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Rising Drug Costs, $500 Million Gap Concerns Lynne Saxton

Eight months into her job as director of the Oregon Health Authority, Lynne Saxton applauded the audience at State of Reform’s annual Portland conference for standing up for coordinated care organizations and getting 95 percent of Oregonians insured.
September 17, 2015

“My goal is to get everyone eligible on Medicaid and help those moving off Medicaid to insurance,” Lynne Saxton told health policy leaders gathered at the State of Reform on Tuesday.

Saxton said her counterpart in Washington state tells her she’s lucky to have both public health and Medicaid together under a single agency to better leverage the two and use funding streams for best practices. A recent Cascadia earthquake preparedness playbook session showed Saxton public health’s role in the “state’s ability to recover in technologically and scientifically difficult” situations.

Mark Fairbanks, 90 days into his job as chief financial officer, said OHA developed “a six-year planning tool to look at levers” to fill a nearly $500 million expected funding gap for Medicaid in 2017-2019.

While that gap worries Martin Taylor, director of public policy and member Centricity for CareOregon, Medicaid capped at a 3.4 percent growth curve has thrived while “Individual commercial plans have been clobbered with double-digit rate hikes” during the same period of transformation.

With aggressive competition among dozens of insurers, rates initially were set too low for insurers to maintain financial soundness losing $600 per insured per year, said Patrick Allen, director of Oregon’s insurance regulator, the Department of Consumer and Business Services. With an overall 24 percent hike, Oregon rates now are on par with Washington and California.

Financing Medicaid worries Jeff Heatherington, president and CEO of FamilyCare Inc., who claims Triple Aim is deficient model because it “leaves out health. Healthcare is at the tail end of health” with just 10 percent of what makes a person healthy happening in a clinic. Yet clinical healthcare eats up 18 percent of GDP when that money could be put into schools and housing, he said. Rising drug prices are among his top concerns.

He also sees physicians turning into production assistants, with insurers forcing them to see up to six patients every hour. “Is that good care or a revenue generator?” he asked, suggesting that number be ratcheted down to three patients per hour to give physicians enough time to do their job.

Jim Slater, pharmacy director of CareOregon which serves 250,000 Oregon Medicaid patients through four CCOs says inflation rates for drugs, particularly specialty drugs, are in a “different zone” than inflation for food, housing, education, transportation or anything else with a 154.98 percent increase.

“This is a very serious ask of resources and I don’t see how we’re going to keep up,” Slater said.

Sharon Brigner, deputy vice president of PhMRA, a Washington, D.C. trade association representing 28 member pharmaceutical manufacturers, said just 10 cents of every healthcare dollar goes to drugs with hospitals claiming 32 cents.

Brigner said the 2013 spike in specialty drug prices was driven by 10 million newly insured and 41 new medicines coming to market, including six new drugs that cure Hepatitis C. She said it takes 10 years to bring drugs to market, and only 12 percent of those medications get approved for use.

Audience members asked how much pharmaceutical companies spent on marketing and lobbying versus research and pointed out that pharmaceutical companies have among the highest profit margins of any industry.

Jan can be reached at [email protected].