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MACRA’s impact on biopharma: Pressing the accelerator on value-based care

You can’t read a health care publication these days without seeing MACRA as one of the headlines. There is no doubt that MACRA will be a transformative law, directly impacting how clinicians are paid under Medicare. But, will MACRA really impact other stakeholders – including biopharma companies? The answer is yes: the law reinforces where the industry is already headed with value-based care.

What is MACRA?

The Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, replaced the sustainable growth rate (SGR). Under the new program, clinicians face new payment rules for Medicare Part B that encourage value-based arrangements.

Though the Medicare Physician Fee Schedule (PFS) remains the base for Part B payments, the law establishes two tracks to better align payment with quality and outcomes measures. Clinicians who meet certain thresholds through Advanced Alternative Payment Models (APMs) beginning in 2017 will qualify for temporary financial bonuses through higher updates to the PFS. All other clinicians will participate in the Merit-Based Incentive Payment System (MIPS). Under MIPS, clinicians will receive payment adjustments determined by performance on four types of measures: quality, resource use, use of health information technology, and participation in certain activities. MACRA does not change Part B drug payment policy but resource-use measures under MIPS will likely reflect Part B drug spending.

How is the industry preparing for MACRA?

The Deloitte Center for Health Solutions recently conducted a brief online pulse survey of US executives who lead value-based care efforts at their organizations to gauge awareness, preparedness, and perceptions about MACRA. Their responses suggest that biopharma’s customers – health care providers and health plans – expect significant disruption to their business as a result of MACRA, but biopharma leaders do not.

The health system and health plan executive respondents said they feel that MACRA will be disruptive to multiple aspects of their businesses:

  • More than one-third of health system executives surveyed believe that MACRA will be very disruptive to their organization’s financial model (41 percent) and technology systems (35 percent).
  • 28 percent of health system and health plan executives surveyed say they plan to pursue more value-based payment arrangements in the future due to MACRA.
  • 52 and 83 percent of health system and health plan executives surveyed, respectively, believe that MACRA will lead to increased physician consolidation.

Compared to the health system and health plan executives, the biopharma executive respondents  tended to be less concerned that MACRA will disrupt their customer relationships and instead said that they believe that MACRA could impact market access for their products:

  • Of those surveyed, fewer biopharma executives feel that MACRA would be very disruptive to their relationships with health systems, compared with health system and health plan executives. Large portions of all respondents reported that they believe MACRA will be very disruptive to the relationships between life sciences companies and health systems.
  • A majority of biopharma executives surveyed believe that MACRA will make it more difficult for patients to access the care, services, or products they need, but fewer health system and plan executives anticipate this impact.

While no one knows how MACRA will play out and, therefore, there are no “right” answers, comparing perceptions on how MACRA might disrupt stakeholder relationships suggests that biopharma may not be adequately prepared. And, like it or not, there will be an impact.

MACRA will change how clinicians view and use drugs, especially those that are physician-administered. Clinicians will be seeking to demonstrate the value of the care they provide – including value provided through the use of drug treatments. Quality measures under MIPS are likely to include those that reflect good medication adherence, for example.

Increasing physician consolidation also means that health system administrators will continue to play an increasing role in health care delivery and treatment choices. Clinicians in large practices may have more rules regulating what they prescribe, determined by health system committees and standardized treatment protocols. Health system committees will likely require demonstration of the cost-effectiveness of products before considering them for use or embedding them into treatment protocols.

On top of this, health plans are actively seeking to increase value-based agreements, driving the demand for biopharma to tie payment to performance of products.

Navigating the road ahead

In many ways, MACRA doesn’t change the capabilities that biopharma needs but it does place additional pressure on the industry to accelerate its development of value-based offerings. Biopharma companies will likely need to continue to build the evidence, capabilities, and risk-tolerance levels needed to enable outcomes-based contracts.

Companies should consider focusing on showcasing products’ value through the:

  • Structure of late stage clinical programs
  • Real world evidence programs
  • Commercial materials and models
  • Contracting structures to tie in financial incentives
  • Analytical capabilities to track and measure performance against contracts

It’s easy to see why most discussions about MACRA tend to focus on changes within and impacts on health care providers and, to a lesser extent, health plans. However, patients also hold a critical role. Medicare adherence and engagement in their own care can help improve outcomes. Given this, it’s critical that biopharma companies continue to evolve their patient/consumer engagement approaches – especially when it comes to programs that complement use of their medications and broader patient support platforms. These approaches will not only enable biopharma companies to stay connected to the patients who take their medications to help them realize the value of the treatment they are undergoing. They also create a foundation for the companies to support health care providers and health plans as they increasingly focus on the value associated with treatment choices.

As our health care system moves along the road to MACRA implementation, biopharma companies should consider focusing on accelerating their evolution toward value-based models to keep up with customer demands. In addition, they should stay close to ongoing decisions about how MACRA will be implemented. Doing so can enable each biopharma company to understand not only the priorities set within MACRA but also how their medicines can help providers and health plans achieve their value-based care goals.

Author bio

Jodi Reynolds is a principal in Deloitte’s life sciences and health care strategy practice and brings over 16 years of experience working with and for life sciences companies. Jodi is a leader in the strategy practice with a specific focus on product strategy and customer and stakeholder engagement.  She also focuses on understanding the implications of value-based care on the biopharma sector and the opportunities it creates.