PharmaCon IIR Presentation 2013

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Exploring medical aid member behaviour in a Single Exit Price (SEP) and Designated Service Provider (DSP) environment

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PharmaCon IIR Presentation 2013

  1. 1. Medical Aid Member Behaviour SEP & DSP Clayton Samsodien The Medical Aid Broker Experience
  2. 2. HPCSA concerned over health workers/medical aid agreements
  3. 3. 1. Impact of SEP on member behaviour 2. DSP arrangements and utilisation 3. Consolidation and race for critical mass 4. Comparing SA with international practice in terms of medicine pricing CONTENTS
  4. 4. Impact of SEP on member behaviour
  5. 5. Reduction in spend Source: Council for Medical Schemes
  6. 6. • Reduction in medicine prices – average 22% (2007) • Medicine spend increased by 15.2% in 2011 when compared to 2000. • However, as a proportion of total healthcare spend, decreased from 27% in 2000 to 19.2% in 2004. • From 2005 – 2010, medicine expenditure remained stable at 17% Impact – Statistics Source: CMS 2011-2012
  7. 7. Impact – Providers Source: CMS
  8. 8. • Admin charges to supplement income resulting in co-pays • No tariff codes for admin fees charged • Increased dissatisfaction of medical scheme benefits • Move to Corporate pharmacies fuelled by funders DSP arrangements • Move to generics constitute more than 50% by volume of medicine sales in South Africa, similar to the proportions in the US. Increase from 30% 10 years ago. Impact – members
  9. 9. • Alleged that large retailers welcome price regulation as it keeps competition out of the industry • Low volume, high mark-up establishments provide essential access to the poor • Additional admin charges to supplement income not covered by schemes • Decrease in profit margins, business restructure, alternate revenue streams • Improved efficiencies in medicine stocks, billing and reduction in overheads Impact – Providers
  10. 10. DSP’s Arrangements & Utilisation
  11. 11. • 39% of Pharmacists confident in DSP arrangements • Confidence level of only 52% that medical schemes provide adequately for the reimbursement of chronic medicines and only 51% for the reimbursement of acute medicines. • Use of DSP’s more negative than positive as it restricts freedom, and member provider relationships OMAC (Old Mutual Actuaries and Consultants) Healthcare Monitor • Medicine cost remained stable, lower percentage of healthcare spend, yet benefits are still depleted early in the year Important Issues Source: PPS
  12. 12. • Lower contributions keeping healthcare affordable • Tariffs negotiated upfront hence no out-of-pocket expenses • Provides accessibility and delivery • Benefits last longer • Partnerships save in wasteful expenditures • Members have the right to use other providers but will need to cover the difference in cost Benefits of DSP’s
  13. 13. • Action sought to declare DSP to be an incentive scheme or rebate system hence in contravention of Section 18A of the Medicines and Related Substance Control Act of 1010 of 1965. • Section 18A is clearly aimed at ensuring that the market for medicines is not affected by discount or reward schemes that would lead to retailers or wholesalers artificially hiking the price of medicines. • DSP is a statutory mechanism to compel medical schemes to fund certain medication in full when it is supplied through a DSP and the effect is the provision of certain medicine at no cost • The court stated that the supply of medicine by an appropriate service provider is covered by the MSA and not by section 18A of the Medicines Act. Regulation 8 of the MSA approves of the DSP whereby chronic medication can be obtained by members from approved service providers without paying a 40% co-payment. Important Judicial Matter Source: ENS
  14. 14. Pro It is argued that selective contracting increases competition between provider networks and drives down prices for funders and ultimately consumers. Con Such arrangements have negative impact on the market by leading to foreclosure of non-contracted businesses and potentially raising prices to the uninsured 28 Options with DSP reduced contributions registered in 2012 Market Impact
  15. 15. • Restrictions on service providers compromise a patients choice of healthcare provider resulting in negative impact on provider choice and consumer wellbeing. • OMAC Survey: Medical scheme members 60% negative attitude to DSP arrangements, 31% wanted “freedom of choice”, 13% wanted “to see own doctor” 9% found it “inconvenient”. DSP Arrangement Concerns
  16. 16. • Cost pressure encourage members to migrate/select plans that make use of DSP/Networks • Poor understanding of what constitutes an emergency results in dissatisfaction (Benefits not properly understood) • Removal of DSPs causes confusion and results out-of- pocket expenses • Members tend to migrate to plans without DSP’s after a poor experience • Overall trend – migration to DSP plans becoming popular Member behaviour
  17. 17. Consolidation & Race for Critical Mass
  18. 18. • 120 in 2008 to 95 in 2012 • Administrators: 24 to 19 (2011) • Registered options reduced from 171 to 141 (03/2012) • 2013 Mergers Liberty/Spectramed BestMed/MineMed BestMed/Sappi Discovery/IBM Trends
  19. 19. • Static membership 3.7% growth per annum • Migration to GEMS threatens viability of open schemes • High volume low margins does not favour small players • Larger administrators/schemes benefit from economies of scale • Estimated that the merging of 2 schemes can reduce healthcare costs by 2% • Larger schemes able to negotiate better DSP arrangements and networks due to increased membership Comments
  20. 20. • Change in administrators as a result of mergers not properly communicated resulting in changes in member cards, disease management programmes and providers • Options within schemes merge as well resulting in some fall out and forced migration to “default” options • Above average contribution increases • Mergers for the sake of gaining critical mass without regard to members interest not proper • Schemes attempting to prevent option changes between merged options Concerns
  21. 21. Comparing SA with International Practice in terms of Medicine Pricing
  22. 22. • Germany: First country to roll out reference pricing. Reimbursement prices of pharmaceuticals products controlled indirectly through limits on reimbursement within social insurance schemes and doctors allocated with drug budgets. • USA Prices of prescription medication are largely unregulated in the USA due to the belief that price controls would negatively impact on the investment in research and development for new innovator medicines (Oriola 2009). Medicine prices in America are reported to be 72 % higher than Canada and 102 % higher than in Mexico (Danzon 1999). Global Experience Source: Daleen Pretorius
  23. 23. • Canadian: All citizens have access to medication provided in hospital through a publically financed scheme, addressing hospital and physician services at no cost. Medication dispensed outside of the hospital is not considered under the insured benefits guaranteed by the Canadian Health Act. • Australia: Pharmaceutical Benefits Scheme (PBS) offers Australians government subsidised prescription medicines at a cost that individuals in the community can afford. This forms the central mechanism in Australia for supply of prescription medication. Global Experience Source: Daleen Pretorius
  24. 24. • United Kingdom: utilised pharmaco-economic analysis or economic evaluations to determine what the national healthcare system should pay for therapeutic drug classes. The National Health Service (NHS) in the United Kingdom (UK), controls 95% of the prescription drug market Indirect price controls feature in the UK. This is enforced by controlling profits Companies with capital in the UK negotiate around a reasonable rate of return on capital employed. • SA one of a few countries with price ceilings for all prescription medicines in the private sector resulting in decrease profits. Global Experience
  25. 25. Various pricing and control mechanisms are utilized by governments globally to exert downward pressure on Medicines and render this essential commodity to more people. Medicine cost remained stable, lower percentage of healthcare spend, yet benefits are still depleted early in the year. Therefore….have members benefited from SEP? DSP’s … members benefit from lower contributions but subjected to out-of-pocket experience when accessing benefits in non-emergencies. Conclusion
  26. 26. Questions? Thank You

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