The Trump administration is battling rising health costs by going after the incentives that help drive higher prices.
That’s the idea at the heart of the new payment model for high-priced drugs laid out by the administration last week. It is also the driving force behind a new initiative to engage health care investors about how reimbursement policies are fueling funds for new treatment options in the pipeline.
“We have certain initiatives that we do where we depend on innovation,” Eric Hargan, deputy secretary for Health and Human Services, told CNBC in a recent interview.
“Whether it’s in digital health, new drugs, health [technology], new payments models, managing patient population, all those things are crucial to continuing to improve people’s lives. Much of that is driven by the investors,” he added.
Last week, the deputy secretary sat down with CNBC to discuss the investor initiative at the Cleveland Clinic Innovation Summit. His objective is to gain better insights from venture capitalists, private equity and strategic health care investors, through a year-long project dubbed the Deputy Secretary’s Innovation and Investment Summit.
“Is there some way in which what we’re doing, whether it’s on regulatory side or the reimbursement side, is signaling to them invest here [or] put your money over there. We don’t have a lot of insight into that,” Hargan said.
With increasing reimbursement pressures coming from both government and the private sector payers, health care investors are likely anxious to make sure their voices are heard. Hargan is currently deciding on the members for the summit group, and plans to convene the first meeting in December.
“Drug companies (are) never going to walk away from the world’s largest payer for prescription drugs.”
It’s not unheard of for health officials to communicate with investors. Andy Slavitt, the former administrator of Centers for Medicare and Medicaid administrator, attended the J.P. Morgan Health Care conference while he served during the Obama administration. During former President Barack Obama’s tenure, administration officials also held informational briefings for financial health analysts on the Affordable Care act.
In this case, Hargan said the summit group will be more interactive, and will meet over the course of the next year. While he declined to provide names of those who had applied, he said more than 300 investors had signed up for one of the dozen spots on the summit group.
“It tells me that there was hunger out there for this kind of engagement. I thought this would be fertile ground and it turns out that is in fact that there is,” he said.
The summit group provided a carrot for health investors to engage with the administration on ways to foster more value-based care. But when it comes to reimbursement, HHS Secretary Alex Azar has recently showed that the administration is more than willing to use a punitive stick.
Azar’s new proposal would set reimbursement to 26 percent above international prices for drugs under Medicare Part B, which include high-priced cancer infusions and rheumatoid treatments administered by physicians. Azar has chided critics who contend that the new payment model could lead to less investment and innovation in those treatments.
During a recent speech at the Brookings Institution, Azar said that “to believe that this is going to meaningfully impact patient access, you have to believe that drug companies somehow will find it appealing to sell a drug in Germany, Japan and other countries at lower prices — but not to the United States at higher prices,” he exclaimed.
The secretary added that “drug companies (are) never going to walk away from the world’s largest payer for prescription drugs.”
Drug pricing won’t be the only thing on the summit agenda; new reimbursement models for care delivery and new devices will also be part of the discussion, said Hargan. He is hoping that the investor group can help the administration gain greater insight, the better to get ahead of potential reimbursement problems lurking in the health care pipeline.
“We’re not deciding what should be an investor strategy, or a public-private partnership; this is meant to be a step above that,” he explained.
“What is the role that the private sector plays in bringing those things to market and comes to us to say, ‘Pay for this, or approve this.’ That’s a question that we need to get perspective on,” he said.