing. The Department of Justice is reaching beyond the usual healthcare statutes to go after life sciences and healthcare companies in an expanding array of areas—from mail and wire fraud to obstruction—and using more aggressive techniques than ever before, including wiretaps and video recordings.

HHS also has new tools. It now uses predictive modeling to identify fraud and even more demanding Corporate Integrity Agreements. In addition, the Affordable Care Act (ACA) raises penalties up to six times loss or gain for False Claims Act violations in connection with an Exchange.

Fraud and Abuse 2013 helps you safely navigate today’s increasingly stringent and complex enforcement environment. In addition, it provides a guide to building and implementing effective compliance programs. You will gain insight into your most critical questions, including:

  • What emerging regulations and trends are critical for life sciences and healthcare companies to be tracking?
  • How can institutions and companies strengthen compliance programs to safeguard their organizations—and their individual executives?
  • What actions should companies take to protect themselves in an increasingly complex enforcement environment?
  • How can organizations avoid actions—and respond effectively, if they do face an inquiry?

Don’t miss this chance to understand the latest legislative developments and enforcement trends for investigating anti-kickback violations, off-label pharmaceutical marketing and Medicare Part D violations. Plus, learn how you can create and measure strong compliance plans—and demonstrate their effectiveness. Our thought-leading presenters are:

  • Robert Hussar, Counsel, Healthcare Industry, Manatt
  • Jacqueline Wolff, Partner, Co-Chair, Corporate Investigations & White Collar Defense, Manatt

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