Doc turned insurer CEO: Drug pricing ‘immoral and often illegal’
Dr. John Bennett, president and CEO of Capital District Physicians’ Health Plan (CDPHP), has run the Albany, N.Y.-based not-for-profit health insurer since 2008. Bennett represents a firm with 450,000 members and $2.2 billion in revenue, and he’s emerged as one of the more outspoken board members of America’s Health Insurance Plans. Modern Healthcare reporter Bob Herman recently caught up with Bennett after he made some provocative statements about the drug industry on CDPHP’S blog, where he posts regularly. This is an edited transcript.
Modern Healthcare: You wrote that drug prices are “unconscionable” and the actions of pharmaceutical companies “immoral and often illegal.” Why?
Dr. John Bennett: That is based on what I believe are solid medical ethics. We see people charging whatever the market will bear. I remember having discussions in medical school. What would you do if you were a researcher and you developed a cure for cancer? What would be an appropriate charge for that? Are you allowed to take everything patients can give you to let them live? I just don’t think it is right.
MH: How is drug pricing affecting your company?
Bennett: We have issues. Copay coupons seem like a consumer-friendly thing to do. But when they’re attached to a policy which raises the price of the drug anywhere from 70% to 380%, then we have a problem. While consumers think they’re getting a free ride, their insurer is now paying exorbitant increases on the backend.
We have a lot of singlesource generics for which only one or two companies make the drug. It’s fascinating how the prices of these drugs seem to go up in tandem, whether generic or brand name. We had a hepatitis C drug on the market, Sovaldi, and it was priced at $84,000. Then a new drug came out. You would think, with competition, it would be priced lower. No, it’s priced higher. It’s not only the specialty drugs, like those for multiple sclerosis, cancer, hepatitis C and rheumatoid arthritis. It’s things like albuterol for asthma. People should not be fooled into thinking that the Martin Shkreli case at Turing Pharmaceutical was isolated, or that it’s limited to orphan drugs or rare things.
MH: What recommendations do you have to change pharmaceutical pricing?
Bennett: Consumers need to be educated. We are a notfor-profit. Our premiums are highly regulated and cannot be above a certain percentage of our actual medical-claims costs. We need a similar thing in pharmaceuticals.
Let’s find out what pharmaceutical companies truly spend on research and development, not what they have received for free from the National Institutes of Health or universities, and not what they have bought from other companies. Obviously, they need to market. They need to pay their executives. But let’s bring it to light, make it transparent. And there needs to be some limits on how much profit they can take.
MH: Harvard Pilgrim Health Care, a New England-based health insurer, recently signed a value-based contract with Amgen for its new cholesterollowering drug. Essentially, the insurer will receive bigger rebates if the drug doesn’t show the type of results for plan members that it did during clinical trials. Will CDPHP pursue this?
Bennett: We would look to do similar deals. We’ve not gotten any responses from pharmaceutical companies when we’ve tried that. We’ve also been approaching some medicaldevice makers.
MH: The National Association of Insurance Commissioners is finalizing model legislation to ensure that health plans have adequate provider networks. How do you view narrow networks and the decline of preferred provider organizations?
Bennett: We do not have any narrow networks right now. As a physician-sponsored health plan, our goal has always been to raise the quality and service level of all of our physician providers. We also have a lot of communities where there are very few providers. Most of our communities have one hospital, at most two. Who are you going to exclude? So, we have concentrated on raising the
“As a physician-sponsored health plan, our goal has always been to raise the quality and service level of all of our physician providers.”
bar for all of our providers and tried to move to valuebased contracts.
MH: Will your rates stay competitive?
Bennett: We have a pretty good market share in our region. We’re trying to improve not only the quality and service, but the economic efficiency of our primary-care practices. We have a program called Enhanced Primary Care, based on the patientcentered medical home, with a value-based contract. It’s a global riskadjusted payment per member per month, and the bonuses we give to those practices are based on the triple aim: quality, patient experience and service, and cost efficiency.
Payers should be able to have some flexibility in creating value networks. It’s becoming increasingly difficult, however. Provider consolidation makes it very hard for a payer, particularly in some of the smaller markets like ours, to pick a side.
MH: Providers argue that consolidation will lower prices and costs.
Bennett: There are numerous studies to show that, unfortunately, although provider consolidation is often touted as intending to lower costs, it rarely, if ever, does. Provider consolidation historically has almost never led to lower premiums.
MH: What about insurer consolidation?
Bennett: You could look at it that way, or you could also look at it as trying to balance things out. Anthem and Cigna, they’re so broad throughout the nation, that all of their markets are going to look different. In our market, they have very little penetration, so the immediate effect of that will not be very great on CDPHP.
If you have a market where you have one dominant hospital system which has been demanding very high prices, merging the two payers is a counterbalance or a countervailing thing that could be consumerfriendly. I would argue that insurance consolidation could lead to lower prices more than provider consolidation. You could have some markets where the merger of the big five insurers drives prices down.
MH: That sounds like a back-door argument for a single-payer system.
Bennett: I am definitely not saying that. Do you really want the government to be the arbiter of what services you get? I think you need a regulated market.
MH: Your Medicare Advantage plan is pretty highly rated, with 4.5 stars for 2016. What has CDPHP done to achieve that high rating?
Bennett: We partner with our providers. We have a culture in which people know that they have to do the right thing for the members in all of their decisions. They have to treat the member the way a doctor treats a patient.
We provide very hightouch customer service. We follow up on appeals doggedly and make sure that the member is heard. We partner with our providers around highquality care, give them the tools they need, and the data they need to do appropriate prevention and screening for our members. If you think about that, every day, those things all percolate through the culture of the organization.