Top Healthcare Market Trends

 

Many of the 2016 top healthcare market trends began back in 2012-to-2014, and finally emerged more clearly in 2015 for commercially insured populations. This year Access Market Intelligence identifies four (4) major themes emerging that creates the top trends to watch in 2016 into 2017.

Themes encapsulating the Top Trends are Macro Issues Trending in the U.S., Pricing Pressures, Networks, and Information Technology.

Here are the Top 10 Trends for 2016:

1) Global Macro Trends wash ashore in the U.S. as pricing pressures around the world and unanswered value gaps to differentiate new medicines add to the potential for healthcare system bankruptcy as it currently exists since medical care inflation continues unchecked.

Adding to system pressure will be implementation of physician payment reform and ACA continued market changes that impacts device and drug manufacturers.

 

2) The 2016 election season will remain front and center this year. Democratic frontrunner Hillary Clinton is likely to mutely paint the ACA as a symbol of success that just needs a bit of fine-tuning.

On the Republican side of the aisle, House Speaker Paul Ryan recently announced that the first order of business this year will be putting a bill on the House floor that would repeal the Affordable Care Act, also referred to as Obamacare. This takes on increasing importance, as it is the first time the U.S. Senate has also voted for repeal.

GOP candidates will fight to be heard on their plans to repeal and replace the ACA, but the eventual nominee will be asked: Replace it with what, exactly? And how is it going to make things better?

 

3) Big meets even bigger: More consolidation in the offing as the implementation of the ACA seems to have put this trend in high gear early in 2016. While regulators weigh the pros and cons of the proposed Aetna-Humana and Anthem-Cigna deals, provider systems are joining forces and snapping up private practices, while in retail pharmacy – Walgreens is currently poised to acquire Rite Aid. Will the FTC slow this down?

Manufacturers have a different issue after a big 2015 of deal making since their targets are reduced and upside to make a difference more difficult in the 2016 marketplace.

Overall, consolidation in the healthcare and pharmaceutical industries is likely to continue, as smaller companies will need to increase their negotiating power when competing with new, larger rivals.

 

4) Pharmaceutical pricing and the growth of biologics will continue to dominate pharmaceutical news in the coming year. Pharmaceutical manufacturers argue they need to charge high prices for money to be used in research and development of new drugs.

The growing percentage of healthcare funds spent on drugs could mean less money for other healthcare or non-healthcare services. Market shareholders are developing plans to control the costs of drugs while still ensuring that patients get the medications they need. CMS reimbursement reductions overall have the effect to further exacerbate pricing pressures on providers, hospitals or health systems.

There will be pushback, but the reaction to high drug prices will vary with the player and the turf being protected. Public and private players will talk and take some action toward basing drug choices on the value delivered. But how will that value be measured?

Adding to the struggle, some 5,000 fold increases in generic drug prices along with 10 times higher drug prices resulting from increased numbers of biologic drugs requires manufacturers to rethink the business model or others will rethink it for them. One aspect may be the entry point is no longer FDA approval but percent cure rate after the success in Hep C market sector.

Biologic drugs pipeline growth that will emerge through 2020 as personalized treatments continue to drive biopharma innovation just as Wall Street valuations and VC investments are being reconsidered due to real market challenges.

Manufacturing trends in the pharmaceutical industry will include continued development of flexible manufacturing of biologic products, closer partnerships between industry and regulators due to introduction of novel concepts, and the need to foster new and existing talent are impacting biopharma trends to meet product availability demands.

 

5) Provider network decisions will increase in importance during 2016 as new rules are being developed for narrowing networks. Because it’s hard for consumers to choose a network without knowing what providers are in it, rules are tightening up on health plans’ obligations to maintain accurate provider lists.

Increasing healthcare costs continue to outpace inflation, creating greater incentives for insurers to offer plans with high-deductibles and narrow networks. A question that needs to be answered is the effect that the narrowing networks have on access and quality.

In response to concerns about the rise of narrow-network health plans, the National Association of Insurance Commissioners (NAIC) has proposed new regulations to ensure that the trend doesn’t harm consumers’ access to affordable, quality care.

CMS recently laid out new rules on this for Medicare Advantage plans on the federal marketplace.

Complicating the issue, out-of-network bills will be a growing issue as the problem stems from the inability of health plans and out-of-network hospital specialty providers to agree on a proper fee, so consumers end up being billed the balance. Neither Congress or regulators are likely to act in a meaningful way in 2016.

 

6) Market trends collide; employers have become concerned about their ability to continue to offer health benefits that will maintain a healthy and productive workforce. ACA implementation has led many employers to more closely analyze the benefits offered to employees to determine whether it still is viable to offer health coverage, especially when faced with uncertain insurance premiums. At the same time, employers have been working hard to comply with the Affordable Care Act (ACA) and are cognizant of the expected excise tax.

Two strategies that Employers are considering include offering health plans with increasing employee cost-sharing such as CDHPs, and offering employees a defined contribution to purchase their own coverage.

 

7) Employers are more willing to take aggressive steps to tackle rising specialty drug costs head on. In the past 5 years, there has been a large increase in the number of employers focused on effective ways to manage the rising cost of specialty drugs. According to a report by Towers Watson & Co., 53% of employers have added new coverage and utilization restrictions for specialty prescription drugs, including prior authorization or limiting quantities based on clinical evidence. Another 32% are expected to add restrictions by 2018, Towers Watson found in the 20th Annual Towers Watson/NBGH Best Practices in Health Care Employer Survey of 487 large U.S. employers.

The National Employer Initiative on Biologic & Specialty Drugs Annual Survey from the Midwest Business Group on Health with the Institute for Integrated Healthcare/Access Market Intelligence found that in 2015 there is a growing appetite to break the status quo in plan design to improve plan performance, and a perceived lack of value in healthcare solutions dealing with critical or chronic disease—drugs and clinical care.

 

8) Education Gaps continue across all stakeholders as regulators, drug companies, payers, patients, and employers as plan sponsors continue to face knowledge gaps around health care along with the challenges facing each other in a post-ACA marketplace.

Stakeholders have realized that these education gaps exist and are developing products and programs to help consumer education take hold in 2016. Employers, insurers, and providers will allocate more resources to providing online and mobile tools to help consumers understand their healthcare plans’ costs and benefits so that they can know the cost of their treatment while obtaining the healthcare services that address their needs.

 

9) Appetite for quality to grow as it relates to value, although the market views quality tools as not some panacea. The fact is that few patients use the proprietary or non-proprietary quality and price transparency apps that health plans, PBMs or other commercial plan sponsors provide. Are they not useful? Do people not care? Are health plans not to be trusted?

While we have seen an increase in measuring and reporting the performance of health care, patients have not been able to consistently interpret the data collected and how it impacts their healthcare decisions.

 

10) There is no end in sight for data breaches as the online mechanism for the Office of Civil Rights (OCR) under Health and Human Services to publish data breaches as reported to them and required by HIPAA continues to uncover issues. The breach numbers last year are staggering. According to OCR, there were 253 healthcare breaches that affected 500 individuals or more with a combined loss of over 112 million records. The Top 10 data breaches alone accounted for just over 111 million records that were lost, stolen or inappropriately disclosed. The top 6 breaches affected at least 1 million individuals – and 4 of the 6 were Blue Cross Blue Shield organizations.

 

In summary, 2015 represented continued change while 2016 will feature accelerated change along with increased governmental oversight, and patient engagement in care decisions in partnership with their provider and employer plan.