The US government and the private sector are likely to clamp down on Specialty Care pricing and even on volumes, according to a report on Wednesday from researchers Liberum.
While the Medicare Part B component of Specialty Care spend is small ($27bn out of $457bn), total US Specialty Care products have been a major component of revenue and profit growth for the Pharma industry, Liberum notes.
"We expect both the government and the private sector to begin to clamp down on Specialty Care pricing and potentially on volumes. However, the changes will take a number of years to be enforced across the board and as a result we remain comfortable that Specialty Care drugs will continue to face a favourable environment for at least the next 12-24 months in the US in both the private and public sector," the report added.
The prognosis came on the day that the Centres for Medicare & Medicaid Services (CMS) announced a programme to test a new model for how Medicare Part B reimburses prescription drugs.
Medicare Part B covers drugs administered by a physician in the office or hospital outpatient setting for the over 65s.
In 2015, Medicare Part B spend on prescription drugs was $27bn, which has grown at a rate of 11% from 2009-2015. While meaningful, this figure is only a small part of the US total spend on prescription drugs, which is expected to be around $450bn in 2015.
However, drug spending now accounts for 16.7% of total $2.729tn US healthcare spending, and is growing rapidly, hence costs need to be controlled as soon as possible wherever they can, the report said.
According to analysis by the United States Department of Health & Human Services, price rises and change in mix accounted for around 60% of the growth in all drug spending (both Primary Care and Specialty Care).
Under the new CMS rules, in phase 1 of the programme, the payment for physician-administered drugs will change from the average sales price (ASP) of the drug plus 6% to, ASP plus 2.5% and a flat fee of $16.80. This is intended to be budget neutral overall, but the change in payment structure is hoped to result in more cost sensitive behaviour on the part of the doctor.
Doctors are currently incentivised to prescribe the most expensive drug, so the new structure should diminish that incentive. This test will commence in late 2016.
In phase 2 of the programme, which will start not start until at least 2017, the changes envisaged will include indications-based pricing (payment for a drug is varied based on its clinical effectiveness for different indications, some indications are less effective than others).
Phase 2 will also mean reference pricing (setting a standard payment rate for groups of therapeutically similar drugs as seen in Germany).
It will also mean risk-sharing agreements based on outcomes (CMS may enter into voluntary agreements with drug manufacturers to link patient outcomes with price adjustments).
Other developments will involve feedback on prescribing patterns and online decision support tools (this data will enable CMS to drive usage towards cheaper alternatives and influence physician behaviour), and discounting or eliminating patient cost-sharing.