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Oklahoma is implementing a new program that only pays big pharma full price if their drugs work

Oklahoma is implementing a new program that only pays big pharma full price if their drugs work

  • Under the conditions of a new Medicaid program in Oklahoma, the state will only pay drugmakers the full agreed-upon price of the drug if it works as advertised.
  • Oklahoma’s plan is part of the Trump administration‘s commitment to lower drug prices.

Oklahoma’s Medicaid program this month will start implementing a first-in-the-nation drug pricing policy where it will only compensate drug companies the full price for their medication if they work exactly as advertised.

This type of rebate program aims to hold pharmaceutical companies accountable for the efficacy and safety of their drugs. The program is state-wide and will not affect the pricing of drugs in any other states.

The program works as follows: Oklahoma and the drug companies agree on a certain price for a certain medication. If the drug works as promised, the states pay the drug company the full price. But if it falls short in terms of effectiveness, then the state only pays the drug company a fraction of the initial agreed-upon price.

If it works, it could save the state an estimated $2 million.

It’s all part of of the Trump administration’s plan to lower drug prices.

“Oklahoma’s plan for value-based drug contracts is an important example of how states can innovate to bring down drug costs,” Secretary Alex Azar said in a Center for Medicaid and Medicare services press release in June when the plan was first announced. “The Trump Administration is committed to giving states the flexibility they need to make healthcare more affordable, and strongly supports innovations like value-based purchasing for prescription drugs.”

The state, however, is not forcing drug companies to participate in the program. Sign-up is voluntary, but can positively affect company reputation. Additionally, drug companies that do sign up will have their effective products that have passed through this system put on a preferred drug list, which could result in more profit in the long run.

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The CEO of one of the largest health insurers in the US explains why he thinks healthcare costs so much

The CEO of one of the largest health insurers in the US explains why he thinks healthcare costs so much

Cigna CEO David Cordani

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Cigna CEO David Cordani
source
Reuters
  • Last week, Business Insider sat down with David Cordani, the CEO of health insurer Cigna, to discuss skyrocketing healthcare costs in the US.
  • In 2017, the US spent $3.5 trillion on healthcare. Spending is expected to climb to $5.7 trillion by 2026, according to the Center for Medicare and Medicaid services.
  • Cordani says he thinks high costs come from too much reliance on intervention after the onset of disease or illness, rather than sickness prevention.

It’s no secret that healthcare costs are high in the US.

David Cordani, CEO of Cigna, told Business Insider in an interview last week that the central reason why these costs have skyrocketed is because the country focuses more on intervention after a person gets sick rather than illness prevention.

“We spend the majority of our money and resources addressing people once they’re sick. We need to spend some more of our resources keeping people healthy in the first case, and identifying people who are at risk of health events and lowering those health risks,” he said.

In 2017, the US spent $3.5 trillion on healthcare, and that figure is projected to reach $5.7 trillion by 2026, according to the Center for Medicare and Medicaid Services. Hospital care (32% of spending), drug prices (10% of spending) and physician and clinical services (20% of spending) are all getting more expensive.

Cordani suggested that providing more social service support such as local education programs, financial assistance, and resource guides for finding healthcare providers would help bring down healthcare costs, as well.

Another issue, he said, is that the US has more specialists and more hospitals per capita than most other developed countries, and less primary care doctors like OBGYNs, pediatricians, and family practitioners.

“We spend a lot more money on high cost intervention, as opposed to enabling the primary care physician, the geriatrician, the pediatrician, to have more resources to help to coordinate care for individuals,” said Cordani.

There’s potential to improve drug affordability by increasing the quality of post-clinical care, Cordani believes. Hospitals, instead of just prescribing pills, should assess if the patient truly needs drugs to help them get better. Health insurers should also offer more behavioral and well-being services such as mental health therapy, nutrition guides, and lifestyle advisory.

Cordani summed up his approach: “First, you always need to have a strong foundation. And we do so by engaging the individuals, trying to lower health risks, keep people healthy, and then improve the quality of healthcare that’s delivered. Two, use actionable information to predict or identify health risks before they happen … that’s how you improve overall cost and quality.”

Watch the full interview here.

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