Biotechnology Healthcare - November/December 2008 - (Page 26) care,” he continues, “are very difficult to predict.” Because union-run VEBAs often start out underfunded, Kirkman-Liff believes it will be difficult for biotechnology companies to negotiate with them: “I think VEBAs will be very tough in their negotiations, as a way to be aggressive in trying to implement cost-management strategies.” Moreover, he says, the bond of brotherhood across unions could present other concerns for healthcare providers and biopharma manufacturers. “The unions probably will try to find ways to build bridges and alliances among their VEBAs. As such, several VEBAs may come together to engage in bulk purchasing of pharmaceuticals, medical equipment, and so on. In addition, some VEBAs may also partner with group purchasing organizations.” Kirkman-Liff agrees with Lyles that wellness programs offer a less drastic option for cost containment. He believes that wellness programs, such as those that seek to change unhealthy behaviors, result in better health in general and may help to maintain the funding viability of union-run VEBAs. INDUSTRY STRATEGIES So how can biotechnology companies deal with the new lay of the land? “I think biotechnology companies should begin to reach out to union leadership,” replies Lyles. “Help them to identify and understand biotechnology products and what they represent beyond their price tags. In other words, provide education and training to the people in the unions who manage VEBAs.” Kirkman-Liff advises biotech companies to view VEBAs the same way they view large managed care plans or a Medicare Advantage plan. “It should really be the same type of negotiations,” he suggests. Manufacturers market their products to MCOs and large employers, and will have to learn how to do the same with VEBAs. There are similarities and differences in marketing to a VEBA, compared with other entities, says Christopher V. Goff, Esq., CEO and general counsel for the Employers Health Purchasing Corp. of Ohio and the Employers Health Coalition of Ohio. “Biotech companies will have to sell their value propositions, just as they would when courting an MCO or a group of self-funded employers. They will have to develop a relationship with the VEBA board just as they would with any other commercial customer,” he says. But the difference, he adds, is that unionmanaged VEBAs have a finite pool of money. “Once those dollars are gone, the benefits are also potentially gone, unless the VEBA finds another way to generate revenue. “As such, the VEBA has to engage in some wise spending.” But VEBAs have one advantage that traditional health benefit plans don’t: flexibility. Lack of a defined benefit structure may give VEBAs an opportunity to pay more for care that evidence suggests improves health outcomes or is cost-effective, or less for care that may provide negligible benefit. And that may bode well for access to expensive care, including biologics. The reason, says Wallach, is that for a lot of traditional plans, expensive therapies raise medical costs. “However, in a lot of cases, there is more flexibility in how VEBAs are structured to pay costs, so they may be more likely to pay for more expensive treatments, such as biotechnology. What will and won’t be paid for doesn’t tend to be set in stone, as may be the case with a Blue Cross plan or other traditional healthcare plan,” he says. As such, a biotech company with a skillful negotiator may be able to get more treatments covered through a VEBA. WHAT NEXT? What the future holds for biotechs, in terms of dealing with VEBAs, is yet to be determined. Contacted for this article, the UAW declined to comment on opportunities or challenges for the biotech industry, explaining that decisions have not been made at that level because the structure of the new VEBA was not yet in place. Kirkman-Liff offers an interesting perspective, suggesting that a VEBA’s responsiveness to highcost, high-tech therapies is really in the hands of the biotechnology industry itself. “Certainly, it is very difficult to predict where technology will lead,” he states. However, he believes that if the industry can develop affordable personalized therapies based on an individual’s molecular makeup, then enormous savings in healthcare costs could result. And with that, VEBAs may be much more amenable to making biologics an integral part of the healthcare mix they provide. Few such products have reached the marketplace, however, and for now, the challenge for unions and others that would manage VEBAs is not unlike what physicians faced under capitation in the 1990s: Make do with what you have and spend the money wisely. The implications for access to high-tech therapies can be important. William Atkinson has been a fulltime freelance business writer for more than 30 years. He lives in Carterville, Ill. 26 BIOTECHNOLOGY HEALTHCARE · NOVEMBER/DECEMBER 2008
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