And coming up, more on the recent health and Human Services forum on pharmaceutical innovation and drug costs. Up next, senators from medicare and medicaid acting administrator andy slavit and purchasing strategies for the pharmaceutical industries. This includes manufacturers, employers, consumers, Health Insurance providers and government officials. Once again, if you will all take your seats well get started on the final panel of the day. Where as promised, well devote our discussion to outcomes based purchasing, what is the potential for those, what are the obstacles and how do we get to better value and better accessibility for patients as soon as possible through these and other mechanisms. Let me introduce our panelists now. You have been introduced to at least this gentleman there, dan durham, Senior Vice President of ahib, thats americas Health Insurance plans. And ken frazier is with us, the president and chief executive officer of merck and company. One of the premier pharmaceutical companies. And ken is currently serving as the head of pharma. Steve miller is here from express scrips. They are one of the leading pharmacy management companies. Bernard tyson is with us. He is the chairman and chief executive officer of keizer p m permanente. Covering now more than 10 million americans in many parts of the United States. And finally with us is Allen Spielman who is assistant director of health care and insurance, federal employee insurance operations in the u. S. Office of personnel management. So welcome to all of you. Before we go into our topic today, which is the outcomes based purchasing of pharmaceuticals we have been hearing so much about already today, i would like to ask each of you to address from your perspective, your unique perspectives as stake holders on various sides of this equation the top opportunity and the top policy challenge that you see now in bringing to market these very innovative drugs and treatments, cures in many instances, and making those affordable and sustainable for most americans. And getting the best treatment to the right patient at the right time. So dan, from the perspective of the nations Health Insurance policy plans, give us your perspective. Well, thank you, susan. I would like to start by thanking secretary burwell for inviting ahip to be a participant in this very important discussion. I spent four memorable years here and also would like to thank the hhs team. I know how hard they work in putting this forum together in short order was a monumental task. Today were in a consumerdriven market. Consumers are demanding value. Thats quality care at the lowest possible price. Thats what health plans are focused on. Were driving value in Todays Health Care system by collaborating with providers on quality and negotiating on price. And we do this in very innovative ways. Were building highvalue networks, we are focused on payment and Delivery System reforms, including bundle payments, patients in medical homes and global budgets and the like. These are changing the incentives to drive value for patients. And when it comes to Prescription Drug prices, i think we have reached an Inflection Point here. We are still very much in the fee for service world. We have to move to the value world. And thats what health plans are focused on. And theres specific examples here that were going to talk about today. And we have already heard about some of the barriers, but recently harvard pilgrim reached an agreement with mj or the cholesterol lowering drug and focused on outcomes. We have then previously with merck and signa, specifically on lower hemoglobin levels. But we need to see more of those. Its far more prevalent in europe and other countries than what were seeing here in the United States. So the bottom line is, driving value in the system for consumers, we need innovative medicines. Health plans want to provide the best innovative medicines to their patients. But they have to be affordable. And prices have to be sustainable. So we need to focus on solutions here, private sector marketbased solutions that drive value. So were paying for outcomes, were not paying for volume. And i think doug said it best this morning, he said, 20 years out it will be outcomes equal revenue. Hopefully well get there a lot sooner than 20 years. But value is the place we need to be and all shakeholders have an Important Role to play in driving value in our system. Ken frazier. Thank you, susan. I also want to thank secretary burwell, acting secretary slavit and the hhp for slavin, and all the hhs people for giving us this tremendous forum today. And say i hope its the beginning of a serious discussion between all the participants in health care about how we can provide greater value to the people that we all exist to serve, which are patients. Let me also start by saying as a whole the research and Development Efforts of the pharmaceutical industry and the biotech industry have had an indelible, lasting effect on preventing illness and extending life, and we have the potential to do even more. And thats why were spending tens of billions of dollars each year in our quest to do just that. That said, my company and the industry share the concerns that have been expressed about the rising cost of health care, particularly when those costs are passed on to patients. We share the administrations goals of creating a more affordable and sustainable Health Care System, promoting innovation, and improving Patient Access to new medicines. We, too, believe in the potential of valuebased approaches to derive greater value from health care spending. And, in fact, as we just heard, have partnered with several private insurers, including cigna, to try to implement these things over the past five years. But its important for us to recognize that policy and systemic changes are needed to enable us to fully realize their potential. Our efforts must stop start with a holistic patientcentered focus, and with an accurate view of the role of innovation and medical progress in achieving better value. We also need to Work Together to look at the value of all components of the system, hospitalizations, drugs, devices, and all other interventions. As we continue our work to create better valuebased approaches, and while we work to address the pressing unmet medical needs of patients, diseases such as cancer and alzheimers, we need a policy and Regulatory Environment that supports and rewards innovation and allows biopharmaceutical manufacturers to be full partners in the Movement Towards this valuebased health system. Spending on Prescription Drugs has not been the dominant driver of u. S. Health care cost. In fact, just this week, avalier released a study of payer data that showed that Prescription Drug costs are not the primary drug driver premium increases for 2016. Medicines actually hold great promise for reducing future costs as we face growing rates of chronic disease in a rapidly growing aging population. Even the cbo, the congressional budget office, has recognized an increase in the use of medicines and medicare will lead to cost savings elsewhere in the system. So, let me just summarize by saying the issue that were discussing here today, the shift toward valuebased payment, is a good example of how it is that we can drive to the kinds of goals that we want. Better Patient Outcomes for lower costs in a way thats sustainable for all participants in the Health Care System, so thank you. All right. Thank you very much. Steve . Yes, susan, thanks for having me. Again, i want to thank hhs for having this forum today. This is, as ken said, hopefully the beginning of a discussion that we all need to have. As youve heard already today, pharmaceuticals are the biggest challenge in health care right now. That is, its the most rapidly rising cost in all of health care. And while were paying 300 billion today, thats going to go to 400 billion to 500 billion over the next several years. We need a sustainable system. We need a system that rewards the pharmaceutical manufacturers and allows them to continue to be the great industry they are in the United States, but we also need to have affordability and access. And so what were going to talk about hopefully in this panel is not just value base, but its indication based, its outcome based. Its all sorts of Innovative NewPayment Systems that were going to have to adopt if were going to be able to continue to reward these companies but also make access and affordability available to our patients. When we started the price war for the hepatitis products, its because it was actually a new product in the marketplace, and that was formulary exclusions. By truly excluding products in the marketplace, we were able to actually shift market share and reward another company. So every time we do something thats disruptive in the marketplace, that looks to be anti one company, its actually really pro another company because were rewarding them with our market share. And what valuebased, indicationbased, outcomesbased plans have to do as we move forward is we have to identify the ways to reward people as well as to make it clear that we can shift the marketplace. Hopefully, there are tasks that you take away from this of what can pharma do to make for a Better Future . What can government do to make for a Better Future . What do patients need to do for a Better Future . And what do payers need to do . Because without getting all the components of the system working together, the final thing ill say is the enemy for all of us is actually waste in the Health Care System. In the United States, we spend about 3 trillion a year. Its estimated that about a third of that is waste. Now, one persons waste is another persons profit. And weve been very ineffective in the United States at going after that waste. You heard other people talk this morning about adherence and the waste that causes. But we have to root out every bit of that waste because if we do, that money is arbitragable. It can be reallocated to pharmaceutical products, to social service products, to other things that will actually make a bigger difference. So im really excited to talk about doing this with this panel today. Great. Bernard . Thank you. And its great, really great to be here. You know, i have to tell you honestly, as i was reflecting on the topic and discussion and how to tee up my two minutes to three minutes, i struggled somewhat because i dont want to get trapped in the latest headlines of valuebased something. And ive talked to enough people to see that we dont really have a common definition for that term anyway yet. And depending on whos promoting value base, theres a usually a view of that that one may or may not agree with. Im working hard every day to make Health Care Affordable for 10. 3 Million People and hopefully for the country by demonstrating with an endtoend system how we can look holistically at the entire spectrum of health care to populations from all walks of life. As it pertains to this particular topic, i start with a different conversation at the table with my partner across the table from me of pricing. I start with i could bring 10. 2 million members and this is the price you said, but i need this kind of price because thats the way the system works in this country, in every industry. And i hear back, i would love to do that but i cant because i have this problem, that problem, and medicaid gets favorite status and, you know, the Government Forces this or that. I go, well, theres something wrong with this picture. Thats what i start with. Valuebased pricing if the market would dictate that a pill is worth 1,000 and its truly market based, but someone can charge 10,000 for that pill, and i dont have a choice but to accept the 10,000, if i go from 10,000 to 8,000, im still paying more than what the market would do if the market was really working on my behalf as i work with my partner across the table. That, for me, is a starting point of a fundamental flaw that we need to address now in the 21st century. Ive heard debate that youre going to run innovation to the ground. No, were not. Every other industry has figured out how to do this in a freemarket context. And im not saying we throw the baby out with the bath water. The fact of the matter is i cant tell you how pleased i am that the industry is now looking at possibilities to cure diseases as opposed to continue to manage the illness. Thats a major step forward. And the whole system should be rewarded for that kind of innovation. But at the end of the day, the american people, the employer, the government are paying for all of this. And it has to fit into an affordability envelope. And so when i see and talk to members and people around the country who are trying to figure out how to make ends meet and they have the additional burden of a Health Care System that is weighing them down, that they havent seen a real wage increase in 20plus years, i end up saying to myself, we have to come up with Better Solutions to produce the value while also making sure we have a viable and Sustainable Health ecosystem. And that for me at the end of the day is what the value base is all about. Are we making a difference to the affordability piece of the formula that people who are paying for all this can see it in tangible ways . Thank you. Alan . Thank you, susan. And thank you, secretary burwell. And i want to talk about the federal employees Health Benefit program and our strategic perspective. And, of course, the federal employees Health Benefit program is the original Health Insurance exchange. Founded in 1960, 250 planned choices nationwide, total of 50 billion in spend, and covers over 8 Million People, both active employees and retirees in the same risk pool. And the impact of Prescription Drugs, the Economic Impact on our program is enormous. Over 25 of that 50 billion, 12 billion or more, is represented by Prescription Drugs. And weve been on a journey for the last 25 years in managing Prescription Drugs. And it started back in introducing and enabling managed care tools and techniques and promoting transparency and contractural arrangements. And now proactively driving adoption of best practices, whether its managed formulary, promoting drug pricing tools for consumers, or management of the specialty benefit. But were entering a new phase and thats to link planned performance to quality, Customer Service and resource use. A true payforperformance. We want to put our money where our mouth is. We have about a half of a billion dollars out of that 50 billion that we can apply to this. And were adopting measures at the population level, at the plan level, consistent with our population, such as controlling diabetes. So our strategy really is threefold. Were wanting to leverage the individual choice Market Dynamics with our promotion of best practices among our plans, enabling innovation, and overlaying a value equation, where at the plan level will create financial incentives for Population Health and management of cost outcomes. And we think that will create the dynamics, the catalyst for continuous value innovation. Great. Well, thanks to all of you. So to move to our topic on valuebased payment, outcomesbased payment, et cetera, weve been tossing these phrases around all day. We probably havent done as much as we could have to really break rocks and explain how the arrangements work. Ken, im going to start with you and ask you to give us a sense of how the arrangement you struck with cigna around diabetes drugs was structured. We know its not necessarily the model that all of these arrangements follow, but give us a sense of how that arrangement came together and how it incorporates this concept of valuebased payment. Well, the outset, lets and i think several people have alluded to that, that there is no single definition of value. And thats one of the challenges that we have here is that value can be difficult to define and difficult to measure based on which person is looking at it. But in the cigna case, what we did is we sat down with a very important customer of ours. We realized that it was very important for us to make sure that diabetic patients were reaching their blood glucose goals. And so we said, lets provide an additional incentive in the form of an additional rebate to cigna if they can show that under their broad auspices, not just the pharmacological interventions, that they are getting patients to their goals. And part of that obviously is to make sure patients are taking their medicines on a regular basis. And so simply, instead of just paying people for the amount of market share that we get from that particular health plan, we just incentivize people to make sure that the patients got the benefit of the medicines and the benefit of the other interventions, and that they were, in fact, getting to goal. So you got the outcome that you wanted, which was that people were controlling their blood glucose level, and we were able to pay them for reachi