INSIGHTS AND PERSPECTIVES

2018 policy in review: Pros, cons and promise

BY Lindsay Bealor Greenleaf

As 2018 comes to a close, many of us will spend a brief moment reflecting on the year, pondering our highs and lows, our successes and failures. The most motivated among us will take the extra step to identify areas of our life where there is room for improvement, like getting to the gym or finishing a column before the eleventh hour.

Rather than limit reflection to our personal lives, how about taking a trip down memory lane to revisit prescription drug pricing reforms?

Let’s start off on a positive note by recalling favorable policy changes and proposals.

In May 2018, the Trump administration proposed several positive policy changes in its drug pricing “Blueprint,” including: a proposal to modify the Anti-Kickback Statute safe harbor that allows for rebates; a proposal to require a percentage of rebates be applied at the point of sale to reduce patients’ out-of-pocket costs; and a proposal to promote value-based purchasing in federal programs by enabling tools like indication-based pricing.

A few months later, in September, Congress voted to prohibit “pharmacy gag clauses,” which is language middlemen known as pharmacy benefit managers insert into contracts with pharmacies that prevent the pharmacist from telling a customer when they can pay less for a drug by simply forgoing insurance.

It is ludicrous to think that using insurance could actually be worse for patients, and even more ludicrous that a pharmacist would be prohibited from helping them save money. Considering a recent USC Schaeffer study found that 23 percent of prescriptions paid at the pharmacy counter by commercially insured patients are overpaid, this reform to prohibit pharmacy gag clauses marks a significant win for patients.

However, this year also included several troubling policies put forth by the Trump administration.

In August, the administration enacted a policy change allowing Medicare Advantage plans to force seniors to “step through” an undesired drug before being granted access to the physician-administered therapy prescribed by their doctor. Beginning in 2019, this “fail first” policy will significantly harm patients suffering from some of the most complex and debilitating conditions, like cancer and rheumatoid arthritis.

In October, the Trump administration proposed the “International Pricing Index Model,” which would impose international reference pricing for Medicare patients’ physician-administered drugs.

Compared to the rest of the world, the United States places a high value on access to therapies, which is why Americans currently enjoy access to cancer treatments two years earlier than other developed countries. If the administration chooses to swap today’s payment design for a model that links to socialist countries’ payment designs, we are at risk of losing the speedy access to innovative therapies that we enjoy today. Americans could be forced to wait in line for cures, or worse: there will be nothing to wait in line for.

In November, the administration targeted longstanding patient protections in the Medicare Part D program by proposing to weaken the “Protected Classes,” which currently guarantee coverage for cancer, HIV, epilepsy, mental health and transplant-rejection drugs. A recently released proposed rule would allow plans to expand the use of prior authorization and step therapy, as well as exclude a Protected Class drug from coverage if its price increases faster than inflation. If finalized, this policy change would hinder access to treatments for Medicare’s most vulnerable patients.

While 2018 brought a mixed bag of reforms, we can find promise in the future.

With Democrats winning control of the House, we expect them to spend the next two years developing and voting on aggressive drug pricing legislation, including policies to allow the government to negotiate prices in Medicare, which is essentially government price setting, as well as expand the government’s power to seize patents if they do not approve of a manufacturer’s price. But with Republicans maintaining control of the Senate, it is unlikely that any of these ill-conceived policies will be enacted next year.

Since regulators are immune to the slowdowns that result from midterm election campaigns and the changing of the guard, we expect the Trump administration to continue its current pace of policymaking.

Going into 2019, we hope that the administration sets aside some time to observe the implications of recently enacted changes before barreling through with another series of reforms. Mindful observation and reflection is important, especially when it comes to policy, because it is difficult to assess how well one policy is working while numerous other policy changes are simultaneously underway.

Only by slowing down and measuring the effectiveness, as well as the consequences, of this past year’s policy reforms can we be confident that these changes are productive and protect patients’ access to critical therapies.


Lindsay Bealor GreenleafLindsay Bealor Greenleaf is director at ADVI, a healthcare consulting firm representing life science companies and healthcare provider organizations.

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Let’s rethink generations in 2019

BY David Orgel

There’s a generation gap that could get bigger in 2019.

It’s not about disagreements between different age groups. Rather, it’s a gap in terms of how generations are perceived versus the reality.

This is a crucial topic for retailers because they have worked hard to understand shoppers. However, there’s a temptation to make broad assumptions about how shoppers will act based on generational trends. Those insights only go so far. They can be too general, and often don’t account for ongoing consumer behavior shifts.

This will become a bigger concern as we move into 2019. That’s because retailers increasingly are counting on personalization strategies to address individual customer needs. Technology will enable personalization more and more. Nevertheless, getting to that point will be challenging if we’re relying on outdated assumptions about consumers and generations.

Recent consumer research from the Food Marketing Institute helps to underscore how quickly consumers are changing, and why we need to stay on top of generational realities. The findings are relevant to many types of retail channels. Here are a few key examples based on FMI’s “2018 U.S. Grocery Shopper Trends Report:”

  • Online shopping: If you think millennials lead the charge for growth in online shopping, you’d be right. That is, until now. Gen Xers and older consumers are driving growth for the first time, according to the report. It’s important to adjust thinking to realize how this trend is broadening to older generations. It’s likely that millennial behaviors have influenced older shoppers, who are taking the ball and running with it.
  • Transparency: There’s a general assumption that younger consumers are the most interested in transparency. However, the report data shows that baby boomers and Gen Xers also demand transparency from retailers and brands. In fact, these older shoppers are the most focused on at least one aspect of transparency: how honest and open companies are about business practices. The fact is, consumers across generations and other demographic markers are interested in transparency. This was corroborated by earlier industry research. “In this information age, consumers expect they should be able to find anything,” said David Fikes, FMI’s vice president of communications and community/consumer affairs. “Maybe this has been led by millennials, but everyone is adapting.”
  • Checkout experience: I tend to think younger shoppers are the ones populating store self-checkout lines, while older folks are willing to wait for cashiers. However, that assumption is not true. Shoppers overall are now prioritizing easy checkout, including through self-checkout or smartphone assistance, according to the report data. Consider that even matures, the oldest generation measured, have jumped on the self-checkout bandwagon.

I recently came across a clever way of looking at the generational topic. FMI’s Melaina Lewis, the association’s manager of communications, wrote a blog post called “I’m a 25-year-Old-Grocery-Shopping Boomer?”

The piece leverages gamification with a chart that takes readers through a number of questions and steps to determine, “Do you grocery shop like your generation?” The answers are calculated using the report’s data and insights, and the chart explains each user’s findings.

In Melaina’s case, she has shopped more like a baby boomer over the past year, compared to the millennial she is. That’s because her preference is to grocery shop in stores rather than online, even as she makes use of grocery store apps. This lines up with typical boomer patterns. The point is that consumers do not always walk in step with their own generations.

That’s why we should resolve to rethink generational perceptions in the coming year. This requires digging deeper into consumer data and better understanding which insights are relevant, and which aren’t. The best approach is to combine generational insights with more segmented or personalized data.

Retailers will find this to be a competitive differentiator. It will keep the focus on generations — not generalizations.


David Orgel is an award-winning business journalist, industry expert and speaker. He currently is the principal of David Orgel Consulting, delivering strategic content and counsel to the food, retail and CPG industries. To read last month’s column, click here.

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Editor’s note: Sears’ troubles mark end of an era

BY Seth Mendelson

Sears, once the nation’s largest retailer, filed for bankruptcy in mid-October.

It was a long time coming. Sears has been the retail version of a dead man walking for the better part of a generation, and even its much-questioned purchase of the equally struggling Kmart chain more than a decade ago did little to change the perception that this was a big chain in big trouble.

The gurus who run this chain said they will keep it going with a loan or two from some high-risk investors, though they plan to close about 142 stores later this year. This is just corporate-speak that really means they have no clue what to do with the remaining stores, and they will probably close these 500 or so units in the near future too.

So, for all intents and purposes, Sears is dead, and it died because its corporate leadership — over the last 20-to-25 years and maybe longer — failed to realize that consumer-shopping behavior was quickly changing and they needed to change with it or fail. Even the decision to close the famous Sears catalog in 1993 now seems like a mistake, given the fact that a digital version of it could probably have been successful nowadays.

Instead of reading the consumer tea leaves, Sears did its best to dismantle its retail assets, selling off many of its most popular brands and doing little to keep up with changing fashion trends that could have kept the company at the forefront of the industry. Meanwhile, the company seemed to pay a great deal of attention to its real estate portfolio, which may have made its top executives rich, but did nothing for its retail operation.

Can other retailers benefit from Sears’ decline? Unlike the Toys “R” Us liquidation a few months ago, there is not much to go after if Sears completely closes down. Consumers got the message years ago that this was not a chain that carried the most sought-after merchandise, and they stayed away in growing numbers. Suppliers did not want to help either, fearful that when a bankruptcy filing did take place, they would be left holding the bag.

In the end, Sears will join the growing list of retailers that failed. The problem here might be that no one really cared anymore.

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