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2020 New Horizons Keynote Lecture by David W. Parke II, MD (Video)

2020 New Horizons Forum Keynote Lecture: “When Cost and Innovation Collide in Ophthalmology.”

David W. Parke II, MD (Chief Executive Officer, American Academy of Ophthalmology) delivered the Drs. Henry and Frederick Sutro Memorial Lecture at the 9th annual Glaucoma 360 New Horizons Forum in San Francisco on February 7, 2020. The keynote started a full day of presentations and panel discussions on innovations in glaucoma drug delivery, pharmaceuticals, and devices. New Horizons Forum is a glaucoma innovation meeting presented annually by the Glaucoma Research Foundation in San Francisco, California.

Please click the video below to watch the keynote lecture:

2020 New Horizons Keynote Lecture - David W. Parke II, MD from Glaucoma Research.

Video Transcript

Andrew Iwach, MD: These are our Keynote speakers from prior years, really KOL's [key opinion leaders], luminaries in our field. It's exciting to see that we can draw these people and the information they share with us really stimulates us to move the ball forward in innovation. To this year's Keynote speaker: Dr. David Parke. His education started at Stanford University, then on to Baylor College of Medicine for his medical degree. At the Eye Institute at Baylor he did his ophthalmology residency and retina fellowship.

This is a busy man, in very different areas, very diverse, from different areas: data management, data collection, diagnosis. He has been an important influence and leader within OMIC which is the Ophthalmic Mutual Insurance Company, which gives him insight into when problems can occur and there are issues so it puts him in the center of this. He's been a leader of the AUPO [Association of University Professors of Ophthalmology] on the academic side. He's been on editorial boards, he is one of the editors in the past of the American Journal of Ophthalmology. He also does research with the Academy's team. Not only do they have offices here in San Francisco, but they also have a physical presence in Washington D.C. He served for 17 years as the lead for the Dean McGee Eye Institute before taking on the role of CEO here in San Francisco for the American Academy of Ophthalmology. I'd like to ask Dr. David Park to join us, to talk to us about “when cost and innovation collide.” And before you speak Dr. Park, I'd like to present you with a small token of our appreciation, a plaque to commemorate your talk today.

David W. Parke II, MD: Thank you very much, Andrew. This is a particular pleasure. It's not very often, that as a retina person, I am asked to speak at a glaucoma meeting. And I will admit and confess over the years to having caused a fair amount of it. But today what I was asked to talk about, and I really appreciate very much the fact that Andrew asked me to speak on the subject, is really when cost and innovation collide; and Adrienne [Graves] so eloquently said, this meeting is all about innovation. And as a physician I've benefited, my patients have benefited from innovation, and many of us in this room have personally. We now face the, sort of the reality, how do we continue to foster innovation while handling some of the real policy issues that are before us? I apologize at 8:00 in the morning, a lot of what going to be speaking about is not exciting in the sense that innovative science is, it's really health policy, health economics, and there's a little bit of politics thrown in, but it is the reality in which we live.

If you look at this issue in Washington [D.C.] these days, you say, if you look at the exit polls in Iowa, the healthcare is either the number one or number two issue and specifically healthcare costs and it's probably the single issue in Washington from a political standpoint on which both parties are united and the single issue they both want to own. Now, I'll try to demonstrate that this is not simply a drug or device issue, but it has ramifications throughout healthcare, and it has ramifications for every practicing ophthalmologist as well. But the bottom line is that if cost limits the clinical impact of innovation, then it limits innovation itself.

So, let's go to an example. This morning, Bloomberg relays that the pharma behemoth ‘GlauAllerNovGen’ received FDA approval for its new drug. The new drug ‘GlauBgone’ [audience laugther] reverses visual field loss with no complications. The tentative pricing was announced at $40,000 per year. U.S. sales are estimated to become $10 billion per year. The company stated in a release, ‘this is less than the average annual cost of care for these patients, factoring in the cost of lifetime care for those who would have gone blind without GlauBgone. GlauBgone represents innovative science. Without adequate payment, we will never have drugs like GlauBgone.’ This is no different than what's happening in oncology and rheumatology and in the rare disease space, and the company statement is accurate. Without adequate payment, we will never have the drugs and devices we so desperately need.

So, let's look at this from the healthcare policy perspective. Our goals are obvious. Reduce costs not only to the patient but aggregates, costs to society, improve access or quality, in part through innovation… and can we, or how can we have it all?

Now, if you look at this slide, this is something we all know, and this just uses 2017 data, that the total healthcare expenditure per capita in the United States is far above the comparable country average in every other country out there. So we have an issue. Is this sustainable? And it's changing. If you look at it over a period of about 40 years, you see that it's gone from about $1,000 to nearly $11,000. And there is a patient cost. These price increases come at a real patient cost. When treatments cost more than patients can afford or by extension [more than] employers and taxpayers can afford, medication adherence or the use of valuable devices goes down and this has real societal cost. Non-adherence to medication throughout all of healthcare is estimated to be about $105 billion annually in avoidable healthcare costs.

Now, some maintain that healthcare cost increases are not innovation driven but are simply a matter of demography. We have a growing and particularly aging population. Multiple economic studies however, have demonstrated that it really isn't true. When you normalize for population change, innovation remains the largest driver for cost increases. It's just bred over a larger group.

Others maintain that because innovative technology increases physician productivity, it results in more physician revenue. It should be something therefore, that the physician community welcomes on an economic basis as well as on a quality and support of innovation basis. Again, that's not really true. Medicare payment bakes this into the payment schema such that because of budget neutrality, productivity enhancements result in automatic decreases in physician payment per service. So the economics become complex.

The core issue behind all this, and we all know this from an economic standpoint, [is] that the healthcare market is not an efficient market. Patients don't pay the full actuarial value of their prescription drug coverage leading to a relatively unconstrained demand signal, or set of signals, and payers and pharmacy benefit managers have a very permissive approach to this, which creates further market inefficiency. And ultimately, what we end up with is Medicare setting an implicit pricing standard, which goes for all other payers in the commercial space and the self-funded space.

So let's look at some drug pricing issues. In 2007 Medicare accounted for 18% of retail drug spending. It's now about 31%. Here's an interesting thing, is that about 30 million Americans are classified as having a rare disease that could benefit from treatment that currently doesn't exist. And in recent years, more and more drug approvals are in the rare disease space. And if the assumption was made that they were at a price of $250,000 per drug, that would equal half the national budget. So you know, we all want these drugs and devices. We all basically want innovation to succeed. How do we reconcile this with the pricing issues?

Let's look at device issues on the other hand, because it's not just on the drug side. Any procedure, because of budget neutrality mechanisms, pushes down the value of everything else, even with some volume growth. And so, there really is no net payment for new technology upgrades. Think for instance, Femto. And this is a difficult concept for patients and even for some physicians to understand because they assume, I think as we all would, that better results should be paid better. I mean, think cataracts and intraocular lenses compared to what came before.

And here's an example of the impact of new technology on old payments. As you all know, cataract surgery went down January this year. Why did it go down? It went down because of a glaucoma procedure. It went down because of endo-cyclophotocoagulation. According to CMS procedures, this then opened the entire family of codes and endocyclo opened all the cataract codes to re-evaluation, and this resulted in approximately a 15% decrease in cataract surgery payment. And many new technologies that impact procedures result not only in a payment for the technology, but in a re-evaluation of the entire family of codes, and we all know that re-evaluations never go up. And so this is another example of the intersection of innovation and cost. And this is a graph to show you what's happened to the payment for cataract surgery since 1994. Certainly we'd all argue that the quality of the outcome has gone up dramatically, but yet the payment has gone down substantially.

Now we all know that in a healthcare policy right now, there's a major movement from volume-based payments to value-based payments, where value is the classical quality over cost. So how does this play out in the innovation space? There are some principles we have to keep in mind. The first one is that incremental value is always greatest when there's no current treatment. Think anti-VEGF drugs or Luxturna, but innovation really must work. I mean, take a look on the other hand, at the market position of retinal prostheses. If there's incremental value that's marginal, the price journaling must be equivalent or less to existing prices, generally. And remember this is relative across the entire scope of medicine, the payment schema exhibit relativity, not just within ophthalmology but into general surgery, into dermatology and oncology. And at one point, for instance, I think as many of you know, in the early development of MIGS devices, their payment was higher than for a hysterectomy or a mastectomy, and so the rest of the community goes, "Does that make sense?" And that's one of the things that drives ultimate payment change.

There are some newer approaches to valuing, and one of them of course we know is value-based pricing in the pharmaceutical space. We also have indication-specific pricing. If a drug or device is used for two different things, if it is more effective in one space than the other, it may potentially pay differently in each of those two indications. And then outcomes- based [pricing] which is interesting. If you have a drug that's supposed to cut the mortality from congestive heart failure in half and it doesn't, is the whole concept of rebating to the payer that the drug or device didn't meet expectations. I'm not advancing any of these specifically, but saying these are all being talked about now in the health policy space.

Now, how do other countries do it? Some of you in the audience, for instance, know the British National Health Service approach using the National Institute for Health and Care Excellence. They have a fairly rigorous application of what's known as the quality or quality adjusted life year with about a $25,000 to $40,000 U.S. threshold and it's a binding decision. Now those of us that know the U.K. system knows it's really more of a religion than a system. I always love this photograph. This is, you know, what happens when you have the London Olympic opening ceremonies and you had doctors and nurses basically dancing, celebrating the NHS. Could you imagine a bunch of glaucoma doctors doing this to the Superbowl? [audience laughter]. I mean, it just wouldn't work, which reflects the different cultures and approaches to health system in the two countries.

So how does the U.S. define value? It really doesn't. We don't have a mechanism for defining value. The QALY [quality-adjusted life year] is attractive to policymakers because it is quantitative but it reduces people to numbers and that's really not a particularly appropriate approach, I think we'd all agree.

High value can support a high cost and I think the Hepatitis C drugs are perfect example. 2013 launch price of $84,000 for 12 week course was considered a bargain because of cost avoidance. So a value based system does not necessarily mean low cost. There are collateral impacts. The MIGS space is a perfect example of this. We have a technology intensive payment rate which keeps the price high. But again, budget neutrality plays here and it puts a downward pressure on some of the other costs involved in the system. So while the innovating company may benefit, other technologies can suffer. And again, I'm just trying to illustrate the complexity of some of this.

One last thing about impact is the role of private equity [PE]. Private equity is one of the hottest topics in ophthalmology right now. And somewhere on the order of 12% to 15% of the ophthalmology workforce is or is estimated to shortly become involved in private equity purchase. At the national level, private equity is emerging as the real bugaboo because it was the single most important factor behind the killing of surprise billing legislation, in part because PE owns the large air ambulance services, emergency medicine practices and basically they are focused on increasing top line revenue and it's not either pro-cost-reduction or pro-innovation. And this is starting to play out on Capitol Hill.

What's the role of the Academy in all this? We advocate for the patient, we advocate for the profession and so by extent we are also advocating for innovation. One of the things that we do, of course, is to put out clinical guidelines to help guide optimal quality care; and the IRIS Registry recently is something we're doing which is giving us great insights into real world evidence. This shows the growth of the IRIS Registry. We now have over 18,000 physicians contracted in it and we now have about 275 million patient records from across the country and this gives you for glaucoma, some idea of the database. For 2018 alone, over 5 million patients with glaucoma and glaucoma suspects. I’ll give you a look at some of the data. This shows you, for instance, for open-angle glaucoma, what types we have and you just do the numbers. You can see that for things like pseudoexfoliation there's a massive database out there compared to what we normally see. If you look at non-filtration surgery, and Andrew showed some data from Medicare, this really is the data from Medicare and commercial, and then we can look at it for filtration surgery. Here's an interesting slide which looks at postoperative events within the IRIS Registry. And I've highlighted the areas which are really, I would say, disparity compared to the rest of the database. It gives you an idea for the kind of data that we can now use to inform policy and inform economics decisions.

So, in conclusion, cost and innovation are going to always collide, and it's our role as experts in the professional community, in industry, to help try to reconcile this, to put models forward. It's always going to require some market regulation and we're going to be moving to some form of value-based pricing. But a perfect value-based pricing model has yet to be described. We're all going to benefit from more granular data on processes and outcomes of care so that we can get to a sustainable equilibrium that rewards innovation and ultimately moves our profession forward. Thank you very much.

Andrew Iwach, MD: David, thank you for the overview of the opportunities, but also some of the challenges.

End transcript.

Last reviewed on August 21, 2020

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