Tech Companies Earn White House Praise for Committing to Easier Health Data Access

Image result for Tech Companies Earn White House Praise for Committing to Easier Health Data Access imagesSource: The Hill

Major technology companies on Monday announced their commitment to making it easier to share data across the healthcare sector, in a move backed by the White House.

The companies said that they’re pushing to make data more accessible for the healthcare industry and providers, with the intention of reducing costs by improving ease of access.

Amazon, Google, IBM, Microsoft, Salesforce and Oracle, along with the Information Technology Industry Council (ITI), all pledged their support to improving healthcare data interoperability. The pledges came during Monday’s Blue Button 2.0 Developer Conference.

“Today’s announcements represent a watershed moment toward fostering more innovation in America’s healthcare systems,” White House senior advisor Matt Lira said in a statement to The Hill.

Experts say medical data is often splintered across databases and hard to access for patients and healthcare providers.

Greg Moore, an MD and Vice President of Healthcare at Google Cloud, told The Hill that a lot of healthcare data has been digitized over the past decade, but “unfortunately it’s in silos.

“We’ve collected and digitized all this data but it’s not communicating with another,” Moore explained. “If you go to one provider on one side of town, there is not an easy way in most cases for a provider to access that information.”

The goal, Moore said, is to use systems like Google’s Cloud and other cloud computing and artificial intelligence services to help foster a“frictionless” exchange of x-ray data, lab data, medical claims and other types of healthcare data between patients, providers and other organizations.

Moore said that having the White House’s Office of American Innovation backing the plan is helpful in building momentum towards improving healthcare interoperability.

Dean Garfield, president and CEO of ITI, also praised the White House’s work on the issue.

“The Office of American Innovation has really stepped up here. These are multi-generational issues,” he said. “Rather than reinvent the wheel, they’ve done a lot of working building on things the Obama administration had done and they deserve credit for that.”

President Obama had pushed for data interoperability during his presidency, but came up short.

Former Vice President Joe Biden has criticized the Trump administration’s previous plans to improve data interoperability as to vague to make any real change.

Medicare To Overhaul ACOs But Critics Fear Less Participation

Image result for Medicare To Overhaul ACOs But Critics Fear Less Participation imagesSource: Kaiser Health News

ACOs were expected to save the government nearly $5 billion by 2019, according to the Congressional Budget Office.

It hasn’t come anywhere close.

On Thursday, the Trump administration proposed an overhaul to the program, which was designed to encourage doctors and hospitals to work together to coordinate care by reducing unnecessary tests, procedures and hospitalizations. The move could dramatically scale back the number of participating health providers.

Administration officials say ACOs have led to higher Medicare spending.

The announcement was just the latest in a steady drumbeat of moves by Trump administration officials to unwind health policies set in place by the Obama administration.

Medicare ACOs began in 2012 and today enroll more than 10 million beneficiaries. If they provide care for less than certain cost targets — while meeting quality of care standards — then they get to share in any of the savings. Commercial insurers and Medicaid have also adopted ACOs in the past decade.

About 82 percent of the 561 Medicare ACOs are set up so that they are not at risk of losing money from Medicare. They can share in any savings they achieve. The rest are in a model where they can gain a higher share of savings, but also risk paying back money to Medicare if they do not meet their savings targets. Those ACOs have been more successful in saving money, Medicare officials said.

The Medicare program said it would phase out its no-risk model beginning in 2020.

A recent industry-sponsored survey showed 70 percent of ACOs would rather quit than assume such financial risk.

Seema Verma, administrator of the Centers for Medicare & Medicaid Services, said it’s wrong to have ACOs that can only make profits but not risk any losses. “We want to put the accountability back into Accountable Care Organizations,” she said during a briefing with reporters.

Existing ACOs will have one year to switch to a model accepting financial risk. New ACOs will have two years.

Currently, ACOs have up to six years to shift to a model where they share in financial risk.

These and other proposed changes would save Medicare $2.2 billion over the next decade, Verma said.

The proposal drew rare praise from a former Obama administration official. Andy Slavitt, who once headed CMS, tweeted: “CMS is proposing changes to Medicare pay for value (ACO) models. … At first look, they look positive to me.”

CMS estimated that its new policy would lead to a drop of about 100 ACOs by 2027.

Industry observers say that prediction seems modest at best.

“That does not seem too realistic,” said Ross White, manager of the Center for Healthcare Regulatory Insight at KPMG, a large consulting firm. “This is going to come as quite a shock to a lot of current participants, although the administration has been sending these signals for several months. … It definitely seems like they are trying to ratchet down and squeeze the dollar savings out and not have participants in it for the wrong reasons.”

Clif Gaus, the CEO of the National Association of ACOs, blasted the proposal, saying it will “upend the ACO movement” and introduces “many untested and troubling policies.”

CMS is “pulling the rug out from ACOs by redoing the program in a short time frame,” he said.

He added that the “likely outcome will be that many ACOs quit the program, divest their care coordination resources and return to payment models that emphasize volume over value.”

Tom Nickels, executive vice president of the American Hospital Association, also criticized the new ACO rules. “The proposed rule fails to account for the fact that building a successful ACO, let alone one that is able to take on financial risk, is no small task; it requires significant investments of time, effort and finances.”

Under the new plan, CMS also wants to require doctors in ACOs to inform their patients that they are in an ACO. That has not occurred previously, because unlike HMOs, ACOs do not restrict which providers they can see.

Verma, who has repeatedly said unleashing the free market principles will help control costs and improve quality, said ACOs are driving more hospitals and doctors into mergers, which leads to higher costs.

“We want to work with ACOS that are serious about delivering value. We can no longer run a program that is losing money for taxpayers,” she said.

Trump Administration Sinks Teeth Into Paring Down Drug Prices, On 5 Key Points

Image result for Trump Administration Sinks Teeth Into Paring Down Drug Prices, On 5 Key Points imagesSource: Kaiser Health News

Three months after President Donald Trump announced his blueprint to bring down drug prices, administration officials have begun putting some teeth behind the rhetoric.

Many details have yet to be announced. But experts who pay close attention to federal drug policy and Medicare rules say the administration is preparing to incrementally roll out a multipronged plan that tasks the Centers for Medicare & Medicaid Services (CMS) and the Food and Drug Administration with promoting competition, attacking the complicated drug rebate system and introducing tactics to lower what the government pays for drugs.

Mark McClellan, director of the Duke-Margolis Center for Health Policy in Durham, N.C., and a former CMS administrator, said that although none of the initial steps has “fundamentally transformed drug prices,” there is “a lot going on inside the administration.”

Two HHS officials who are rolling out the plan, Dan Best and John O’Brien, described their efforts to Kaiser Health News not as a public relations strategy but a push to reform the system.

“This administration is trying to go after root causes” of high drug prices, said Wells Fargo analyst David Maris.

But others are not so optimistic.

Ameet Sarpatwari, an instructor in medicine at Harvard Medical School in Boston, said policies the administration has rolled out thus far “alone will not translate into meaningful cost savings for most Americans.”

Broadly, the strategy falls under a handful of steps:

1. Attacking The Rebates

Health and Human Services Secretary Alex Azar has said Americans “do not have a real market for prescription drugs” because drug middlemen and insurers get a wide range of hidden rebates from drugmakers, but those savings may not be passed on to consumers or Medicare. In July, the administration submitted a proposed rule that could change the way rebates are handled.

Details of the proposal have not been made public. But O’Brien, a deputy assistant secretary at HHS, explained during a recent conference on federal drug spending sponsored by the Pew Charitable Trust: “You don’t have to use market power to get rebates, you can use market power to obtain discounts, to actually lower the price of the drug on the front end.”

Umer Raffat, an investment analyst with EverCore ISI, said “it’s not clear [that drug prices are going down]” but the “rebate structure is changing.”

2. Bringing More Negotiation To Medicare

This week, CMS Administrator Seema Verma announced that Medicare Advantage insurers can use a step-therapy approach to negotiate better prices for Part B drugs — those administered in hospitals and doctors’ offices. These private plans will be allowed to require patients to first select the least expensive drug before stepping up to more costly drugs if the original medications aren’t working.

The administration is also looking at ways to introduce more competition into Part B drug purchasing. That idea was mentioned deep inside the annual Medicare outpatient payment rule released last month.

Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes in New York, pointed to the possible introduction of a competitive purchasing program in which a firm negotiates with drugmakers to buy their drugs and then sells them to the doctors and hospitals that will administer the medications. Bach said that helps ensure that hospitals and doctors can’t make more money by prescribing more expensive drugs.

Currently, Medicare pays the average sales price plus 6 percent to doctors or hospitals when they purchase drugs, a pricing mechanism that can benefit the providers if the drug costs go up. If there were a third party buying the drugs, it would “have a huge effect,” Bach said.

3. Paying For Value

Trump’s blueprint calls for CMS to encourage “value-based care” to lower drug prices, shifting from paying a set fee for drugs to basing payments on how well the patient does on them.

Louisiana’s Medicaid program could show the way. The state is working with CMS to explore a subscription-based model to pay for hepatitis C medicines. Louisiana would pay a fixed price to a drug manufacturer that would then get unlimited access to treat patients enrolled in Louisiana’s Medicaid program or in prison.

The program would move “from a big payment upfront to paying less over time based on actual outcomes,” said McClellan, who also serves on the boards of health care giant Johnson & Johnson and insurer Cigna.

CMS also approved a Medicaid waiver from Oklahoma in June. Medicaid programs are allowed to negotiate drug prices. Oklahoma’s plan would expand that to negotiate additional prescription price reductions based on value-based purchasing agreements.

Still, CMS’ recent rejection of a related Massachusetts proposal makes it difficult to believe negotiating drug prices will really happen, said Sara Rosenbaum, a professor of health law and policy at George Washington University.

That proposal would have allowed Massachusetts’ Medicaid program to choose drugs based on cost and how well the medicines work.

“They have been very good and quite careful with their [Medicaid] program and so why not let them try this?” Rosenbaum said.

4. Tackling Foreign Drug Costs

Pharmaceutical makers often sell their drugs at substantially lower prices in many foreign countries than they do in the United States. Trump emphasized in May that “it’s time to end the global freeloading once and for all,” saying U.S. consumers were paying part of the cost of the medicines that patients in other countries use.

He directed U.S. Trade Representative Robert Lighthizer to address the situation. Lighthizer’s office declined to comment.

When Sen. Todd Young (R-Ind.) asked during a Senate health committee hearing in June whether trade agreements with other countries should be used to “level the playing field,” Azar’s response was swift: “We absolutely believe we should be using our trade agreements to get them to pay more even as we have our job to pay less.”

Avalere Health President Matt Brow, who has been involved in talks with the administration, said it’s clear the focus on overseas pricing isn’t going away and the administration is “talking a lot about how to get the president what he wants.”

5. Increasing Competition

FDA Commissioner Scott Gottlieb has become the Trump administration’s lead proponent for increasing competition among drugmakers.

Competition resonates with Americans “because people see it every day in their experience in Costco and other places,” said Rena Conti, an assistant professor at the University of Chicago.

Gottlieb has announced plans to bolster the use of generic drugs and an “action plan” to encourage the development of biosimilars, which are copycat versions of expensive biologic drugs made from living organisms.

And to combat anti-competitive behavior in the market, Gottlieb said the FDA has passed along information to the Federal Trade Commission and hinted at potential action to come: “I think we’ve handed them some pretty good facts.”

Obama administration gave out $434 million in improper Obamacare payments: Watchdog

Image result for Obama administration gave out $434 million in improper Obamacare payments: Watchdog imagesSource: Washington Examiner

The Obama administration improperly paid out $434 million to Obamacare customers to pay down the cost of insurance in 2014, the first year the law’s health insurance marketplaces went online, a federal watchdog reported Monday.

Health and Human Services’ Office of the Inspector General released a report Monday that outlined the improper payments during Obamacare’s first year.

In a review of 140 health insurance policies sold in 2014, the inspector general found that Centers for Medicare & Medicaid Services improperly paid out financial assistance payments for 26 policies.

For the other five policies, CMS authorized possibly improper financial assistance to insurers that didn’t provide the right documentation.

CMS was using an interim process for approving financial assistance payments when the exchanges first went online, before moving to an automated system in 2016. The payments in question include income-based tax credits to customers to lower premiums and cost-sharing reductions paid to the insurer to lower out-of-pocket costs for low-income customers.

The interim process worked by having Obamacare insurers submit a monthly template that contained the amounts that the insurer submitted for reimbursement based on the numbers of enrollees who had paid at least the first month’s premium for their plan.

But CMS didn’t have an effective process to ensure that financial assistance payments made it to enrollees who paid their premiums.

“Instead, CMS relied on [insurers] to verify that their enrollees were confirmed and to attest that the financial assistance payment information they reported on their templates was accurate,” the inspector general report said.

The inspector general estimated, based on its sample, that CMS authorized improper payments totaling $434 million for 461,127 policies. It also authorized potentially improper assistance payments of $504 million related to 183,983 policies.

The watchdog said that CMS and the Treasury Department needed to collect the improper payments and work to resolve whether the other payments were improper.

But CMS told OIG that it will not require Obamacare insurers to return improper financial assistance payments for policies “on which issuers acted in good faith, nor will it resolve potentially improper financial assistance payments for issuers that are out of business,” the report said.

CMS said in respons to the report that OIG extrapolated from a small number of policies to get to the $434 million figure.

“We disagree with OIG’s methodology in estimating the amount of improper financial assistance payments, both because of the extrapolation method used, but also because OIG did not take into consideration guidance that was provided to issuers at that time,” the agency said.

Attorneys General File Suit to Challenge Association Health Plans

Image result for Attorneys General File Suit to Challenge Association Health Plans images

Source: Bookweb

On Thursday, August 2, attorneys general from 11 states and the District of Columbia filed suit against the Department of Labor, challenging the Trump administration’s new Association Health Plan (AHP) rule. The attorneys general of California, Delaware, Kentucky, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Virginia, Washington, and Washington, D.C., allege that the new rules violate the Affordable Care Act (ACA) and the Employee Retirement Income Security Act (ERISA).

The rule, which was released on June 19, would allow businesses sharing a common industry or geographic area to join together to purchase health insurance. The release of the rule was prompted by an executive order signed by President Donald Trump in October.

In their complaint, the attorneys general assert that the rule “is part of this Administration’s broad effort to undermine the ACA.” The complaint further argues that “the Final Rule’s purpose and effect are simple: to shift, through manipulation of the Employment Retirement Income Security Act, a large number of small employers and individuals into the large group market because the ACA’s core protections do not apply to that market.” According to the complaint, AHPs would lack market incentives and statutory protections under federal law that apply to plans from true large employers, resulting in fewer benefits and less coverage in all three markets.

The attorneys general allege that the AHP rule is unlawful because it undermines the statutory structure adopted in the ACA to apply protections to the individual and small group markets. Their suit argues that the rule allows associations of small employers and individuals to be treated as large groups; allows a self-employed individual to qualify as both an “employee” and “employer,” violating ACA, ERISA, and established case law; and it unlawfully expands ERISA to allow all employers in a state or metropolitan area to group together into a profit-making commercial insurance enterprise. Included in the attorneys general’s grievances outlined in the complaint is the fact that AHPs would be permitted to discriminate based on a range of factors, including age, gender, education level, occupation, and claims history, and still qualify as ERISA plans.

Proponents of AHPs argue that they will benefit small businesses owners who cannot afford traditional coverage. In an op-ed published by the Wall Street Journal, Department of Labor Secretary Alexander Acosta describes how the ACA “imposes starkly different rules” on small versus large businesses: “Companies with 50 or fewer employees are subject to the law’s benefit mandates and rating restrictions, while large companies are not. This is backward. Small businesses should face the same regulatory burden as large companies, if not a lighter one. AHPs will help level the playing field.” Dawn Sweeney, president and CEO of the National Restaurant Association, argues in the New York Post that the rule “empowers small businesses to advocate for better, more affordable health care.”

The Association Health Plan rule is scheduled to take effect August 20, 2018.

IRS Proposals Clear Way for Trump Tax Cut for Insurance Brokers

Image result for IRS Proposals Clear Way for Trump Tax Cut for Insurance Brokers imagesSource: Insurance Journal

The Treasury Department has moved to clear up some confusion in the Trump tax cut law by proposing that the full 20 percent deduction for pass-through businesses be made available to a broad spectrum of small businesses, including insurance agents and brokers.

Many small businesses that are organized as pass-throughs such as S-corporations, limited liability corporations and partnerships, including insurance agents and brokers, have been waiting for clarification on their eligibility.

The Treasury’s guidance on the tax deduction was necessary because the language of the Tax Cuts and Jobs Act (TCJA) indicated that the full tax break would not be available to certain specified service trades or businesses but left some question whether insurance businesses were considered part of that group.

Treasury and the Internal Revenue Service have now proposed that insurance agents and brokers, as well as real estate agents and brokers, not be included in the definition of the specified businesses that face limits on their eligibility.

In the words of the proposed guidance, the meaning of brokerage services not eligible for the deduction includes services provided by stock brokers and other similar professionals “but does not include services provided by real estate agents and brokers, or insurance agents and brokers.”

Q&A from IRS on 20% Deduction for Qualified Business Income

According to the IRS, the Trump tax law allows owners of eligible sole proprietorships, partnerships, trusts and S- corporations to deduct 20 percent of their qualified business income.

The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers.

However, the law limits deductions for taxpayers with higher incomes if they are in certain specified service trades or businesses. The IRS has now said insurance agencies and brokerages are not among the services facing limitations.

The deduction — referred to as the Section 199A deduction — is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year. Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.

The 20 percent deduction was designed to target small businesses that don’t benefit from the Trump tax law’s reduction in the top corporate rate from 35 percent to 21 percent.

While these proposals are subject to further review and could change, insurance agencies, many of which are pass-throughs, welcomed them.

“Our initial read of the draft regulations is that agents and brokers are not a specified service trade. While these are draft regulations and not yet final, we see this as a very positive development,” Charles Symington, Independent Insurance Agents and Brokers of America (Big “I”) senior vice president of External, Industry & Government Affairs, told Insurance Journal.

According to the association, two-thirds of its member agencies are pass-through entities.

Symington said his group has “been spending a great deal of time on this issue on the Hill and with the Administration arguing that insurance agents and brokers” organized as pass-throughs should receive the full benefit of the new 20 percent deduction.

Symington said that the Big “I” is currently reviewing the draft and will provide comments to the IRS.

Congress passed the Trump tax act in December 2017. Treasury officials had hoped to issue clarifying rules earlier this summer.

About 90 percent of U.S. businesses are organized as pass-throughs. They range from mom-and-pop stores to private equity funds.

“The pass-through deduction is an important tax cut for small and mid-size businesses, reducing their effective tax rates to their lowest levels since the 1930s,” said Treasury Secretary Steven T. Mnuchin. “Pass-through businesses play a critical role in our economy. This 20-percent deduction will lead to more investment in U.S. companies and higher wages for hardworking Americans.”

The proposed rules also set forth safeguards to prevent employees from becoming reclassified as independent contractors to qualify for the tax break.

According to the IRS, taxpayers may rely on these proposed regulations until final regulations are published in the Federal Register. The public has 45 days to comment on the proposals.

The IRS issued a Q&A on the deduction after announcing its proposals.

Silver Loading in the Golden State

A policy with an affordable premium may come with a deductible that’s too high. If the copayments for physician visits are reasonable, the plan may not include their preferred doctors.

These consumers need better options, and in early August federal officials offered a strategy to help bring down costs for them.

The guidance is from the Centers for Medicare & Medicaid Services, which oversees the insurance marketplaces set up by the Affordable Care Act. CMS is encouraging states to allow the sale of plans outside of those exchanges that don’t incorporate a surcharge insurers started tacking on last year.

Many insurers added the premium surcharges last fall to plans sold on the individual market. It was a response to the Trump administration’s announcement that it would no longer pay the companies for the “cost-sharing reduction” subsidies required under the health law. The subsidies help cover deductibles and other out-of-pocket costs for lower-income consumers who buy marketplace plans.

Insurers typically added the cost to silver-level plans because those are the type of plans that consumers have to buy in order to receive the cost-sharing subsidies. “Silver loading,” as it’s called, added an estimated 10 percent to the cost of those plans, according to the Congressional Budget Office.

People who qualified for federal premium subsidies — those with incomes up to 400 percent of the federal poverty level (about $48,000 for one person or $100,000 for a family of four) — were shielded from the surcharge because their subsidies increased to cover the cost.

But people with higher incomes faced higher premiums. The new guidance is geared to help them.

“It encourages states to encourage silver loading only on the exchange,” said Aviva Aron-Dine, vice president for health policy at the Center on Budget and Policy Priorities.

But some analysts say they’re unsure if the new federal policy will make a difference since states have already implemented similar strategies.

Many states moved last fall to limit silver loading to plans sold on the exchanges, while allowing or, in the case of California, requiring, very similar plans to be sold off the exchanges without the extra premium charge.

Yet CMS’ endorsement of the strategy removes doubts states may have had, said David Anderson, a research associate at Duke University’s Margolis Center for Health Policy who has tracked the issue.

Eighty-three percent of people who bought a plan during the open-enrollment period for 2018 qualified for premium tax credits. The average monthly premium per subsidized enrollee was $639; after accounting for premium tax credits, however, enrollees owed just $89 on average. That amount was 16 percent lower than the monthly premium the year before.

For people who don’t qualify for premium tax credits, the picture is very different. The average monthly premium for 2018 was $522. That total was 28 percent higher than the previous year’s total of $407, according to an analysis by the Center on Budget and Policy Priorities of CMS enrollment data.

In general, federal rules require that insurers charge the same rates for identical qualified health plans that are sold on and off the exchanges. The CMS guidance suggests that the unloaded plans could be tweaked slightly in terms of cost sharing or other variables so that they are not identical to those on the marketplaces.

Tracing what type of coverage is purchased off the exchange is difficult because there is no centralized source. Consumers can buy plans directly from insurers, or they may use a broker or an online web portal. According to one such portal, eHealth, 28 percent of unsubsidized consumers on its site bought silver plans in 2018, while 42 percent bought bronze plans, whose coverage is less generous than silver plans and typically have lower premiums. Conversely, on the exchanges nearly two-thirds of people bought silver plans in 2018 while 29 percent bought bronze plans, according to federal data.

If fewer insurers add the CSR load to silver plans sold off the exchange, those plans may be more affordable next year than they were in 2018, said Cynthia Cox, director of health reform and private insurance at the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

“This makes silver plans an option for [unsubsidized] people who wanted to buy a silver plan but might have been pushed off onto a bronze plan,” she said.

Consumers who want to consider off-exchange plans have to find them first. Some experts suggest checking with insurers that are selling on the marketplace in an area, because it’s possible that they’ll also be selling plans off the exchange.

But that’s not a given. A health insurance broker can help people find and evaluate plans sold off the exchange. But experts urge consumers to stay on their toes and make sure they understand whether the plans they’re considering provide comprehensive coverage.

Starting in October, insurers can offer short-term plans with limited benefits that last up to a year.

“Differentiating between the two may not be easy, and the off-exchange unsubsidized market is the target market for short-term plans,” said Anderson.

CMS Finalizes Rule Requiring Hospitals to Post Prices Online

Image result for CMS Finalizes Rule Requiring Hospitals to Post Prices Online imagesSource: Healthcare Dive

Dive Brief:

  • CMS on Thursday issued its final rule on the Inpatient Prospective Payment System, cementing the agency’s April proposal to increase transparency by pushing hospitals to post standard charges online in a machine-readable format. The rule doesn’t require posting any more information than hospitals are already mandated to provide to the public, but CMS has issued a request for information seeking input on furthering pricing transparency.
  • The final rule boosts payment rates for general acute care hospitals paid under IPPS by about 1.85%, up from the 1.75% bump proposed in April. Payments for long-term care hospitals have been increased 1.35%, up from the proposed 1.15%. CMS estimates the rate hike will increase Medicare spending on inpatient hospital services by about $4.8 billion in 2019, up from the April estimate of $4 billion.
  • On the interoperability front, providers will be required to use 2015 Edition certified EHR products in 2019. The rule also eliminates the 25% threshold policy for long term care hospitals, reduces reporting periods to 90 consecutive days and eliminates 18 reporting measures while “de-duplicating” 25 more.

Dive Insight:

The jump in Medicare’s estimated total spending on inpatient hospital services from $4 billion to $4.8 billion is the result of an increase in new technology add-on payments of $0.2 billion and the projected hospital market basket update, according to CMS. All-in-all, that estimate doubles spending projections made in last year’s final rule.

CMS will also distribute about $1.5 billion more for uncompensated care payments in 2019 than it did in 2018, totaling roughly $8.3 billion. The boost is the result of increases in payments that would have been allocated toward disproportionate share hospitals (DSH). This payment change in part reflects the rising number of uninsured Americans.

CMS will also be starting a full audit process for Worksheet S-10 charity care data this fall in an effort to determine how charity care payments are distributed.

As for pricing transparency, the final rule requires hospitals to “make public a list of their standard charges via the Internet in a machine readable format, and to update this information at least annually.” Patient advocate organizations may find this transparency effort somewhat toothless, as CMS had already required hospitals to make their standard charges public. However, CMS’ supplementary RFI acknowledges swathes of opacity in pricing that need to be addressed.

April’s proposed rule was mostly met with applause from industry associations like the American Hospital Association that had been pushing for reduced reporting periods, the elimination of reporting measures and eliminating the 25% threshold policy for LTCHs. The final rule, which includes all the above, was in turn welcomed by AHA. Tom Nickels, executive vice president for the association, praised most policies included in the final rule in a statement.

“There are a number of policies CMS finalized today that will reduce regulatory burden and help ensure America’s hospitals and health systems can continue to provide high-quality, efficient care for the patients and communities they serve,” Nickels said, noting the association is still studying the rule.

Looking toward the future, CMS Administrator Seema Verma told reporters on a call Thursday evening that the agency is concerned with differentials in the wage index floor that show geographic disparities in payments that favor urban over rural hospitals. This final rule preemptively allows the imputed wage index floor to expire for all-urban states. Nickels said AHA will be analyzing policy changes affecting the area wage index to “determine their ultimate impact.”

Reality Check on PBMs and Drug Costs

Image result for Reality Check on PBMs and Drug Costs imagesSource: Politico

PBMs AND DRUG PRICES: A REALITY CHECK — There’s a big target on the backs of pharmacy benefits managers lately with both the drug industry and HHS drawing attention to the role they play in the pricing of medicines. Pending at OMB is a rule that could dramatically reshape PBMs by changing the practice of drug rebating — the discounts that PBMs negotiate with pharmaceutical companies — with the aim of ultimately lowering the cost of drugs.

Because the PBMs can retain a portion of the rebate as profit, they may have a perverse incentive to favor higher-cost medicines with larger rebates in their insurance plan formularies, leading drugmakers to raise prices on brand medicines, HHS Secretary Alex Azar has said.

But a new analysis sheds light into how little of U.S. drug spending might be addressed by overhauling rebates. That’s because most of the money spent on pharmaceuticals in this country goes to drug companies — not middlemen like PBMs, wholesalers, pharmacies, insurers or doctors.

The U.S. spent an estimated $480 billion on prescription medicines in 2016, including the gross profits of all intermediaries, according to an analysis last week on the Health Affairs blog. Memorial Sloan Kettering Cancer’s Nancy Yu, Preston Atteberry and Peter Bach found that $323 billion of that was drugmakers’ net revenue excluding rebates, discounts and other price concessions like copay coupons — but not accounting for manufacturing expenses.

In comparison, PBMs captured only 4 percent of the pie — or $23 billion in gross profits. That’s less than the profits taken by other players in the supply chain like pharmacies ($73 billion), providers ($35 billion) and wholesalers ($18 billion).

Put another way, as Financial Times reporter David Crow wrote last week: “Even if Mr. Azar’s reforms were to wipe [CVS and Express Scripts] profits out entirely, the savings would not cover the cost of the U.S.’s top-selling medicine, AbbVie’s anti-inflammatory drug Humira, which generated $12.36 billion in sales last year” in the U.S.

Asked whether it was fair to compare net revenue of drug makers to gross profits in the other industry, Bach, one of the authors, said that they were not looking to compare which part of the drug supply chain was more profitable. Instead they were following each drug from the time it’s manufactured and determining how much every player in the supply chain makes as the medicine passes through their hands. “So finding those dollars was the point“ Bach said.

None of this means PBMs are likely to catch a break anytime soon. And there may be legitimate reasons for concern about the industry’s practices. An article by Axios’ Bob Herman caught our eye last week. It contains a wealth of data on the difference between what pharmacies are paying for medicines and what state Medicaid programs are paying PBMs for the same drugs. For example, Indiana’s Medicaid program paid about $300 per pill for a generic version of Novartis’ Gleevec, while the drug’s pharmacy acquisition cost was $84.

Happy Monday and welcome back to Prescription PULSE, where we draw your attention to a very colorful warning letter from the FDA to BioDiagnostics. Agency inspectors found that the company used “kitchen cooking pots and household power tools” to manufacture a drug for vaginal use. It has since recalled all of its products, Fierce Pharma reports. Send your favorite drug manufacturing stories and pharma tips to Sarah Karlin-Smith ( or@sarahkarlin) and Sarah Owermohle ( or@owermohle).

A PBM PUSHES BACK  Express Scripts “will be just fine without rebates,” the PBM’s senior vice president and chief medical officer, Steve Miller, said in a media briefing Thursday. The problem, he argued, is how fast you remove what has become a mainstay in drug contracts without shocking payers’ budgets with the full price of therapies.

“Making them go away overnight is probably a windfall to pharmaceutical manufacturers and a punishment to all the plan sponsors,” said Miller. It could be particularly disastrous for Express Scripts’ Medicaid programs, which the PBM says keep 100 percent of their negotiated rebates — and therefore would feel the full brunt of the list price in a rebate-less system. Commercial plans may not fare much better — the company reports that they pocket an average 10 percent of rebates they negotiate for other payers.

The PBM is proposing a “glide path” of at least a few years to transition payers from from buying high-rebate drugs like insulin at their rebated price to buying them at their straightforward list price. The hope is that drugmakers would reduce their prices during that period until they eventually match what the companies would have taken in under the rebate system — and the result would be budget-neutral for payers. The problem is that no drug makers (that we know of) are publicly on board with cutting prices by rebate-equivalent amounts.

Express Scripts has floated the idea with state payers and talked to drugmakers that have concerns about how long such a phase-in would take, Miller said. “There’s a lot of details to work out on this, but we believe we have to be creative going forward.”

SENATE APPROPS: WHERE THE FDA MONEY WOULD GO — The Senate last week approved $159 million in new discretionary spending for FDA in fiscal year 2019 via H.R. 6147 (115) — significantly less than the $400 million requested by the administration. Medical product initiatives would get $88.5 million and new efforts to respond to the opioid crisis would get $49 million. The rest would go to food safety.

The medical product dollars in the Senate bill would go toward promoting domestic drug manufacturing and advanced medical device manufacturing, as well as helping FDA stay current with the science and tools needed to evaluate new drugs. Money is also dedicated for modernizing generic drug development and review and to FDA’s oncology center of excellence and rare disease work. For more details on these programs and how the Senate bill compares to what House appropriators have laid out for FDA, see this handy breakdown from the Alliance for a Stronger FDA.

ICYMI: HOW DRUG COMPANIES ARE BEATING TRUMP AT HIS OWN GAME — At least 10 pharmaceutical makers made pledges to roll back or freeze prices in July following a tweet from President Donald Trump. But those gestures are largely symbolic — efforts to beat Trump at his own game by giving him headlines he wants without making substantive changes to the way they do business, Sarah and Sarah report, along with colleague Andrew Restuccia.

The token concessions are “a calculated risk,” said one drug lobbyist. “Take these nothing-burger steps and give the administration things they can take credit for.”

Even the few companies that actually cut prices mostly targeted old products that no longer produce much income — such as Merck’s 60 percent discount to a hepatitis C medicine that had no U.S. revenues in the first quarter. Others volunteered to halt price increases for six months — in some cases, just weeks after announcing what is normally their last price hike for the year.

The industry’s deft response to Trump’s tweet shaming has also become a test of whether his administration is serious about following up with an aggressive crackdown on the companies — or will simply declare victory based on token measures and move on. Keep reading here.

HIGH-COST DRUGS SHIELDED BY NEARLY 40-YEAR MONOPOLIES — Hundreds of patents shielding the top-selling U.S. drugs have allowed pharmaceutical companies to extend their monopolies for years — meanwhile, those therapies’ prices have risen an average of 68 percent since 2012, according to an I-MAK report.

Four of the 12 best-selling medicines have already been on the market for 20 years, the standard exclusivity time frame for novel medicines approved by the FDA. But drugmakers have become adept at filing new patents for different indications, doses and manufacturing details, sometimes nearly doubling the duration of that monopoly.

AbbVie’s Humira, of course, tops the list for both revenue ($18 billion globally last year) and the number of patent applications (247 since it first hit the market). Though the FDA has approved two biosimilars of the autoimmune medicine, AbbVie has sued or struck deals with companies to keep competition out until at least 2022. Meanwhile, it has raised the drug’s price 144 percent since 2012. These tactics have increasingly drawn criticism — the patent system is one of the many priorities included in the Trump administration’s drug pricing blueprint, and FDA Commissioner Scott Gottlieb recently discussed the issue when launching a biosimilar action plan. But the agency can’t address IP issues itself — that could take FTC intervention.

Only one of the 12 blockbusters, the cancer treatment Herceptin, has dropped in price since 2012. But the Roche product also could potentially be the longest on the market without competition — the company is seeking to make it 48 years before rivals launch, according to the report by the nonprofit Initiative for Medicines, Access and Knowledge. Read the I-MAK report here.

UNAPPROVED ANTIDEPRESSANT COULD POSE EMERGING PUBLIC HEALTH RISK — Use of a nonapproved antidepressant that mimics some of the effects of opioids has spiked in recent years, posing a potential public health risk, researchers reported Friday in CDC’s Morbidity and Mortality Weekly Report. An analysis of calls to poison control centers related to tianeptine — marketed as Coaxil or Stablon, among others — from 2004 to 2017 found that while there were only 11 calls about the drug over the first 14 years combined, the number began rising noticeably in 2014 — reaching 81 calls in 2017 alone. Though the drug isn’t FDA approved, consumers can buy it online as a dietary supplement or research chemical. The authors recommend that misuse of tianeptine be considered when patients have opioid-like overdose or withdrawal symptoms.

“In light of the ongoing U.S. opioid epidemic, any emerging trends in drugs with opioid-like effects raise concerns about potential abuse and public health safety,” they write. Read the MMWR findings here.


Maine law eases generic development — Generic and biosimilar drug developers may soon be flocking to the Pine Tree State thanks to a new law, ME SP432 (181), that attempts to stop brand drugmakers from using FDA safety programs to prevent cheaper competition. Major pharmaceutical companies have long used the FDA safety programs, known as REMS, to prevent generic and biosimilar manufacturers from acquiring samples of their branded medicines. Samples are needed to do the necessary research for an FDA-approved copycat product. The issue has drawn attention — including bills in Congress — but no concrete action on the federal level. The Maine law, which was enacted on July 4 without Republican Gov. Paul LePage’s signature, will require brand companies to make available any drug distributed in the state to generic and biosimilar makers at a cost no greater than the wholesale price.

It will be interesting to see if brand-name drug companies try to challenge the law, said Nicholas Mitrokostas, a partner at Goodwin’s intellectual property group. They might argue that the state law is preempted by federal law, since REMS are a restriction put in place by FDA, he said.


Drug companies ramp up charity efforts in midst of opioid probes —Drug distributors and manufacturers are handing out millions of dollars in grants and donations to organizations in parts of the country that have sued the companies over their role in the opioid epidemic, Bloomberg’s Jared S. Hopkins reports. Wholesaler Cardinal Health, for example, has given at least $3 million to about 70 groups, including some with ties to plaintiffs in the opioid legislation. The efforts could pay off: Researchers at Harvard Business School who studied 20 years of lawsuits against public companies found that targeting advertising after lawsuits are filed increased the probability of a favorable outcome for companies. More here.

Clovis settles government probe over trial data — The company has agreed to pay $20 million to settle an SEC probe into whether it purposely misled investors with a false report of data on an investigational lung cancer drug. The news comes four months after the biotech revealed the SEC was preparing civil charges against current and former executives. More from Endpoints News here.

Opioid alternative may be endangering patients with back pain — The opioid epidemic appears to be spurring the use of injectable drug Depo-Medrol for back and neck conditions, with doctors administering the treatment close to the spinal cord. That’s despite known risks of administering the drug in this location and Pfizer’s own attempt to get FDA to ban that type of treatment five years ago due to risks of blindness, stroke, paralysis and death. Several other countries did so while the FDA beefed up the label warning. Neither Pfizer nor FDA made the request public. More from The New York Times here.


FDA published the user fee rates for prescription drugs, biosimilars, and medical devices for fiscal year 2019. RAPS has a handy chart comparing the rates to FY 2018.

The Institute for Clinical and Economic Review released a preliminary list of therapies that may get its cost-effectiveness assessments in 2019. ICER also released a final report on AbbVie’s endometriosis drug Orlissa and an updated report on plaque psoriasis drugs. And it announced it will review Novartis’ atherosclerosis drug Ilaris and plans to assess the comparative clinical effectiveness and value of two spinal muscular atrophy drugs.

Bipartisan leaders of the House Energy and Commerce Committee sent lettersThursday to the CEOs of three drug companies — Insys, Mallinckrodt, and Purdue Pharma — seeking information about their roles in the opioid crisis.

FDA is soliciting public comment ahead of planned work to promote development of clinical outcomes assessments and endpoints that could be used in clinical trials and support FDA decisionmaking on drug approvals.

FDA posted draft guidance for developing and submitting nicotine alternatives for regulatory approval as drugs, the latest step in the agency’s push to cut down on cigarette smoking.

Eighty-three members of the House of Representatives sent a letter to HHS Secretary Alex Azar urging him to eliminate retroactive direct and indirect (DIR) fees in Medicare Part D.

Using its authority under the 21st Century Cures Act, the FDA awarded grants to three universities working on the continuous manufacturing of drugs and biological products.

Medicare Part B spending is forecast to grow 8 percent over the next five years, outpacing the U.S. economy, according to a report from the HHS inspector general on fraud, waste and abuse in the agency’s programs. Recommendations in the OIG report include boosting oversight and changing data collection for Medicare Part D and Medicare Advantage plans.

CATCHING OUR ATTENTION: POWERFUL OPIOIDS VASTLY OVERPRESCRIBED DESPITE FDA PROGRAM TO LIMIT THEM — Off-label prescribing of a class of fast-acting fentanyl drugs — some of the strongest opioids — was widespread under a distribution oversight program that the FDA entrusted to a group of pharmaceutical companies, The New York Times reports.

TIRFs — transmucosal immediate-release fentanyl in the form of quickly absorbed sprays, tablets and lozenges — were only intended for cancer patients with severe pain who had built up a tolerance to opioids. Yet thousands of pages of documents show that patients with back pain and migraines also received the lucrative medicines, increasing the risk of overdose or addiction.

Humana Sues Dozens of Generic Drug Manufacturers for Price-Fixing Scheme

Image result for Humana Sues Dozens of Generic Drug Manufacturers for Price-Fixing Scheme images

Source: FierceHealthcare

Humana has filed a lawsuit against more than two dozen pharmaceutical companies for conspiring to fix the prices of widely used generic drugs, a scheme that forced the insurer to pay for drugs at artificially inflated prices.

The complaint, filed in the U.S. District Court for the Eastern District of Pennsylvania on Friday, adds to numerous ongoing investigations by the Department of Justice and nearly every state in the country. Humana said its allegations are “based on personal knowledge” of the price-fixing scheme as well as information made public during the state and federal investigations.

Communications between the drug manufacturers reveal that the companies schemed to obstruct competition and set, increase, or maintain the drugs’ prices, according to the 273-page complaint (PDF). It also alleges that the defendants made arrangements not to compete against each other.

The communications allegedly took place at trade association meetings and conferences, at dinners and other private outings, and via phone and text message. The lawsuit names nearly 30 manufacturers including Mylan, Novartis and Teva, nearly all of which have been subpoenaed by federal prosecutors. Heritage Pharma’s former CEO and president already cut a deal with state prosecutors last year and agreed to assist with the investigation.

Humana said it wants to “recover damages it incurred from egregious overcharges it paid for certain widely-used generic drugs, arising from a far-reaching conspiracy among Defendants and others to blatantly fix the price of such drugs.” The insurer has requested a jury trial and is seeking treble damages under the Clayton Antitrust Act.

Humana’s complaint includes a list of 16 specific generic drugs it purchased in “substantial quantities” for “grossly inflated prices” due to the conspiracy. Five of the drugs are used to treat cardiac conditions, including hypertension and high cholesterol; however, taken together, the 16 drugs treat a wide range of medical issues, from depression to arthritis to multiple sclerosis.

“For most patients prescribed one of the Subject Drugs, the drug is a necessity that must be purchased regardless of price,” Humana said.

Humana claims it spent more than $1.7 billion on the drugs listed in the complaint.

The insurer said there are also “various other persons, firms, entities, and corporations” presently unknown to the company that acted as willing co-conspirators in the scheme.

While Humana points out that the use of generic drugs saved the U.S. healthcare system $1.68 trillion between 2005 and 2014, the defendants’ collusion forced Humana to pay “artificially inflated prices at supracompetitive rates.” According to federal data, the prices of these drugs shot up as much as 8,000% over the course of years, months, or even weeks.

In November, 47 attorneys general representing 45 states, the District of Columbia, and Puerto Rico, and the Department of Justice filed suit against 18 pharmaceutical companies and two of those companies’ chief executives for conspiring to fix generic drug prices as well. Humana references the suit extensively in its own complaint.

One particular line of Humana’s complaint strikes at the heart of the drug pricing debate that has raged for decades.

“The United States is a venue ripe for illegal anticompetitive exploitation of prescription drug prices due to laws that regulate how prescription drugs are prescribed and how the prescriptions can be filled,” it said.

Last Updated 08/17/2018

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