Biotechnology Healthcare - November/December 2008 - (Page 34) Pieces need to come together for bio-re to work — sufficient member volume, willing providers, and a proven ability to remove waste in the system. however, SPs are generally weaker than such specialty carve-out programs as behavioral health, laboratory, or radiology, whose costcontrol techniques have remained strong and successful for many years (Frank 2007, Blumenthal 1998). By contrast, bio-re could: • Perform care management across physician and hospital services, not just drugs • Direct patients to centers of excellence for their conditions — a technique that has worked well for other conditions, such as transplants and stroke • Integrate all benefit avenues through which specialty pharmaceuticals and follow-up care are provided (for example, the prescription benefit, medical benefit, or home care) • Develop alternatives to the “percent markup” reimbursement structures, giving physicians incentives for choosing the right drug, not necessarily the most expensive drug The reinsurer, as the care manager, also could make innovative, capitation-like purchasing arrangements with manufacturers. For example, instead of purchasing a product on a per-pill (or per-injection) basis, the reinsurer could buy in bulk, saying, “I represent 50 million lives. I will pay you $500 million for all of the products X, Y, and Z these people need.” This type of guaranteed payment might work well for biopharmaceutical developers, especially innovator companies, because the actual production costs of most drugs — even the most highly priced agents — often are fairly reasonable; the research and development costs that precede U.S. Food and Drug Administration approval account for the bulk of manufacturer expenditures. Such a collective purchaser as bio-re could help biotechnology and pharmaceutical manufacturers reduce the time it takes to gain market acceptance of their products by reducing the number of one-plan-at-a-time approvals. Reduced distribution costs and time to market would translate into higher profits and/or lower costs. Bio-re could start on a small, experimental scale and evolve into a full-service carve-out, as described above. The starting point would probably require collaboration from at least a few of the interested parties, including SP benefits managers, insurers, reinsurers, large employers or employer associations, and biotechnology interests. As with the historical Blue CrossBlue Shield collaboration of providers, members, and payers, biotechnology firms could have a seat on the bio-re board. Similar to VICP, the reinsurance entity might be financed in part by the biotechnology companies — which stand to gain a number of critical advantages, such as guaranteed payments per member per year and, in general, a more certain and secure market for innovative products. Of course, reinsurance is not free money. Specialty carve-out programs for radiology, behavioral health, and laboratory are successful businesses because they save money. Bio-re would have to work similarly — making biotechnology more affordable for patients by removing waste in the system. Biotechnology products (and their patients) are more expensive and their use more rare than behavioral health, laboratory, or radiology — hence the importance of reinsurance financial management tools. CONVERGENCE OF INTERESTS Bio-re offers advantages to almost everyone in the biotechnology chain: Patients • Promotes access to cutting-edge therapies • Ensures better quality of care through a more complete implementation of evidence-based medicine • Allows for lower out-of-pocket costs by designing benefits around centers of excellence Payers • Reduces administrative expense through delegation of responsibility for both a costly, complex area and the need to develop evidence-based expertise • Starts from a familiar, wellknown financing strategy • Introduces more predictable costs • Promotes high-quality care and reduces waste • Finances discounts through large-scale group purchasing Biotechnology companies • Stabilizes reimbursement • Optimizes marketing efficiencies 34 BIOTECHNOLOGY HEALTHCARE · NOVEMBER/DECEMBER 2008
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.