1. In the U.S. Healthcare Market
2018
KEY TRENDS
In the U.S. Healthcare Market
Innovate | Implement | Impact

2. The Brooks Group at a Glance
A Veteran Owned Small Business
Established in 1995, our marketplace value is ultimately measured by the client relationships we have developed & maintained over 20 years
Registered as a Preferred Provider with the Society for Human Resources Management as a provider of Continuing Professional Education Credits
Leaders in healthcare focused on leveraging insights, innovation, & implementation to deliver practical solutions with impact. Our service continuum is as follows:
STRATEGIC ADVISORY SERVICES
RESEARCH & INSIGHTS
LEARNING & DEVELOPMENT
Curriculum Design & Content Development
Classroom Facilitation, Interactive,
Virtual & e-Learning, Podcasts
Measurement & Evaluation (Levels I—V, including ROI)
Custom & Open Enrollment Programs:
Account Management
Strategic Thinking & Planning
Executive Level Presence
Accessing & Integrating at Strategic Levels
Developing a Value Proposition
Value Based Negotiations
Revolutionize Your Business
Business Reviews
Field Visits / Account Calls
Live & Virtual Advisory Boards
Global & US Brand Planning
Managed Markets Marketing Strategies
Organizational Design
Executive Coaching
Keynote Speaking Engagements
Market Drivers Report
Brand Value Proposition
Sales Force & Account Management Effectiveness
Equity Scan
PAR: Personnel Assessment Report
(Syndicated Market Research):
ADVOCATE:
Supporting the Patient Voice
Healthcare Primers
Podcasts
Emerging Competencies & Behaviors 2

3. Agenda Topic Slide Section One: Flow of the U.S. Healthcare Dollar 4
Section Two: Consolidation & Fragmentation 12
Section Three: Patient & Provider Barriers to Access 22
Section Four: Evolving Reimbursement Models 31
Section Five: Healthcare Policy 36 3

4. SECTION ONE Flow of the U.S. Healthcare Dollar Market Trend $ $ $
innovate | implement | impact

5. U.S. Healthcare Economics
U.S.GDP $20T (3rd Q 2018)
U.S. Healthcare Spending 2017 $3.5T (18% of GDP)
U.S. Per Capita Healthcare Cost $10,348
Healthcare costs rising faster at 4.3% than economy growing at 2.9%
Baby Boomers (10,000/day) beginning to retire & receive Medicare & SSA
Under current law, national health spending is projected to grow at an average rate of 5.5% per year for
Prescription Drugs:
$425B retail spending
$89B in rebates
$10B in coupons (23% reduction)
= $326B prescription drug spend
151M Commercial Lives in the U.S.
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6. R&D in the Pharmaceutical Industry
In 2016, The Tuft Center for the Study of Drug Development estimated the cost of bringing a drug to the market was $2.6 billion. 
The estimated cost of post-approval R&D of $312 million “boosts the full product lifecycle cost per approved drug” to close to $3 billion.
If other developed countries such as those within the EU, Japan, Canada, Australia, Sweden & Finland helped to fund the R&D, it would bring the figure to 866 M individuals.
The escalating cost of conducting clinical trials discourages pharmaceutical companies from traveling this path of drug development & consequently limits patients’ access to novel treatments.
Many companies are looking for possible ways to cut down the cost of clinical trials & avoid barriers to drug development in order to improve drug development process. 
EU (European Union) 512 M
Japan 127 M
Canada 36 M
Australia 24 M
Sweden 10 M
Finland 5.5 M
=714.5 M
= = M
EU Universal Health Care / Publicly Funded through taxation
Japan Universal Health Care / Publicly Funded through taxation
Canada Universal Health Care / Publicly Funded Health Care (informally called Medicare)
Australia Mixed system: Universal Health Care (public) and private providers
Sweden Universal Health Care / Mainly government-funded/decentralized , private health care exists
Finland Universal Health Care / Publicly Funded 6
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7. 2017 Healthcare Spending 3.5T & 18% of GDP
Healthcare Spending by Segment
2017 Healthcare Spending 3.5T & 18% of GDP
SITES OF CARE DRIVEN BY
Healthcare Segments
MINUTE CLINICS
HOSPITALS
SKILLED NURSING FACILITIES
PHYSICIANS GROUPS
CENTERS OF EXCELLENCE
HOME HEALTHCARE
Healthcare Segments
AMBULATORY SURGICAL CENTERS (ASC)
SYSTEMS OF CARE
LONG TERM ACUTE CARE
INTEGRATED DELIVERY NETWORK (IDN)
LONG TERM CARE (LTC)
PATIENT CENTERED MEDICAL HOMES (PCMH)
INFUSION CENTERS
ACCOUNTABLE CARE ORGANIZATIONS (ACO) 7
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8. National Health Expenditures % of GDP & Per Capita Amount
National Health Expenditures Will Account For ~20% of US Gross Domestic Product Spend by 2025
National Health Expenditures % of GDP & Per Capita Amount
2017 U.S. Healthcare spend currently accounts for 18.2% of GDP
Funded by the Bill & Melinda Gates Foundation (BMGF), an international team of researchers have ranked the best & worst nations based on access & quality of healthcare U.S ranks #29
Top 5 Countries
Iceland
Norway
Netherlands
Luxembourg
Australia
2017 GDP Breakout in the U.S. By Industry
Projected
Industry
GDP %
Healthcare
3.5T
18.2%
Information
961.5 B 5%
Finance, insurance, real estate, rental & leasing
3.3 T
18%
Construction
652.5 B
3.4%
Professional & business services
2.1 T
11%
Arts, entertainment, recreation, accommodation, & food services
646.3 B 3%
Government
2 T
10.5%
Transportation & warehousing
472.2 B
2.3%
Manufacturing
1.9 T
10%
Mining
370.5 B
1.9%
Educational services, healthcare, & social assistance
1.4 T 7%
Other services, except government
347.9 B
1.8%
Retail trade
1 T
Utilities
279.7 B
.8%
Wholesale trade
Agriculture, forestry, fishing, & hunting
153.7 B
.08%
U.S. Healthcare spend currently accounts for 18.2% of GDP (10 years ago was 9%).
Funded by the Bill & Melinda Gates Foundation (BMGF), an international team of researchers have ranked the best and worst nations based on access to healthcare, and the quality of it, using a novel metric.
Published in The Lancet, it reveals that the US, by far the wealthiest nation on Earth, comes in at #29. This doesn’t sound great if you think America’s strange, lop-sided, and under-attack healthcare system is the best in the world, but it’s still quite high on the list, mind you – there are 195 nations on Earth, after all. It’s also in familiar company, with the UK, Singapore, and South Korea all appearing in the upper levels of the ranking.
The team behind this endeavor are all collaborators on the Global Burden of Disease (GBD), a tool that aims to quantify health loss so that others can rectify such problems. Using reams of collected data from the GBD initiative’s 2016 assessment of the world’s health, they’ve now published it in the form of a ranking.
Known as the Healthcare Access and Quality (HAQ) Index, it’s primarily derived from an assessment of the incidences of 32 causes of preventable death. These include diseases you can avoid by getting vaccinated, cardiovascular diseases, surgery-treatable gastrointestinal conditions, a variety of cancers, and so on.
The open-access paper – a hallmark feature of BMGF research publications – explains that if people have access to solid healthcare systems, there should be lower incidences of these afflictions.
Using carefully weighted methods, each country was scored on a scale from Here, 0 represents the worst levels of the incidences of these preventable diseases from 1990 to This scoring was conducted on a global, national, and (in parts) subnational level.
Background
A key component of achieving universal health coverage is ensuring that all populations have access to quality health care. Examining where gains have occurred or progress has faltered across and within countries is crucial to guiding decisions and strategies for future improvement. We used the Global Burden of Diseases, Injuries, and Risk Factors Study 2016 (GBD 2016) to assess personal health-care access and quality with the Healthcare Access and Quality (HAQ) Index for 195 countries and territories, as well as subnational locations in seven countries, from 1990 to 2016.
Methods
Drawing from established methods and updated estimates from GBD 2016, we used 32 causes from which death should not occur in the presence of effective care to approximate personal health-care access and quality by location and over time. To better isolate potential effects of personal health-care access and quality from underlying risk factor patterns, we risk-standardized cause-specific deaths due to non-cancers by location-year, replacing the local joint exposure of environmental and behavioral risks with the global level of exposure. Supported by the expansion of cancer registry data in GBD 2016, we used mortality-to-incidence ratios for cancers instead of risk-standardized death rates to provide a stronger signal of the effects of personal health care and access on cancer survival. We transformed each cause to a scale of 0–100, with 0 as the first percentile (worst) observed between 1990 and 2016, and 100 as the 99th percentile (best); we set these thresholds at the country level, and then applied them to subnational locations. We applied a principal components analysis to construct the HAQ Index using all scaled cause values, providing an overall score of 0–100 of personal health-care access and quality by location over time. We then compared HAQ Index levels and trends by quintiles on the Socio-demographic Index (SDI), a summary measure of overall development. As derived from the broader GBD study and other data sources, we examined relationships between national HAQ Index scores and potential correlates of performance, such as total health spending per capita. 8
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9. National Health Expenditures
U.S. Healthcare spending increased 4.3% to reach $3.5 Trillion, or $10,348 per person in 2017
$3.5 Trillion
Daily NICU costs exceed $3,500 per infant, and it is not unusual for costs to top $1 million for a prolonged stay.
Total economic costs of preterm birth has been estimated to be $26 billion
Based off of 2008 / AMA Journal
Of the $1.6 trillion spent on health care in 2011, we estimate that approximately 13%, or $205 billion, was devoted to care of individuals in their last year of life. 9

10. Four Dimensions of the Quadruple Aim
Population Health Management is a critical component to achieving the goals of the Quadruple Aim of CMS.
Triple Aim is a framework developed by the Institute for Healthcare & adopted by the Centers for Medicare & Medicaid Services (CMS). Over the past few years a fourth dimension—Improving Provider Satisfaction—has been added.
Improvement that describes an approach to optimizing health system performance.
Four Dimensions of the Quadruple Aim
Improving the patient experience (including quality & satisfaction)
Improving health of populations
Reducing per capita cost of healthcare
Improving provider satisfaction
Don Berwick, during his tenure at CMS, created what was known as the triple aim of healthcare. That has since evolved to the quadruple aim of healthcare:
Bend the cost curve
Better patient satisfaction & experience
Improve provider satisfaction & reduce burnout
And finally, improve population health
This last component, population health management, is a critical component to achieving the goals of the quadruple aim of healthcare and ensuring we are not addressing topics only when they become problems.
Source: IHI.org 10

11. Key Market Trends & Drivers
Market Trend Market Reactions
Consolidation & Fragmentation
CVS / Aetna
Cigna / ESI
UnitedHealthcare (Surgical Care Associates, DaVita, Avella Specialty Pharmacy, Genoa Healthcare, EHR)
Civica Rx: 7 healthcare systems representing about 500 U.S. hospitals
Catholic Health Initiative (CHI) / Dignity Health *
Patient & Provider Barriers to Access
Increased Utilization Management & More Excluded Drugs
Increased Patient Out-of-Pocket Expenses / Copay Accumulator Programs
Point of Sale Rebates
More Stringent Medical Benefit Management
Step Therapy on Part B drugs
340B Drug Discount Program
Evolving Reimbursement Models
Proliferation of Outcome & Process Measures
Value-based Contracting
Stakeholder Accountability in Healthcare Pricing & Affordability
QALY / ICER / NICE
DOJ Inquiries on Free Patient Services for Reimbursement
Healthcare Policy
American Patients First
Pricing Pressure & Transparency in Pharmaceuticals
Medicaid Block Grants
Safe Harbor Protections
Opioid, Suicide & Obesity Crisis
Technology & Population Health
Premiums – Compliant vs. Non Compliant Plans
Update October 16, 2018 –
Vatican has given the green light to the proposed merger between Catholic Health Initiatives and Dignity Health. The merger would create the nation’s largest not-for-profit hospital company by revenue with a combined system of 139 hospitals in 28 states and total annual revenue of nearly $30 billion. The merger still needs approval from state regulators in California, Arizona and Colorado.
2nd Patent Cliff Lies Ahead For Pharma with $251B in Sales at Risk by 2024
“We are looking at an industry set to experience sales accelerating from the sluggish levels following the financial crisis, to annual compound growth of over 6% between now and 2024,” read the report. Additionally, it is predicted that the pharmaceutical market will be driven by an unmet need in various disorders, consistent with a previous report that anticipates that the orphan drug market will reach $262 billion in “Total prescription sales are expected to be $1.2 trillion in 2024, due to novel therapies addressing key unmet needs, as well as increasing access to medicines globally. Payer scrutiny and sales losses from genericization and biosimilars will act as brakes on growth,” according to the report. Novartis is expected to lead the prescription drug market, with $53.2 billion in sales in 2024, ahead of competitors Pfizer and Roche, both of whom will be in a close race for second place, reaching $51.2 billion and $50.6 billion, respectively. Despite the entry of an adalimumab biosimilar being delayed until 2023, the reference adalimumab (Humira) is expected to remain the top-selling drug in 2024 despite a compound annual growth of –3% over the next 7 years. “The growing power of payers, combined with the arguably underestimated threat of biosimilars and the genericization of some of the industry’s biggest products, including Humira,” could hold back growth, said the report. In total, $251 billion in sales are at risk between 2018 and 2024, creating a second “patent cliff” for the industry.
For insurers selling individual-market health plans, monthly premiums on average were 54 percent higher for their ACA-compliant plans in 2015 than for their noncompliant plans, in large part because of higher medical claims for compliant plans. (ex. Per member per month, compliant plan $355, non-compliant plan $231)
Good Article on 2018 Trends (includes pop health/opioid crisis, etc…listed key take aways below)
In the last few years, the popularity of wearable technology has skyrocketed. The wearables market has doubled since 2015 and exceeded $4 billion in Healthcare organizations have already begun to take advantage of the data wearable technology can provide, and this trend will continue to gain traction.
Vaccinations are the cornerstone of population health efforts. However, recent CDC studies show immunization rates of certain infectious diseases have declined – 2017 flu vaccination coverage among adults was down 4 percent from 2016.
The opioid crisis resulted in overdose deaths of 64,000 Americans in 2016 and remains a serious issue facing the U.S. and the healthcare industry. More and more providers will increase their work to curb the spread of Fentanyl, heroin, prescription opioids, and synthetic drug abuse.
According to PwC, half of provider executives will focus on altering their prescribing practices for these drugs in an effort to reduce the number of patients who develop dependence through misuse of legally provided medications. Also, expect to see healthcare organizations work with payers, public health officials, pharmacies, community organizations, and first responders to take a more proactive approach to reducing opioid abuse.
Social determinants, or socioeconomics, play an important role in population health outcomes; food and housing security, transportation access, education, and employment all contribute to a patient’s ability to make healthy decisions and maintain wellness. To improve the overall health of patients of low socioeconomic statuses, healthcare organizations must appeal to these patients in meaningful ways. An effective way to achieve this objective is to work closely with community organizations that service these populations.
With the Internet of Things (IoT), health systems can access and analyze new patient datasets from medical devices, apps, wearables, home monitors, and more. Artificial Intelligence (AI) and applied analytics help healthcare organizations with administrative and marketing tasks, automating outreach by accessing patient data. While these technologies improve health outcomes and save health systems time and money, they also increase vulnerability to cybersecurity breaches.
In fact, a recent Accenture study found privacy concerns is one of the top barriers to adopting IoT in healthcare. Health systems should prioritize data privacy and create detailed cybersecurity plans and defense measures to combat IoT and AI-related security breaches. By keeping patient data safe, healthcare organizations ensure that their population health initiatives are protected and successful.
In 2018, healthcare organizations need to prioritize customers and innovation to set themselves up for population health success. The most effective organizations will leverage technology, like HCRM and wearables, to get to know their customers better and let those insights guide their initiatives. In a changing healthcare landscape, data-driven organizations are going to be able to identify needs within the community and execute more efficient strategies in support of population health.
* Pending approval 11

12. SECTION TWO $ Consolidation & Fragmentation Market Trend $ $ $
innovate | implement | impact

13. Commercial Health Plan & PBM Markets are Highly Concentrated
Commercial Health Plans & PBMs are using their negotiating power to gain favorable agreements with providers & pharma. They are looking to expand their services & vertically integrate.
MagellanRx, MedImpact, Navitus
EACH 1%
UnitedHealthcare
All other PBMs
PerformRx
Envolve
EnvisionRx
Express Scripts
Commercial Health Plan Current Market Structure
(266 Million Members)
PBM Current Market Structure
Prime Therapeutics
(266 Million Members)
Highmark, 5.2M
Humana, 9.2M
OptumRx
Independence
Group Health, 10M
CVS Caremark
Kaiser
10.6M 13
Source: HIRC 2017
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14. Top 10 Health Systems by Revenue
IDN Name
Location
Hospitals
Revenue
Net Income
Physicians
Total
Employees
Kaiser Permanente
Oakland, CA 39
$72.7B (2017)
$3.8B (2017)
22,080
210,794
HCA Inc
Nashville, TN
177
$43.6B (2017)
$2.22B (2017)
37,000
240,000
Catholic Health Initiatives *
Englewood, CO
139
$28.4B (2017)
$970M (2017)
25,000
159,000
Ascension Health
Saint Louis, MO
153
$22.6B (2017)
$1.86B (2017)
40,000
165,000
Tenet Healthcare Corporation
Dallas, TX 69
$19.2B (2017)
$704M (2017)
32,000
115,000
Trinity Health
Livonia, MI 93
$17.6B (2017)
$1.3B (2017)
7,500
131,000
UPMC Health System
Pittsburgh, PA
30+
$16.0B (2017)
5,700
80,000
Community Health Systems Inc
Franklin, TN
127
$15.3B (2017)
$2.45B (2017)
20,000
120,000
UC Health System 12
$11.4B (2017)
$283M (2017)
5,000
42,000
Carolinas Healthcare System (Atrium Health)
Charlotte, NC 47
$9.7B (2016)
$530M (2016) --
60,000
Net Income pulled from Annual Reports
Dignity Net Income 2017 – 384M
CHI Net Income 2017 – 585.2M
Total net income = approx. 970M
* Pending merger with Dignity Health
Source: SK&A Top 25 Integrated Health Systems Market Insights Report, August 2017
Company websites 14

15. Integration of Healthcare Stakeholders Creating Diversified Models
CVS Health + Aetna
Health Plan
PBM
Specialty Pharmacy
Clinic Provider
Retail Pharmacy
UnitedHealthcare + Optum Rx
Health Plan
Specialty Pharmacy
Clinic Provider
Dialysis
PBM
Behavioral Health
Cigna + Express Scripts
Health Plan
Specialty Pharmacy
Clinic Provider
PBM
Anthem + IngenioRx
Health Plan
Specialty Pharmacy
Merck / Medco story (Merger in 1993 / article published 2002)
Merck is dividing itself in two. The world's third-biggest drugmaker is casting off its pharmacy benefits management arm, Merck-Medco , which accounts for 55% of its sales, as a separate publicly traded company. Could Merck be looking for a war chest to fund a major acquisition?
Other drug companies have been shedding "non-core" divisions lately--but none have shed a business this big. In 2001, Merck-Medco had sales of $26 billion--making it bigger than Merck's drug division, which has sales of $21 billion. Merck now gets less revenue from drugs than both Pfizer and GlaxoSmithKline .
Merck bought Medco in 1993 for $6.6 billion as a response to the then-new threat of managed-care companies. It thought it could use Medco, which is hired by managed-care firms to fulfill drug purchases for patients, to increase the sales of its own drugs. But Merck-Medco's margins remained paper-thin even as its revenues grew 12-fold, crimping the margins of the entire company.
With its thin margins and ballooning size, Merck-Medco may have just been too much of a drag on Merck's share price and a distraction from Merck's core business of producing blockbuster drugs. Merck lost its spot as the world's biggest drugmaker. Now, its drug business is being forced to turn on a dime to save itself.
Merck's current stable of prescription drugs is aging. By June, it will lose patent protection on four drugs--Vasotec and Prinivil for hypertension, Mevacor for high cholesterol and Prilosec, which it shares with AstraZeneca , for ulcers. Billions of dollars in sales will go to generics. Then, in 2006, there will be an even bigger loss, as Zocor, an anti-cholesterol drug with annual sales of $7 billion, goes off patent.
To make matters worse, growth of Merck's blockbuster anti-arthritis drug Vioxx has slowed to a sloth's pace. It clocked in sales of only $2.5 billion this year, compared with the $3.5 billion Merck once expected, after some doctors raised concern that it might have worrisome effects on the heart. Merck denies there's any such problem for either Vioxx or follow-up Arcoxia, and plans to conduct new studies to prove it.
To cope with slowing sales and patent expirations, Merck needs to release a raft of new drugs. It's planning on rolling out 11 new compounds over the next five years. It needs some of them to be blockbusters. Chief among the contenders are a series of drugs that affect the central nervous system, with a new antidepressant and an anti-anxiety drug on deck.
But Merck doesn't have much experience in central nervous system drugs, whose success is more difficult to judge than heart drugs like Mevacor, Prinivil and Zocor. Merck's brass may feel that the last thing they need is the low-margin blob of Merck-Medco floating over their shoulders, distracting them from drugmaking.
PBM
Pharmaceutical manufacturers will need to provide strong value propositions including real world data to establish key partnerships with these integrated entities. 15

16. Cigna-Express Scripts Merger Approved by Justice Department
Federal antitrust authorities have given the green light to Cigna’s $52 billion takeover of pharmacy benefit manager, Express Scripts.
The merged company could reshape the health industry, as Cigna would encompass both health insurance & pharmacy benefits.
The merger still needs approval by state regulators, but the federal review is the largest hurdle the company needed to overcome.
The companies said they anticipate closing the deal by the end of 2018.
The companies say they could save money if they coordinated care with prescriptions, but they have not gone into specifics about how the merger could help lower costs for patients or employers. 16
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17. CVS to Buy Aetna for $68 Billion
October 10, 2018
Justice Department OKs CVS-Aetna merger with divestiture
The U.S. Justice Department greenlit the merger between CVS Health and Aetna with a condition: that Aetna divest its Medicare Part D business to WellCare Health plans. That alleviates the federal government's competition concerns.
Source: 17

18. CVS/Aetna Integrated Healthcare Platform
CVS is projecting $750 million dollars in synergies through combining PBM & PDP ops, streamlining corporate functions, improved pricing with third parties, and shifting care to lower cost sites of care.
Potential Member & Client Benefits
Improved clinical outcomes from combination of medical & pharmacy benefits
Increased convenient care from access to “Health Care Hub”
Increased efficiencies leading to lower costs to patients & clients
Projected membership growth through unique offerings in Retail, PBM, and Managed Care 18

19. United Continues to Vertically Integrate Through Acquisitions with Providers
2017 UnitedHealth acquired Surgical Care Affiliates in $2.3 billion deal
Created comprehensive ambulatory care services platform, including primary care, urgent care & surgical care services.
Part of UnitedHealth's strategy of operating across the entire spectrum of health services, spanning health systems, physicians & health plans.
Surgical Care & its affiliates operate 205 surgical facilities in more than 30 states, including ambulatory surgery centers.
Business was combined with UnitedHealth's Optum group, which manages drug benefits & offers healthcare data analytics services.
UnitedHealth Group’s (UHG) Optum subsidiary is nearing a deal to acquire Avella Specialty Pharmacy from Riordan, Lewis & Haden.
In 2019, UHG is expanding into EHRs with an integrated & portable system for its 50M fully benefited members. UHG's digital capabilities as a linchpin for its LT growth, along with dual strategies of reining in costs & expanding its medical services group. 19
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20. Civica Rx
Hospitals Launch Generic Company, Civica Rx, to Drive Down Drug Prices: In January 2018, it was announced that five healthcare systems were launching a not-for-profit generic drug company, Civica Rx.
The healthcare companies were the U.S. Department of Veteran Affairs (VA), Intermountain Healthcare, Ascension, SSM Health & Trinity Health – the endeavor has now expanded to seven health systems & three philanthropic groups.
The company will focus initially on establishing price transparency & stable supplies for 14 generic drugs used in hospitals, without pressure from shareholders to issue dividends or push a stock price higher.
The group now includes Mayo Clinic & HCA Healthcare, which in total represents approximately hospitals.
The launching members already committed $100 million to the project – the approach will be to rely on long-term contracts member organizations sign stating they will buy a fixed percentage of their drug volume from Civica Rx.
Civica Rx’s first drug could launch in It is promising transparent pricing without rebates common to the industry. 20
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21. Amazon, Berkshire Hathaway & JPMorgan’s Healthcare Venture Names Chief Operating Office (COO)
The newly formed healthcare venture of Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co hired Jack Stoddard as COO.
Stoddard was previously a manager for digital health at Comcast Corp.
Amazon, Berkshire and JPMorgan announced the joint venture in January of 2018, saying U.S. healthcare costs were rising too fast & holding back economic growth.
The venture is being led by well-regarded surgeon, author, and industry critic Atul Gawande, who was appointed as chief executive officer in June.
The joint venture will use big-data analysis & other high-tech tools to improve care & cut costs.
Amazon revenue $178B in 2017
Berkshire revenue $242B in 2017
JP Morgan revenue $98B in 2017 21
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22. SECTION THREE $ Patient & Provider Barriers to Access Market Trend $ $
innovate | implement | impact

23. PBMs See Growing Trend Toward Closed or Restrictive Formularies
The two largest pharmacy benefit managers (PBMs) – Express Scripts & CVS Caremark released updates to their 2018 formulary exclusion lists.
For 2018, Express Scripts was more aggressive, expanding its list to 159 excluded products. Its list initially had 85 products, then grew with mid-year additions. For 2018, Express Scripts excluded 64 products – 46 of which it notes are “high-spend multi- source brand drugs” that have generic equivalents.
For CVS Caremark, the total number of excluded drugs remained steady. They removed 17 products from is 2018 formulary, but it also added 17 other products back to its list. CVS has 154 products on its Standard Control Formulary:
CVS added back XTANDI but excluded ELELYSO. Its specialty exclusions that remain from last year include TOBI & orphan drugs OPSUMIT & Helixate FS. 23
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24. Patient Out-of-Pocket Cost/Qtr.
VS.
Average Household Expenses/Qtr.
PATIENT OUT-OF-POCKET COSTS
$1,813 / quarter
TV, CABLE, INTERNET
$500 / quarter
Patients continue to take on more responsibility for the cost of their medical care & the trend shows no signs of letting up.
In 2017, on average 49% of patient out-of- pocket costs per healthcare visit were below $500; 39% were $501-$1,000; & 12% were more than $1,000.
GROCERIES
$2,400 / quarter
2017 Out-of-Pocket Costs
CAR LOAN
$1,200 / quarter
11% increase
$165 (cable,tv,internet) per month = close to $500/quarter
$800 (food) per month = close to $2400/quarter
$400 (avg car loan) per month = close to $1200/quarter
$100 (avg cell phone bill for one person) per month = $300/quarter
ELECTRICITY
$600 / quarter 24
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25. Copay Accumulator Programs
Copay accumulators or accumulator adjustment programs are relatively new policies that some Pharmacy Benefit Managers & insurers are using to prohibit manufacturer copayment cards or other forms of manufacturer assistance from being used to pay down a patient’s deductible or out-of-pocket maximum.
Accumulator programs target specialty drugs for which a manufacturer provides copayment assistance.
There is no industry standard name for copay accumulators. UnitedHealthcare uses the term “Coupon Adjustment: Benefit Plan Protection program.” Express Scripts uses the term “Out-of-Pocket Protection program.”
What does this mean for patients?
It means that when a patient’s copayment card limit has been reached, the value on the card will not have counted toward the patient’s deductible or annual out-of-pocket maximum. Instead, the patient will need to pay their full deductible before cost-sharing protections kick in.
In other words, when a patient uses a copayment card, the amount of money that the card is “worth” does not count towards the patient’s deductible or out-of-pocket maximum.
Who is enrolled in these programs?
People most likely to be enrolled in these programs are those in employer-sponsored plans & those in high-deductible health plans (HDHPs) in particular. HDHPs are becoming increasingly common as plans employers & insurers use to help incentivize appropriate healthcare utilization & to lower costs.
Some organizations currently offering copay accumulator programs are:
Insurers
PBM
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Source: 25

26. UnitedHealthcare to Pass on Rebates from Drug Companies to Consumers
In response to growing consumer frustration over drug prices, UnitedHealthcare said they would stop keeping millions of dollars in discounts it gets from drug companies & share them with its customers.
Dan Schumacher, president of UnitedHealthcare, said the new policy will apply to more than 7 Million people who are enrolled in the company’s fully insured plans.
Individuals with high deductibles who buy drugs that carry large rebates will see the greatest savings.
The decision by UnitedHealthcare is the latest in a series of steps taken by drug makers & health plans to try to lessen public discontent over drug prices.
The Trump Administration recently floated the idea of requiring private drug plans under Medicare to pass on the savings to consumers at the pharmacy counter.
A former executive at Eli Lilly & the new secretary of health & human services, called UnitedHealthcare’s move a “prime example of the type of movement toward transparency & lower drug prices for millions of patients that the Trump Administration is championing.” 26
Source:

27. More Stringent Medical Benefit Management
Medical benefit drugs will no longer be protected, as payers are developing new capabilities to manage the medical benefit.
More Stringent Medical Benefit Management
Increased Medical Benefit Management Techniques
Development of Vertically Integrated Payer Models +
Developing medical formularies
Increased utilization management
Shifting medical benefit drugs to pharmacy benefit
Site-of-care management
ASP + differential spread
As specialty drugs have become increasingly costly, payers have implemented more utilization management techniques for medical benefit drugs.
Increased vertical integration between PBMs & MCOs leads to increased ability to manage both pharmacy & medical cost.
Source:
Specialty Pharmacy Summit 2018 27

28. Step Therapy on Part B drugs
The Centers of Medicare & Medicaid (CMS) is allowing Medicare Advantage (MA) health plans to implement step therapy protocols in order to decrease prescription drug spending.
On January 2019, MA health plans can apply step therapy guidelines for physician-administered medications.
Step therapy requires beneficiaries to use condition-based preferred medications before using more expensive drugs. MA plans can also cross- manage prescriptions from Medicare Part B & D, which allows health plans to provide beneficiaries with the most cost-effective prescriptions.
CMS estimates that MA payers spend $12 billion a year on Part B drugs, and believes the implementation of step therapy can help MA plans control spending & reduce beneficiaries’ out-of-pocket costs.
In a memo to MA plans, CMS stated that MA plans must disclose step therapy use within a plan’s Annual Notice of Change (ANOC) & Evidence of Coverage (EOC) documents. Plans that have already released these documents to beneficiaries can send out an official addendum that explains new step therapy guidelines.
MA plans can only apply step therapy requirements to new prescriptions that enrollees did not previously use, which means that MA plans can’t disrupt beneficiary’s current prescription treatments. Beneficiaries must also have the ability to receive expedited step therapy prescriptions when the patient has an immediate medical need for the drug.
CMS suggested that step therapy should align with care coordination programs that help address an individual’s specific healthcare needs.
“As soon as next year, drug prices can start coming down for many of the 20 million seniors on Medicare Advantage, with more than half of the savings going to patients.”
A Medicare Supplement Insurance (Medigap) policy helps pay some of the health care costs that Original Medicare doesn't cover, like:
Copayments
Coinsurance
Deductibles
Medigap policies are sold by private companies.
Some Medigap policies also cover services that Original Medicare doesn't cover, like medical care when you travel outside the U.S. If you have Original Medicare and you buy a Medigap policy, here's what happens:
Medicare will pay its share of the Medicare-approved amount for covered health care costs.
Then, your Medigap policy pays its share.
8 things to know about Medigap policies 
You must have Medicare Part A and Part B.
A Medigap policy is different from a Medicare Advantage Plan.  Those plans are ways to get Medicare benefits, while a Medigap policy only supplements your Original Medicare benefits.
You pay the private insurance company a monthly  Premium for your Medigap policy. You pay this monthly premium in addition to the monthly Part B premium that you pay to Medicare.
A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you'll each have to buy separate policies.
You can buy a Medigap policy from any insurance company that's licensed in your state to sell one.
Any standardized Medigap policy is guaranteed renewable even if you have health problems. This means the insurance company can't cancel your Medigap policy as long as you pay the premium.
Some Medigap policies sold in the past cover prescription drugs. But, Medigap policies sold after January 1, 2006 aren't allowed to include prescription drug coverage. If you want prescription drug coverage, you can join a Medicare Prescription Drug Plan (Part D).
It's illegal for anyone to sell you a Medigap policy if you have a Medicare Advantage Plan, unless you're switching back to Original Medicare.
Medigap policies don't cover everything
Medigap policies generally don't cover Long-term care, vision or dental care, hearing aids, eyeglasses, or private-duty nursing.
—U.S. Dept. of Health & Human Services (HHS) Secretary, Alex Azar 28
Source:

29. Narrow Networks
Payers can realize cost savings through narrow networks, but limited options for consumers are resulting in some potential regulations & restrictions to their utilization.
Narrow provider networks: “allow insurance companies to keep premiums down by including physicians they see as providing less-costly, more value-based care.”
The increased prevalence of narrow networks gives consumers a wider range of value propositions & prices among health insurance plans, but includes restrictions in access.
Payers defend narrow networks as a necessary cost control measure, and research conducted by economists from Harvard Business School & Northwestern University indicates that it has been effective. Narrow network plans on the exchanges have median premiums that cost 16% less than broad network plans, according to the report. 29
Source:

30. Growth in 340B Drugs Resulting in Pressure on Pharma
340B is a U.S. federal government program that requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations/covered entities at significantly reduced prices.
M&A activity by providers in recent years has enabled a growing number of providers to qualify for this program.
Discounted sales to providers qualifying for 340B discounts hit $16.2 billion in 2016, 34.0% increase over 2015.
The 340B program accounted for 5.0% of the total U.S. drug market in 2016. 
Hospitals, which make up the vast majority of 340B purchases, are not required to report how funds are utilized.
Three hospital groups (American Hospital Association, Association of American Medical Colleges, and America’s Essential Hospitals) filed suit against the Department of Health & Human Services to prevent $1.6 billion cuts to the 340B discount program.
As of July 2017, there were 19,868 unique pharmacy locations – there are 6, B covered entities with 52,613 contract pharmacy relationships.
Effective January 1, 2018, CMS will reduce Part B reimbursement for 340B drugs from the average sales price (ASP) minus 22.5 percent instead of ASP plus six percent.
340B Contract Pharmacy Locations
Compound Average Growth Rate
2007 to 2010: 10.8%
2010 to 2013: 10.8%
2013 to 2016: 31.0%
2016 to 2017: 12.0%
19,868
Source:
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Source:
Source: 30
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31. SECTION FOUR $ Evolving Reimbursement Models Market Trend $
innovate | implement | impact

32. Moving From Fee-For-Service to Reimbursement for Quality Medical Outcomes
Performance-Based Contracting:
* Physician * Hospital
Bundled & Episodic Payment
Shared Savings
Shared Risk
Capitation
Capitation + Performance-Based Contracting
Payment Systems Based on Value Compensation Continuum
(Level of Financial Risk)
Full Integration
Large % of Financial Risk
Moderate Integration
Moderate % of Financial Risk
Limited Integration
Small % of Financial Risk
Accountable Care Organization
Patient-Centered Medical Home
Over 11,000 NCQA Certified
The market overall for the last decade has been shifting from a fee-for-service model in which the provider is paid for each service provided, to a reimbursement based on quality model. In this model, more onus is placed upon the provider to prove the value they deliver in the services they provide to patients.
If we take a look at this chart, as we move from left to right, the amount of risk taken on by the group shown increases. Physicians paid on a fee-for-service model have little to no value to prove, while those under a full capitation model are receiving a pool of money to provide care for a pool of patients. Therefore, value is king to ensure that they don’t over spend on the care for the patients. Otherwise, the over spending comes out of the pocket of the providers. ACOs are also taking on more risk as well.
The same is taking place for pharmaceutical companies as payers and IDNs seek the pharmaceutical company to add skin in the game in the form of risk based contracting. Data and data sharing agreements are a barrier that remain for these types of contracts but overall the number of these risk based contracts are increasing.
Source: The Brooks Group and UnitedHealthcare Services. Value-based Contracting and Accountable Care Organizations.
Desire for Pharmaceutical companies to add skin in the game in the form of risk based contracting
Data remains a barrier to these contracts but the overall number of risk based contracts are growing 32

33. Quality Measurements are Required for Value-Based Payments
Quality initiatives are required for the measurement of ”value” for reimbursement & can impact the delivery & reimbursement of a company’s products.
CMMI – Centers for Medicare & Medicaid Innovation
PCORI – Patient-Centered Outcomes Research Institute
ICER – Institute for Clinical & Economic Review
CPC+ – Comprehensive Primary Care Plus
Newer Entities
Delivery System Payment Reform
Increased Quality Measure Development
Value-Based Purchasing Initiatives
Quality
ACO – Account Care Organization
PCMH – Patient-Centered Medical Home
ESCO – End Stage Renal Disease (ESRD) Seamless Care Organization
Medicare Star
NCQA/HEDIS – National Committee for Quality Assurance
QRS – Quality Rating System (Healthcare Exchanges)
Core Quality Measure Collaborative
Hospital Readmission Penalties
Pay-for- Performance
Bundled Payments
Speaker will read slide.
Source: Brooks 2018 33

34. International Consortium for Health Outcomes Measurement (ICHOM)
Non-profit organization founded by individuals from three esteemed institutions with the purpose to transform healthcare systems worldwide by measuring & reporting outcomes in a standardized way.
What is ICHOM?
Outcomes are the measure of success in healthcare.
When seeking treatment, patients want to know what their life will be like after treatment.
Why Outcomes?
Organizes global teams of physician leaders, outcome researchers & patient advocates to define standard set of outcomes to enable healthcare providers globally to compare, learn, & improve.
How ICHOM Works…
Speaker will read slide. 34
Source:

35. Influential Healthcare Entities
ICER
NICE
A non-profit organization that evaluates evidence on the value of medical tests, treatments & delivery system innovations.
ICER is best known as the nation’s independent watchdog on drug pricing.
ICER’s drug assessment reports include a full analysis of how well each new drug works, the economic value each treatment represents, & other elements of value that are important to patients & their families. The reports use these analyses to establish a “value-based price benchmark” reflecting how each drug should be priced to appropriately reflect long-term improved patient outcomes.
NICE’s role is to improve outcomes for people using the National Health Service (NHS) & other public health & social care services by:
Producing evidence-based guidance & advice for health, public health & social care practitioners.
Developing quality standards & performance metrics for those providing & commissioning health, public health & social care services.
Providing a range of information services for commissioners, practitioners & managers across the spectrum of health & social care.
Institute for Clinical & Economic Review
National Institute for Health & Care Excellence
QALY is a generic measure of disease burden, including both the quality & the quantity of life lived.
It is used in economic evaluation to assess the value for money of medical interventions.
One QALY equates to one year in perfect health. If an individual's health is below this maximum, QALYs are accrued at a rate of less than 1 per year. To be dead is associated with 0 QALYs.
QALY can be used to inform personal decisions, to evaluate programs, and to set priorities for future programs.
Source: 35
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36. SECTION FIVE Market Trend Healthcare Policy $ $ $
innovate | implement | impact

37. American Patients First
Key Issues
Strategies
High List Prices
Seniors & Government Overpaying Due to Lack of the Latest Negotiation Tools/Regulations
High & Increasing Out-of-Pocket (OOP) Costs for Consumers
Foreign Governments Free Riding
Improved Competition
Better Negotiation
Incentives for Lower List Prices
Lowering OOP Costs 37
Source: HHS American Patients First May 2018

38. CMS Negotiates Better Deals for Medicare Patients
CMS delivered on President Trump’s promise to negotiate better deals for Medicare patients & create competition between drugs used to treat the same conditions, with more than half of the savings required to be passed on directly to patients.
UPDATE: Aug. 2018
CMS will provide Medicare Advantage (MA) plans the option of negotiating for Part B drugs in a way that lowers costs & improves the quality of care.
MA plans that also offer a Part D benefit will be able to cross-manage across Part B & Part D, so that patients receive the best medicine whether it is physician-administered or self-administered.
CMS is putting American Patients First by making sure that MA plans negotiate in a way that ensures patient choice & provides patient protections with guardrails.
Starting January 2019, CMS is giving MA plans the option of ensuring that patients receive the most preferred drug therapy first & progress to other therapies ONLY if necessary.
CMS is allowing MA plans to take advantage of step therapy for Part B drugs, which constitute around $12 billion per year in spending by plans.
Medicare beneficiaries, including those already enrolled in a MA plan, will have the option to select a plan using these new tools to negotiate lower drug prices during 2019 annual Medicare open enrollment from Oct 15 – Dec 7, 2018. 38
Source:

39. Comparison of U.S. and International Prices for Medicare Part B Drugs
UPDATE: OCTOBER 25, 2018
The U.S. Department of Health & Human Services published the Comparison of U.S. and International Prices for Top Medicare Part B Drugs by Total Expenditures document.
The prices charged by drug manufacturers to wholesalers and distributors in the U.S. are times higher than in 16 other countries for the top 27 drugs by total expenditures separately paid for under Medicare Part B.
These 27 drugs accounted for $17 billion (64%) of the $27 billion Part B drug spend.  
Spending for Part B drugs has doubled since 2006, despite overall low Fee-for- Service enrollment growth.
Part B per-beneficiary spending rose 7% rom while Part D per-beneficiary spending increased only 3% per year in the same five-year interval.  
The new payment rate that the U.S. government is looking at is Average Sales Price (ASP) reduced to the average international price plus 6% of ASP. Medicare could achieve significant savings if prices in the U.S. were similar to those of large market based economies.
Speaker will speak to slide 39
Source:

40. Medicare Part B – International Drug Pricing Index
President Trump has proposed pilot studies through the Center for Medicare & Medicaid Innovations (CMMI) establishing an international pricing index for drugs covered by Medicare Part B and allowing PBMs to negotiate prices on some Part B drugs.
Under the planned “international pricing index,” the U.S. drug prices would be benchmarked against the following 16 nations where target drug prices are collectively 44% lower
This move is one of the many proposals in Trump’s blueprint to lower drug prices and experts caution that the impact may be relatively insignificant and it could even confuse patients due to the complexities of drug pricing
Austria Finland Ireland Slovakia
Belgium France Italy Spain
Canada Germany Japan Sweden
Czech Republic Greece Portugal United Kingdom
Speaker will speak to slide 40
Source:

41. Pricing Transparency
Several pharmaceutical companies are issuing pricing transparency reports to provide the public with additional information on pharmaceutical pricing. These reports include the role of intermediaries in the distribution channel, the payment of rebates, and the true increases in list prices.
Janssen released its average discount rate of 42% & discounts & rebates at approximately $15 billion
Merck & Co. ‘transparency report’ shows average percentage price hikes have mostly been in single digits
2013
2014
2015
2016
2017
U.S. Product Portfolio
% Change vs. Prior Year
List Price Change (WAC)
9.0%
8.3%
9.7%
8.5%
8.1%
Net Price Change
4.8%
2.5%
5.2%
3.5%
-4.6%
2010
2011
2012
2013
2014
2015
2016
U.S. Product Portfolio
% Change vs. Prior Year
List Price Change (WAC)
7.4
9.5
9.2
9.6
10.5
9.8
Net Price Change
3.4
5.1
6.2
5.5
3.7
Source:
2010
2011
2012
2013
2014
2015
2016
U.S. Product Portfolio
Avg. Discount (%)
27.3
28.9
29.9
32.1
37.0
38.2
40.9
Merck & Co. has released a report card that shows its average list & net price hikes in the U.S.
Source: 41

42. Trump Administration – Drug Rebate Safe Harbor Protections
The Trump administration is considering a proposal to overhaul safe harbor protections for pharmaceutical company rebates, a plan that could lead to a significant shift in how drug prices are determined.
The Office of Management & Budget is reviewing a proposed rule from the Department of Health & Human Services (HHS) on the matter.
The rule’s title – “Removal of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals & Creation of New Safe Harbor Protection” – signals that the changes could be significant.
Pharmacy benefit managers, or PBMs, have been a prime target in the ongoing debate on how to best lower drug prices, and critics have scorned the way they use rebates.
PBMs have traditionally been protected from antikickback lawsuits under established safe harbors. 42
Source:

43. Medicaid Block Grants Financing Enrollment/Guarantee of Coverage Area
Current Medicaid System
Medicaid Block Grant/ Per Capita Cap System
Trump Administration Considerations
Financing
Federal funding is based on actual expenditures
Federal funding is capped per state or based on a pre-set amount or formula
Decide on how to set the total federal amount or per capita rate; choose to cap only certain categories
Federal & state governments share program costs
Lower-income states pay lower share; special federal match rates for the ACA Medicaid expansion population
State government responsible for program costs over federal capped amount
Set base year & growth rate for each year; determine how to account for non-expansion states
Enrollment/Guarantee of Coverage
Eligible people guaranteed coverage; no enrollment caps
Cede more power to states; weaker federal rules on who must be covered; states decide who qualifies for program & what benefits are covered
Determine federal requirements (e.g., essential standard benefits, eligibility categories)
States must meet core federal requirements for benefits
Source: CMS National Health Expenditure data, FY 2015; Congressional Budget Office, “Options for Reductng the Deficit: ” 43

44. 2018 Midterm Elections Prescription for Healthcare in 2019
House: leans Democratic
Senate: leans Republican
Governor: leans Republican
Higher voter turnout during the recent primaries
The Democrats had an 84% rise in primary voting since the elections while the Republican numbers rose only 24%
800,000 adults registered to vote on National Voter Registration Day – a new record
Voters list healthcare costs as top concern when voting
Open enrollment coincides with election day – too close to be a factor – or perfect timing?
If Republicans hold the House of Representatives, ACA repeal & Medicare reform likely
Expect Democrats to scrutinize association health plans (AHPs) & short-term healthcare plans if they regain the House
Addressing pre-existing conditions holds bipartisan support among voters: nearly 133 million non elderly Americans are affected by this; over 80% of ALL voters support mandating coverage
Opioid legislation will maintain support across party lines & trend towards supporting treatment programs & less on prevention
Prescription drug costs combined with the continued increase in high deductible plans (HDHP) & Health Savings Plans (over 21 million enrollees in 2017) will put pressure on Congress & the Department of Health & Human Services to keep drug pricing, generic competition & approval, and out-of- pocket patient expenses (co-pays & rebates) on the front page
States have been leaders in stabilizing the ACA market.
Governors with tight races championed solutions to minimize premium increases – many will actually be lower for 2019.
2019 is not an election year, so 2020 ACA policies may not receive the same attention from governors opposed to the ACA.
All politics are local:
Lame Duck Congress: Version 2018
Republicans will maximize their majority during the “lame duck” session
An opportunity for:
Adjusting the 70% pharmaceutical manufacturers contribute to donut hole costs
ACA repeal
But realistically:
Federal budget discussions will dominate the December session – federal funding ends December 7th
Source: 44

45. Executive Summary
Evolving reimbursement models coupled with dynamic changes in the U.S. healthcare marketplace demand innovative approaches from organizations like yours to be part of the solution to today’s Quadruple Aim challenge.
Effective personnel need to combine strong marketplace acumen with critical thinking processes to work through implications & responses to be recognized as a “Deep Generalist” & someone that brings value at every interaction.
These attributes will enable you to access key decision makers & uncover areas of mutual interest so you can position solutions that deliver on the priorities of your organization, customers & patients.
These are the qualities of a Trusted Business Advisor. 45

46. Innovate ⎸Implement ⎸Impact
Ryan Evans
Sr, Partner
Innovate ⎸Implement ⎸Impact