As a pharmacist and director of a free clinic, I have been asked on multiple occasions to give my opinion about the controversial Issue 2 that is on the November 2017 Ohio ballot. Though I appreciate the many requests for my opinion, I rarely like to give it. I will try to paint a clear picture of the issue here in my own words, but it should be known that I speak only from various experiences as a medical professional and administrator over the past decade. The following words should in no way be read as a representation of any organization or employer that I am affiliated with.
So what is Issue 2?
Those for Issue 2 would like to see regulators make it required that all prescription medications purchased through the State of Ohio (like Medicaid or other programs that involve the utilization of tax dollars to purchase healthcare) should not cost more than what the VA currently pays through their negotiated pricing.
In the words of the folks for Issue 2 (yesonissue2.com), “If voters pass the measure, the State of Ohio would be required to pay no more for prescription drugs than is paid for the same medications by the U.S. Department of Veterans Affairs (VA). It could also negotiate for prices below those paid by the Department. This would encompass all drug purchases in which the State is the ultimate payer, whether it purchased the drugs directly from the pharmaceutical companies or not.”
Those whom are against Issue 2 (deceptiverxissue.org), obviously, do not wish to see legislation like this approved as they state, “Things that sound too good to be true usually are—and that’s certainly the case here. Since the VA does not disclose purchasing agreements for medications, the state can’t know what the VA’s “lowest price” is and, therefore, what benchmark to meet.”
To sum all this up, if the State were to pass Issue 2, then any prescription medication price purchased via State tax dollars would be required to be at or less than where the currently VA negotiated price is.
What does that mean?!
Like all other industries, pharmaceutical purchasing can be leveraged and negotiated based upon the size of the orders. The larger the purchase order made by a business, the better deal they can get per item.
For example, let’s imagine you are a beef supplier that sells patties to McDonald’s. They would order 10’s to 100’s of thousands of patties a week, increasing the likelihood that you as a supplier would negotiate per patty price with them. Now, let’s say, a mom-and-pop burger joint calls you up and wants just 100 patties a week, and, by the way, they need you to ship that across two states to them. Kindly mom-and-pop have much less leverage for negotiation when they come to you asking for the same per patty price as McDonald’s, right? Well that’s how the world of pharmaceutical sales through the medicine wholesalers (warehouses that stock medication for purchase) works. The larger buying power you have, the better price you can negotiate.
Which brings us back around to the purchasing power that the VA wields when working with wholesalers and the reason why Issue 2 has come to exist. So, why wouldn’t we want our tax dollars spent on cheaper medications that are funneled through the Medicaid system?
Though this issue seems to be very cut-and-dry from a civilian stand-point, there is plenty of little nuisances here to consider.
Centralized vs. decentralized health care
By reading my humble post, I can safely assume you are able to decipher the differing political stances here. I would really rather not get involved in the “vote the card” discussion and would like to focus on higher level monetary philosophies when looking at this proposed model.
In his book, More Human, Steve Hilton has a terrific chapter that discusses the benefits and pitfalls of a decentralized healthcare system. By decentralized, Hilton refers to the same concept to which the military holds and that is in order to wage a war of maneuver rather than attrition we must be willing to walk away from the “factory hospital” models in the hopes to empower smaller community settings. Though he spends pages and pages discussing the benefits to medicine of decentralized, community-centered practices, Hilton refrains from delving into the funding of that practice.
If you are one who believes, like Hilton does, that a decentralized model for healthcare is the way to go, then you may well vote no on Issue 2. The decentralized mindset would want to allow an unregulated environment to continue to thrive, in order to incubate new and innovative private pricing models that, at times, may well drive down costs, for some, more than inflexible government regulations would allow.
On the other hand, the centralized model of healthcare brings the benefit of creating systems and best practices over a large scale operation that could well become the most effective and efficient way of delivering healthcare. In her brief, How is Health Care Utilization Changing, Katherine Hempstead from the Robert Wood Johnson Foundation speaks to the trend of increased utilization of health care in the face of spend growth.
Why is this relevant to Issue 2 you ask? Hempstead goes on in the brief to explain that if we look at the current trends in health care staffing we find that though hiring has slowed down services continue to increase due to advancing technology (i.e. telemedicine). This is important because the trend in ambulatory setting (think outpatient) utilization for care is on the rise with these dynamic services, while inpatient volume has been relatively flat. With these new technology trends in a centralized care model, it would certainly make sense to create even more centralized payment options as a potential way to increase efficiency. With this mindset, a vote yes on Issue 2 would make a lot of sense.
What stance should voters take?
Well, now, that’s certainly none of my business! However, I have had the unique blessing of working half of my 10 years in healthcare in the big box, for-profit, corporate world, and the last half in the small, one-location, non-profit world. Currently, I dabble in both and get to see, first-hand, these systems at speed.
I am very attracted to the decentralized model, as this has allowed me in my position at the free clinic (that, I should add, is not federally funded) the opportunity to seek out unique supply streams that drive down costs and allow us to purchase in ways that are community-centered. One such organization, Dispensary of Hope (dispensaryofhope.org), is a non-profit prescription drug wholesaler that works directly with drug manufacturers to secure medication that would otherwise be destroyed, so that it can be given to free clinics and charitable pharmacies. Without this organization, we would not be able to hold the large inventory that we do currently with our budget.
I also understand the benefits to our currently centralized Medicaid system and subsidized prescription plans through the Affordable Care Act that a vote on Issue 2 would have. In 2015, states that expanded Medicaid (which Ohio is one of) saw an average of $5 million in increased hospital revenue and a $3.2 million decrease in uncompensated care costs. This allowed, on average, for these facilities to experience improved operating margins to the tune of 2.5 percentage points. This is good for the hospitals, but also a case for more pricing regulation as those tax dollars may not have been spent in the most efficient manner.
You made it this far and may still not know what stance to take. Sorry to disappoint.
One final thought that I will share here will either makes things clear or mud. This initiative is based on the current pricing practices of the U.S. Department of Veterans Affairs, however, those practices are not known or shared by those who have laid out the initiative, and rather they only state that the VA is able to leverage their purchasing power to drive down medication costs by “20-24 percent”.
These medication purchases are made in the controlled clinical environment of an uber-centralized care facility (a medical facility with everything under one roof), that is a Veterans Affairs Hospital, and not in the semi-decentralized ambulatory care setting where Medicaid benefits recipients are accustomed to receiving their care. And by this semi-decentralized ambulatory care, I’m speaking of the healthcare system in the community that civilian’s access on a daily basis. The pitfalls that lie here, are the disconnected care providers, in numerous stand-alone practices that struggle to communicate patient needs.
These logistics may seem minor, until you run into a situation where more regulated pricing inevitability leads to more prior authorizations and preferred drug prescribing. Communication between providers in the semi-decentralized ambulatory care setting is much more complex than the VA setting where all care is provided under that one roof.
Though I admire the cost savings that these folks claim we will see with a vote of “yes” on Issue 2, perhaps some more time to study this model in the ambulatory care setting would make sense.
Justin Coby, PharmD, has been affiliated with Health Partners Free Clinic as a volunteer pharmacist since 2007, and was appointed executive director in 2012.