UnitedHealthcare's Matt Vesledahl explains why specialty prescription drug prices are rising – and what insurers are doing in response.
With the FDA's recent approval of a new drug to treat people suffering from Alzheimer's disease, the approval could be a nightmare drug spending scenario -- an extremely expensive product that millions of desperate patients could be eligible for. What factors went into that decision? And what can be done to lower the out-of-pocket cost of prescription drugs for consumers? Matt Vesledahl, a Senior Vice President with UnitedHealthcare, offers his perspective.
Ira Apfel 00:05
Hello, and welcome to UnitedHealth Group's Weekly Dose Podcast, where we'll get you up to speed on the latest trends shaping the future of healthcare. I'm your host Ira Apfel. This week we're talking about specialty drugs, those cutting edge, often lifesaving medications that often come with a big price tag. And the timing couldn't be better. With the FDA, recent approval of a new drug to treat people suffering from Alzheimer's disease. One healthcare reporter said the approval could be a nightmare drug spending scenario, and extremely expensive product that millions of desperate patients could be eligible for. The approval of the specialty drug for Alzheimer's disease raises all sorts of questions, chief among them, how to price it for consumers. What factors go into that decision? And what can be done overall to lower the out-of-pocket cost of prescription drugs for consumers? The White House Congress, state lawmakers, regulators, manufacturers, pharmacy benefit managers, and insurers are all wrestling with drug pricing in general, and specialty drug pricing in particular. But finding consensus on a solution is difficult to say the least. To help make sense of the specialty drug issue. We're going to talk to Matt Vesledahl. Matt is SVP, Chief Network Affordability Officer & E&I Network Strategy Lead with UnitedHealthcare. So Matt, welcome to the podcast.
Matt Vesledahl 01:33
Thanks, Ira. Glad to be here.
Ira Apfel 01:35
So let's start with your role. Tell me a little bit about what you do with the organization and how you impact on all this.
Matt Vesledahl 01:45
Yeah, thanks. Thanks for the invitation. Again, I work in our network management area. So that's an area where we manage the relationships with all of the different hospitals, physician groups, etc. And one of the responsibilities that I have in the area is for affordability, so we have a responsibility to figure out how to make health care more affordable. And an aspect of that is inside of our spot, our pharmacy space. For me, I manage the commercial pharmacy business, and all the activity that we undertake to set up our formulary or for drug list and the negotiations and the interactions we have with pharma companies for the participation of their drugs on that list.
Ira Apfel 02:29
And so let's cut right to the chase. Now we're talking about rising drug prices. That seems to be on people's minds all the time today. And they're been they've been a concern for Americans for many years. How has that evolved? And why is it still a central issue? In healthcare affordability?
Matt Vesledahl 02:49
Yeah, it is a vexing problem. So let me give you a stat to just get after this drug price inflation, Rose 60%. And this has the net effect of it between 2007 and 2018. So a 60% increase. That is as much as nearly every other category in the US economy, maybe with the exception of education, higher education and health care, medical costs. So it's among the highest growth categories. From an inflationary perspective. People can't afford that price. As you pointed out, it's an issue, it's been an issue. And since 2018, it's continued to be an issue. Now, some of the discussion that's happened in the public, whether it's through regulators, the federal government, etc., has put some pressure on pharma companies to slow it down. But still, frankly, inflating at a rate that's well above where the rest of the economy is inflating. And as a as a result of that. We're seeing people's pocketbooks impacted more and more each year as the as their costs of medication continue to go up.
Ira Apfel 03:58
So what is the enterprise doing to address the high drug prices and the incredible inflation rate?
Matt Vesledahl 04:06
Yeah, we're, we're after that in a couple of different ways. So you know, tactically, we have conversations with pharma companies about the drugs that they want to have covered and the drugs they bring to market. And we fight tooth and nail to make sure that we get the best discount possible on those drugs. And we do that through a variety of different ways. One of which is rebates or payments that we get back from pharma for placement of their drug in a preferred position on our formulary. We also do value-based contracts with pharma where we will hold a certain percentage of the cost of the drug as a rebate back to us if it doesn't produce the right clinical effect. And then strategically, we are working to manage categories of drugs. So we will put we will look at a category of drugs and decide is there as a drug that's maybe a market leader that's appropriate to prescribe for everyone in a specific condition. Could we make that the single drug that we prioritize? And by doing that, can we get a better net effective price and drive volume to it. So, with the pharma manufacturers, we are trying to drive volume to specific drugs, we use our formulary to help do that. And as a result of that, we are effectively getting a better price to treat that particular condition on a specific drug.
Ira Apfel 05:32
Now, as you alluded to, there's a whole lot of new drugs coming out today that are really incredible, really promising for patients out there. How do you evaluate the tradeoffs with some of these new drugs?
Matt Vesledahl 05:45
That's an important question. So our, our what's called our P and T committee is primarily responsible for that. And in this case, the P and T stands for pharmaceutics and pharmaceuticals and therapy therapies. And that's a group of medical practitioners who sit on this committee and make decisions about when it's appropriate to cover a drug, and what are the conditions that the drug would be covered under, they'll take a look at what the FDA approved the drug for. And based on its approval for treatment, they'll set up a set of conditions inside our coverage criteria that say if you have specific conditions, or you've had a test and the result of the test was a particular thing, then you it would be appropriate for you to get the drug. Once we make a decision on the coverage criteria, we then move into how do we price the drug? And where on our formulary should we put the drug based on the cost and how much cost share would be shared with a member?
Ira Apfel 06:45
You spoke a little earlier very briefly about something called value-based drug pricing. And that's something that's been discussed alongside some of these higher priced drugs. So talk to me a little bit a little bit about value-based drug pricing, how does it work? And what are the benefits of it?
Matt Vesledahl 07:01
Yeah, value-based pricing is the setup of a contract between us and the pharma manufacturer, where there's a specific clinical outcome we're looking for. And if that outcome isn't occurring, we would get some money back. And basically, that's kind of putting your money where your mouth is, if you will, on the pharma side, if they've produced a drug that they say, well, let's, let's take an example cure someone of a particular element, we might have a value-based contract that would reimburse us back if the person that took the drug wasn't in fact cured. Now, that's the simplest example of how you could establish something like that. Unfortunately, many drug therapies are curative, they, they help with symptoms, or they help treat a disease but they don't they don't fix it all together. In those cases, what you're looking for is, does the drug lessen the medical costs associated with treating this person so you've not only got the drug cost for a particular condition, but you also would have the associated physician hospital, maybe emergency room, or surgery costs that come along with the condition as well, if we could give someone a drug that stopped them from needing to use the ER, once or twice a year, which might be the average for everyone with that condition, then you would have that cost associated with a go away, that might be part of a value based contract that we signed with a pharma company looking to lessen our medical cost burden in exchange for paying more or maybe even the same amount on a pharmaceutical product that treats a condition.
Ira Apfel 08:33
I want to turn out to our competition out there particularly, there are several new tech startups that have entered the competition. What do they purport to do? And how are we responding to them?
Matt Vesledahl 08:47
Yeah, there's such a wide array of people that enter the healthcare space, it's hard to comment on all of them. But here's an example of a major one that everybody will recognize by name, Amazon has stepped into the pharmacy space, they purchased the pharmacy that delivers that delivers drugs now if you're an Amazon member, you can get your drugs from Amazon and they'll deliver them to you. You know, their goal, I think in getting into this spaces is probably twofold. One, it's obviously a very rich environment from a dollars and cents perspective, with the amount of money that's spent on healthcare, it makes sense that they might try to be disruptive in this space by providing pharmaceuticals. Our response to that or at least my response and I think those that I've talked to around it are a little bit of Bring it on, you know Dave Wittman when he was here and leading in the Haven, innovation came to the market and that was the combination of Amazon and two other companies looking at health care. competition will make us stronger and I firmly believe it's good to have competition in the market and if more competition comes to the market, it's going to force us to not only do our best, which we do every day, maybe it'll force us to innovate as well. And that's a good thing for all of our consumers.
Ira Apfel 10:10
With drug prices, you know, rising each year, and there's new, more expensive specialty drugs coming out the market. Where do you think this is all headed? And how do you think insurers and pharmacy benefit managers are going to respond to all this?
Matt Vesledahl 10:25
So I think we have to be innovative, I think we have to, we have to start thinking differently around how to protect our members and really drive costs. And then we have to make sure that you know, the right drug is used for the right person at the right price at the right time. 90% of their drugs, 85% of the drugs that are dispensed are generic drugs. And they're relatively affordable from a cost perspective, we just need to continue the journey to making sure people are getting to those generic drugs where they're available. We need to make sure that we're out covering those drugs first, incentivizing members, frankly, to make the right decision when it's when the physicians prescribing for them, allowing them to have enough information to ask the appropriate question around what alternatives exist for me, and how do I get the lowest price possible? And then when they make those good choices, how do we share the value with them? So not only do we lower premiums or lower overall cost, but is there incentive that's that we could put in the hands of the member when they're making a personal choice to get to a lower cost alternative, that kind of thinking needs to proliferate as far as I'm concerned?
Ira Apfel 11:35
Well, Matt Vesledahl. Thank you so much for being on the podcast today.
Matt Vesledahl 11:40
Ira, it's my pleasure. Thanks for having me.
Ira Apfel 11:43
That's it for this episode of UnitedHealth group's weekly dose podcast thanks for listening and have a great rest of your week.