CMS Rule Aims to Block Use of Drugmaker Coupons on ACA Plan Members’ Out-of-Pocket Costs

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Source: Fierce Healthcare

CMS is taking aim at increasing the use of generic drugs in ACA plans in a new rule filed Thursday evening.

In the rule (PDF), the Centers for Medicare & Medicaid Services included a provision to allow insurers in the 2020 plan year to implement copay accumulator programs that would block the use of manufacturer coupons to lower annual out-of-pocket costs on certain brand name drugs when there’s a generic available.

Virginia and West Virginia have banned these programs in their individual markets, and several additional states are considering similar moves.

CMS, however, argues that the practce would decrease drug spending and encourage people to use generics.

“At CMS, we have improved the operations of the exchange to deliver a better consumer experience at a lower cost,” CMS Administrator Seema Verma said in an announcement.

Here’s a look at the collection of notes and changes CMS included in the new rule:

  • CMS reiterated its support for a legislative fix to end ACA plan “silver-loading,” including the potential for cost-sharing reduction payments to be reinstated. It noted that all the comments it received in response to a request for more information in the proposed rule supported allowing silver loading to continue.

Insurers offering plans on the Affordable Care Act exchanges responded to the Trump administration’s 2017 decision to end CSRs by stacking most premium increases on silver plans, which are used to determine federal subsidies. This offered an alternative way to lower cost-sharing.

“The administration supports a legislative solution that would appropriate CSR payments and end silver loading,” CMS said in the rule. “In the absence of congressional action, we sought comment on ways in which HHS might address silver loading.”

It did not take any action to change the practice. The earliest it might act would be for the 2021 plan year, CMS said.

  • CMS is also considering changes for automatic re-enrollment in 2021, according to the rule. The agency requested feedback on changes in this area as well in the proposed rule. CMS expressed concern that the current form of re-enrollment may prevent plan members from updating their information in a timely manner, which could lead to wasteful spending on tax credits.

All commenters that weighed-in on the issue called for CMS to leave the current re-enrollment policy in place, as it eases administrative burden and can prevent lapses in coverage.

CMS said it will consider those responses as “we continue to explore options to improve exchange program integrity.”

  • The rule also finalizes several policy adjustments for the 2020 plan year in the individual, small group and large group markets. The agency reduced user fees borne by insurers that funds operation of state exchanges and from 3% to 2.5%.

This decrease will go toward further decreasing premiums, CMS said.

  • CMS also aimed to improve transparency in its enhanced direct enrollment program, which allows people to sign up for ACA plans directly through an approved payer or broker without the need to visit Web brokers will be required to provide the agency will a list of brokers and agents that use their platforms.

Pharma Lobby Nears Spending Records With Drug Prices Under Fire

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Source: Bloomberg

Large drug makers and the industry’s primary trade group neared previous spending records on lobbying in the first three months of the year as President Donald Trump and Congress increased pressure to rein in the cost of medicine.

The Pharmaceutical Research and Manufacturers of America trade group, which represents 37 drug companies, spent $9.91 million in the first quarter, up from $6.03 million during the last quarter of 2018, and just shy of its record a year earlier, according to disclosures filed with Congress before a Monday deadline.

Drug companies are facing an unprecedented threat to their pricing practices as the president and lawmakers from both parties have targeted the high costs of drugs. That has become one of the few areas of bipartisan agreement in an otherwise divisive political climate.

The Trump administration has proposed new rules and approved a slew of new generic drugs, sending a signal that more ambitious changes may be needed to lower pharmaceutical prices for Americans. That’s spurred drugmakers to reveal prices of their prescription drugs on websites for the first time in a bid to avoid being forced to make even more public disclosures in TV ads.

Two of the world’s biggest insulin producers started offering bigger discounts — prompting Congress to call for more action and criticize the companies for waiting for so long.

Quarterly Increases

AbbVie Inc.AstraZeneca PlcBayer AGBiogen Inc.Bristol-Myers Squibb Co.Merck & Co. Inc., Novartis AGPfizer Inc. and Sanofi all bolstered their first-quarter spending compared with the fourth quarter, according to the filings.

Novartis hiked its spending an eye-popping 450 percent to $3.2 million from $580,000, and that figure was also about 5 percent above what it spent a year earlier, the filings show. Merck spent $2.74 million in the period, more than 200 percent more than in the last quarter of 2018, but that figure was down more than 17 percent compared with the year before, when it was one of several companies to set a group record.

AstraZeneca, Biogen and Bristol-Myers all spent more than their year-earlier levels. Those companies and AbbVie, Merck, Novartis, Pfizer, Sanofi, Johnson & Johnson all disclosed lobbying on drug pricing, among other issues.

The tide has turned for drug companies in Washington after years of being able to keep Congress at bay. A February hearing before the Senate Finance Committee that called on top officials from seven major drugmakers was touted as a moment of reckoning that could lead to a clampdown similar to what Big Tobacco faced in the late 1990s. But there were few fireworks, with lawmakers largely refraining from bashing the companies, which blamed a patchwork of incentives for high out-of-pocket costs for patients.

One sign that the drug lobby was losing its grip on Congress came in the first quarter of 2018, when PhRMA was blindsided by a change lawmakers made to Medicare that put drugmakers on the hook for more of seniors’ prescription costs. In that quarter, PhRMA and companies including AbbVie, Bayer, Celgene Corp.Novo Nordisk A/S and Sanofi set quarterly lobbying spending records.

America’s Health Insurance Plans, a trade group representing insurers, spent $2.88 million on lobbying, including on Medicare for All, according to its disclosure. That figure was up more than 87 percent from the previous quarter and up 26 percent from a year earlier.

The disclosures generally don’t say what positions a trade association or company took on any given issue.

Medicare for All has become a litmus test between progressives and moderates in the race for the 2020 Democratic presidential nomination.

Newsom Plans to Take on Big Pharma Over Prescription Drugs. L.A. County Wants In

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Source: Los Angeles Times

Gov. Gavin Newsom’s ambitious plan to rein in prescription drug costs through a statewide purchasing system — pooling the power of California’s largest public and private buyers — has a new ally: Los Angeles County.

In a tentative deal announced Wednesday, the Newsom administration and Los Angeles County said they would sit at the same bargaining table when negotiating prescription drug prices with manufacturers. Newsom said the partnership will hopefully spur other local governments to join the coalition, adding that governors in Rhode Island, Colorado and Illinois have expressed interest in a similar model or joining California’s collective.

Newsom made the announcement in front of the Rancho Los Amigos National Rehabilitation Center in Downey on his 100th day in office. His call for taking on the influential pharmaceutical industry was met with cheers from medical staff and patients at the high-tech rehabilitation center.

“I don’t want to overstate this, but I don’t want to understate this. This is a big deal,” Newsom said Wednesday.

The Newsom administration, however, has yet to release details on how the bulk buying system would work, leaving even the pharmaceutical companies he painted as opponents unable to comment substantively on the plan.

“I can assure you are going to see the fruits of this in the very near future,” Newsom said, adding that the state is within “a few months of actually seeing the net direct benefits.”

Tackling high prescription drug costs was one of Newsom’s first initiatives, which he announced in an executive order shortly after being sworn in. His plan would consolidate drug purchases in the state to make California the nation’s largest buyer. Doing so, Newsom said, would tilt the bargaining power in California’s favor when negotiating prices with drug companies.

With the addition of Los Angeles County — and with it drug purchases made on behalf of inmates and county hospital patients — the coalition grew significantly.

Much of the specifics about how the plan would work have yet to be announced. While Newsom said he anticipates a major fight with pharmaceutical companies and lobbyists, so far those groups have been relatively quiet publicly as they wait for details on the plan.

Newsom said he would like to shield some aspects of the state’s plans from the industry giants who will attempt to kill it.

Priscilla VanderVeer, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, said that without details, the lobbying group is currently neutral on Newsom’s plan.

“But much remains to be known,” she said. “We would like a transparent process that protects patient access to medicine.”

The nonpartisan Legislative Analyst’s Office said it could not yet assess Newsom’s plan to consolidate the state’s purchases on high-cost drugs because there are too few details on how it will be implemented.

“The administration has yet to share what specific strategies to expand upon existing bulk purchasing efforts are under consideration other than the broad concept of encouraging participation by private entities in the state’ negotiations,” the analyst’s office wrote this month.

In a meeting Wednesday with the Los Angeles Times Editorial Board, Newsom disputed that his plan was short on specifics.

“It is not that complex. I don’t know what more information folks need,” Newsom said. “The executive order laid out in detail four different actions.”

However, his executive order from January includes just a broad outline with timelines for status reports that have not been made public.

His executive order also called for consolidating prescription drug purchases by January 2021 under the state’s Medi-Cal program, which provides healthcare to lower-income residents. The Legislative Analyst’s Office has estimated that plan could save the state hundreds of millions of dollars, but “it’s highly uncertain” and comes with trade-offs, such as reduced revenue to hospitals and community clinics that receive federal rebates on their drug purchases.

The executive order does not set a timeline for Newsom’s plan to create the bargaining collaborative between state agencies, local governments and the private sector. The Department of General Services was tasked with creating a list of high-cost priority drugs the state would like to focus its collective bargaining power on. The agency is in the process of developing a plan for bulk purchases on those medications.

“Obviously, there are more details to work out in how you use this bigger hammer when it comes to combined purchasing power,” said Anthony Wright, executive director of Health Access, a statewide healthcare consumer advocacy organization. “But this is important.”

Los Angeles County Supervisor Janice Hahn said high prescription drug prices is an issue that Americans want government to deal with and Newsom’s plan to create a coalition to leverage their buying power makes sense. She said the Los Angeles County Department of Health Services alone spends $242 million a year on prescription drug purchases.

“We wanted to be the first,” Hahn said. “If L.A. County, which is the largest county, joins this initiative, other counties will join in, other states may join in, and it will only help us drive prescription drug prices down. L.A. County spends a lot of money every year on prescription drugs and we think something like this could cut that cost in half.”

California Republican Wants to Replace Private Drug Negotiators with State Agency

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Source: Politico California Pro

In an unusual position for a Republican, Sen. Jeff Stone is proposing that California set up its own government agency to negotiate lower drug prices on behalf of most residents and cut out the private multibillion-dollar industry that currently serves that middleman role.

Stone (R-Temecula), a pharmacist who sits on the Senate Health Committee, told POLITICO he is amending Senate Bill 642 to create a new agency called the California Department of Drug Acquisition and Adjudication — a state-operated pharmacy benefit manager (PBM) that would negotiate lower drug prices for California consumers and employers across public and private sectors.

The amendments, expected to be in print late Wednesday, take aim at private PBMs that have faced increasing scrutiny from state and federal officials, including the Trump administration. The bill would exempt all-inclusive plans that operate their own pharmaceutical purchasing, such as Kaiser.

“They’re making huge profits at the expense of California taxpayers,” Stone said in an interview. “I’d rather the drug companies come to us, and we negotiate the discounts and rebates on behalf of our shareholders — the 40 million people of California who would like to see those benefits applied to them by having their insurance premiums reduced.”

He said the state can cut better deals and under his plan, would be required to earmark funds specifically for implementing policies to lower health care premiums. He estimates California could generate $3 billion to $5 billion per year by eliminating traditional drug intermediaries.

“That’s conservative,” he said.

Stone acknowledged that it’s uncommon for a Republican to push for more regulation and bigger government. But he said he’s driven by the potential savings Californians could see. He said he has also grown frustrated as he’s watched the three dominant pharmacy benefit managers that control 85 percent of the national market increase profits without passing savings on to consumers. He blamed them for driving health care costs higher, for companies and the system as a whole.

“They became multibillion-dollar companies on the backs of citizens seeing higher health care costs,” Stone said.

Express Scripts, OptumRX and CVS Caremark control 85 percent of the market, “which allows them to exercise undue market power against manufacturers and against the health plans and beneficiaries they are supposed to be representing, thus generating outsized profits for themselves,” said President Donald Trump’s Council on Economic Advisers in a 2018 report on pharmaceutical pricing.

The companies argue that they play a critical role in negotiating lower drug prices for consumers. They say they are best positioned because they have the scale and expertise to negotiate lower prices with manufacturers, largely through the marketing of generics.

The Pharmaceutical Care Management Association, which advocates on behalf of PBMs, says they are “projected to save employers, unions, government programs and consumers $654 billion — up to 30 percent — on drug benefit costs over the next decade.” It comes as the price of prescription drugs is also rising. Cost growth nationally is expected to grow 4.6 percent this year, according to the Centers for Medicare and Medicaid.

“It is the core mission of pharmacy benefit managers, PBMs, to advocate on behalf of consumers to keep prescription drugs accessible and affordable. PBMs reduce drug costs by using consumer-friendly, market-based tools that encourage competition among drugmakers and drugstores,” PCMA said in a statement.

PBMs have come under fire in recent years, as Republicans and Democrats have sought to assign blame for rising drug prices. Because their operations are largely hidden from public view, it’s hard to know exactly how much money they make after negotiating lower prices between the pharmaceutical industry and health plans. Stone called their operations a “black box.”

California is trying to force PBMs to be more transparent. Former Gov. Jerry Brown signed legislation last year authored by Assemblyman Jim Wood (D-Santa Rosa) that requires them to register with the state Department of Managed Health Care and disclose, upon a purchaser’s request, information on discounts and payments made to pharmacies on behalf of patients.

The information, however, is not public. Stone said the law doesn’t go far enough, but it “cracked the door open.”

The senator is also looking to sell his proposal to Gov. Gavin Newsom, who is drafting a bulk purchasing plan for California that seeks to lower pharmaceutical prices.

“I’m basically giving him a vehicle to get that done,” Stone said. “The driving force behind this is Gov. Newsom, who has made this a priority. This could be a legacy program for him … and help him harness the immense buying power in all these various areas of government that buy and dispense drugs. It’s really going to set the stage for a national discussion on this.”

Though other states have laws in place that regulate PBM operations, no state operates its own government PBM.

Stone said he has had discussions with the Newsom administration and said “they’re fascinated by it and they have said they want to see a first draft of the bill.”

“There’s a difference between Gov. Newsom and Gov. Brown,” Stone said. “We now have a chance to set a model for the U.S.”

Newsom spokesperson Nathan Click declined to comment on the bill specifically, especially since amendments are not yet in print, but said the administration looks forward to understanding the details.

“The governor will weigh in when and if it gets to his desk,” Click said.

Aetna-CVS Merger to be Reviewed as Judge Agrees to Hear Witnesses

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Source: Benefits Pro

This merger’s not over even when it looks to be over, apparently.

A federal judge will hear testimony from witnesses who opposed a ruling from the Justice Department approving the merger between CVS and Aetna that closed last November.

As reported by The Hill, Federal Judge Richard Leon has expressed concern that the settlement of the acquisition by CVS of Aetna—valued at nearly $70 billion—may not have provided adequate protection for industry competition. Said the report, “A CVS lawyer argued that judges had never called for witnesses in such hearings.”

The judge has said he anticipates a week long hearing in May, during which testimony from the American Medical Association and consumer rights groups will likely be heard. Both have said they want to testify.

In addition, there may also be witnesses from the Justice Department and CVS.

Such a move is “highly unusual,” according to the Wall Street Journal. Not only has the acquisition already taken place, but CVS and Aetna have already posted earnings as a single company.

The merger was allowed after the two companies agreed to sell off assets related to drug coverage for Medicare, but Reuters reports that Leon had previously expressed reservations about the deal, saying he was “less convinced” than the government that antitrust issues were resolved by the asset sale and wanted more time to consider the settlement.

CVS had said it would keep part of the Aetna operations separate until he did so.

“Health care is a very high priority for tens of millions of people,” Leon said. “This is a matter of great public interest.”

Drug Industry Middlemen To Be Questioned By Senate Committee

Image result for Drug Industry Middlemen To Be Questioned By Senate Committee imagesSource: NPR

Consumers, lawmakers and industry players all seem to agree that prescription drugs prices are too high. What they can’t always agree on is whom to blame.

On Tuesday, though, fingers are expected to point toward pharmacy benefit managers, the industry’s mysterious middlemen.

The Senate Finance Committee will hear from executives from the biggest pharmacy benefit managers, led by CVS Caremark and Cigna’s Express Scripts.

“They’re kind of a secret organization,” says Sen. Chuck Grassley, R-Iowa, of the pharmacy benefit managers. “I ask people to explain what they’re doing and nobody seems to give you the same answer twice.” Grassley is chairman of the Finance Committee and Tuesday’s hearing is its third on drug prices this year.

Pharmacy benefit managers, or PBMs, manage prescription drug benefits for insurance companies and employers. And because they control the medication purchases of millions of patients, they are tremendously powerful.

“They exist only because pharmaceutical prices got so high and they were a way to get some market power in there that was on the consumer side,” says Len Nichols, a health economist at George Mason University. “Now they’ve become so big and dominant that they are hurting pharma.”

How dominant? CVS Caremark negotiates drug prices, copayments and which drugs are preferred options for more than 92 million people in the U.S. Express Scriptscovers another 83 million.

The companies are hired by insurance companies, or self-insured employers, to control spending on prescription drugs. The PBMs negotiate discounts with pharmaceutical manufacturers, but those discounts come in the form of confidential rebates that are paid to the PBMs after the drugs are purchased.

PBMs pass most of the rebates on to their clients, but they often keep a slice for themselves.

The PBMs dispute that they are withholding savings from their clients. “While drug manufacturers would have people believe that PBMs are retaining these discounts, virtually all rebates and discounts are passed on to clients,” said Tom Moriarty, executive vice president at CVS Health, in a February speech.

Some analyses show that PBMs actually do help reduce drugs prices.

“PBMs have saved money over the last decade by encouraging use of generics,” says Dr. Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.

report from SSR Health, an investment research firm, says the net prices of brand-name prescription drugs fell 4.8 percent in the last quarter of 2018, even while list prices rose 4 percent. The declines came as pharmacy benefit managers refused to pay for some drugs altogether, opting for a competing brand that offered a better price.

Gellad says that evidence is murky, because the rebate system means that many drugs start at prices that are artificially high.

But critics say the system creates perverse incentives for drugmakers to set high prices for their products so they can offer larger percentage rebates. And they say sometimes PBMs benefit more when patients buy expensive drugs than when they buy cheaper ones.

Now the entire business model is under attack. Health and Human Services Secretary Alex Azar in February proposed eliminating the rebate system that underpins the work of companies like CVS Caremark and Express Scripts.

Instead, Azar proposed, the companies would use their market power to negotiate discounts from drugmakers upfront that would be passed on in full to patients.

In comments on HHS’ proposal to get rid of rebates, CVS said drugmakers — not PBMs — are to blame. “Our data show that it is not rebates that are causing drug prices to soar and, in fact, list price is increasing at a faster rate for many drugs with small rebates than for drugs with substantial rebates,” CVS wrote. “The elimination of rebates may not only lead to higher net drug prices, but will undoubtedly lead to higher premiums across the Medicare Part D program.”

Tuesday’s hearing comes six weeks after the leaders of seven pharmaceutical manufacturers appeared before the same committee to defend their pricing practices.

Those CEOs acknowledged that their prices are high for many patients, but they deflected blame onto pharmacy benefit managers.

“We want these rebates, which lower net prices, to benefit patients,” said Olivier Brandicourt, CEO of Sanofi, which makes Lantus, one of the highest priced brands of insulin. Its list price has risen from $244 to $431 since 2013, according to the committee.

“Unfortunately, under the current system, savings from rebates are not consistently passed through to patients in the form of lower deductibles, co-payments or coinsurance amounts,” Brandicourt said in testimony prepared for the hearing.

Sen. Ron Wyden, D-Oregon, who is the ranking member of the Finance Committee, had harsh words for the drug makers at the February hearing.

“I think you and others in the industry are stonewalling on the key issue, which is actually lowering list prices,” he said. “Lowering those list prices is the easiest way for consumers to pay less at the pharmacy counter.”

Grassley is also frustrated.

“The pharmaceutical companies pointed the finger at the PBMs. The PBMs point their finger at the pharmaceuticals. And then both of those are pointing their fingers at the at the health insurance companies,” Grassley said.

“I’m not announcing another hearing,” he continued. “But it might be that if we get this finger-pointing going on all the time, we may want to get those three groups all at the same table to stop the finger-pointing.”

White House, Pelosi in Talks on Drug Pricing Legislation

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Source: Politico

The Trump administration has held early-stage conversations with Speaker Nancy Pelosi’s staff about drug-pricing legislation that could provide each side with a domestic policy victory, according to White House and congressional sources.

Democrats and the Trump administration have made reducing drug costs a priority, but accomplishing anything could be difficult, especially since the administration has taken an aggressive stance to overturn Obamacare in federal court.

Democrats have been reluctant to work with the president or give Republicans the opportunity to claim credit on an issue that ranks high with likely voters.

Rep. Peter Welch (D-Vt.) participated in a mid-February meeting where White House participants included Domestic Policy Council Director Joe Gogan, HHS Secretary Alex Azar, acting chief of staff Mick Mulvaney and Chris Liddell, his deputy for policy coordination. Welch told POLITICO the only shared principle was to lower drug prices.

Wendell Primus, Pelosi’s longtime health policy aide, is handling talks on the speaker’s end, sources told POLITICO Playbook. Primus has also been engaged in bipartisan conversations with aides to Senate Finance Chairman Chuck Grassley (R-Iowa), the senator’s staff told POLITICO. While all of the participants have not yet met in one place, Republicans in the House and Senate are also having separate conversations with the White House and HHS on how to address pharmaceutical costs, according to Grassley aides.

The White House reached out to Democratic-leaning health groups earlier this year to gauge how receptive Democrats would be to working with the Trump administration on drug pricing, sources said.

Primus has been trying to get White House buy-in for a drug price negotiation idea known as arbitration, where a third party would help decide the price of a select group of high-cost drugs, POLITICO reported in February. Republicans might support that idea more than widespread negotiation of all drugs in Medicare Part D. But the proposal irks progressives who think Democrats should stick with their 2018 campaign platform pledge of all-in Medicare price negotiations.

Rep. Lloyd Doggett (D-Texas) said Tuesday that while he wouldn’t rule out arbitration, it was “an extremely narrow approach that would not provide an immediate answer to the concerns I hear from so many people about prescription drugs.” Doggett chairs the Ways and Means Health Subcommittee and sponsored a Medicare price negotiation bill with more than 110 co-sponsors.

If Democrats are going to reach an agreement, “it needs to be on something that really makes a difference in the lives of people on health care and not agreement for agreement’s sake, so a meaningful step forward I’m for and I hope that we can get there,” Doggett said.

Congressional Republicans may also be a barrier to an agreement on arbitration. Grassley has concerns about the plan, his aides said.

The White House-Pelosi talks so far consist of staff-level discussions and aren’t negotiations, according to Henry Connelly, Pelosi’s deputy communications director. “House Democrats promised the American people we’d take bold action to lower prescription drug prices, and that’s what we’re going to do,” he told POLITICO Playbook.

The White House may be trying to use its conversations with Pelosi’s office to send a signal to Republican lawmakers that they need to be willing to push further on drug pricing. Many of the White House ideas on drug pricing — like tying the costs of physician-administered drugs to the lower prices paid overseas — fall outside the market-based approaches favored by Republican lawmakers on Capitol Hill.

Primus wants the White House to agree to a delay in implementation of a sweeping rule to overhaul the drug rebate system, lobbyists and health policy groups said. The proposed rule would prohibit drug manufacturer rebates in Medicare and Medicaid unless they are passed on directly to consumers at the point of purchase. Democrats have been critical of the rule because it is expected to raise seniors’ Medicare premiums and cost the government billions of dollars.

Azar and his team have been adamant the rebate rule — aimed at eliminating “back-door rebates” to middlemen — will be finalized shortly so it can take effect in 2020. But health plans and the drug industry see that timeline as unrealistic. Savings generated from delaying the rebate rule could help the White House pay for other drug-price priorities, including a budget proposal to establish an out-of-pocket spending cap for Medicare Part D beneficiaries that is estimated to cost the government $14 billion over 10 years.

However, this is another idea that faces an uphill battle with Republican lawmakers. Grassley has said delaying the rule would simply be a budget gimmick he does not support.

House Democrats this week intend to start moving a package of narrow bills that address drug prices by creating more robust generic drug competition. Several of the measures have bipartisan backing.

One area of possible compromise could be on legislation to make it harder for brand-name drug companies to deny samples of their products in order to block generic drug competition. CEOs from seven major drug companies recently told the Senate Finance Committee they could support some version of the plan, known as the CREATES Act.

However, work in the House on even these more incremental drug pricing bills have stirred tension between the Democrats and Republicans.

Drug Prices on TV? They May Be Coming

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Source: New York Times

The Trump administration is moving ahead with its proposal to require drug companies to disclose the often sky-high prices of their products in television commercials, despite strenuous objections and the threat of legal challenges by drug makers and TV broadcasters.

The White House is reviewing the text of a final rule to impose the requirement, contending that the disclosures “will provide manufacturers with an incentive to reduce their list prices by exposing overly costly drugs to public scrutiny.”

President Trump has rolled back dozens of Obama-era regulations affecting financial services, energy and the environment. But he has been willing to impose new rules to rein in what he describes as outrageously high drug prices, and administration officials say these efforts will be politically popular.

In a poll last month by the Kaiser Family Foundation, nearly nine in 10 Americans said they supported requiring drug companies to include list prices in their advertisements. Democrats and Republicans were equally likely to favor it.

Mr. Trump vowed in the Rose Garden of the White House last May that he would “bring soaring drug prices back down to earth.” He said this past week that “prescription drug prices have come down” for the first time in 51 years, crediting Alex M. Azar II, the secretary of health and human services, for the development.

The administration wants drug makers to disclose the list prices of drugs in television advertisements, and in many ads, the sticker shock could be considerable. Two dosing pens of Humira, AbbVie’s heavily advertised rheumatoid arthritis and chronic plaque psoriasis medication, have an average retail price of $5,684, according to the website GoodRx, which tracks drug prices. Xeljanz, a Pfizer arthritis medication in heavy television rotation, costs about $80 a pill. Cosentyx, a Novartis medication for psoriasis, has a list price that amounts to $67,325 a year, the company said.

Drug companies say such information would be misleading in an advertisement because most consumers pay less than the list price, and they are lobbying the White House in an effort to kill or delay the rule. Officials could not say how long the White House review would take or when the final rule would be in place.

“Requiring list price disclosures could result in increased consumer confusion and may potentially deter patients from seeking care,” Robert W. Jones, a senior vice president for United States government relations at Pfizer, said in a recent letter to Seema Verma, the administrator of the Centers for Medicare and Medicaid Services.

Eli Lilly, the pharmaceutical company where Mr. Azar was once a top executive, said, “Many patients may incorrectly surmise that they are required to pay the full list price, rather than a co-pay or coinsurance.”

Drug makers spent nearly $4.5 billion on television advertising of prescription drugs last year, according to Kantar Media, an ad tracking company.

Even some people who desperately want lower drug prices question how effective the disclosure requirement would be.

David Mitchell, the founder of Patients for Affordable Drugs, a nonprofit advocacy group, said that the disclosure of list prices in TV ads could be helpful to patients, but he added: “We have not seen any evidence that it will lower drug prices. We do not believe drug companies will be shamed by public displays of prices.” Mr. Mitchell has a blood cancer called multiple myeloma.

Carl E. Schmid II, the deputy executive director of the AIDS Institute, a public policy and advocacy organization, said: “The list price is an inflated price and does not represent what the patient pays, nor for that matter, what the pharmaceutical company receives. In and of itself, it is not a useful figure for patients. What they need to know is how much a drug will actually cost them at the time of sale.”

When the Trump administration proposed the price-disclosure requirement last fall, Mr. Azar called it a “historic action” to reduce drug prices by providing consumers with more information.

But in the fine print of the proposed rule, the Department of Health and Human Services made some notable concessions. It acknowledged that “Congress has not explicitly provided H.H.S. with authority to compel the disclosure of list prices to the public.”

In addition, while extolling the benefits of “price transparency,” the department said that “consumers, intimidated and confused by high list prices, may be deterred from contacting their physicians about drugs or medical conditions.” This, in turn, “could discourage patients from using beneficial medications” and “potentially increase” the total cost of care, the department said in a preamble to its proposed rule.

Two powerful lobbies, the National Association of Broadcasters and the Pharmaceutical Research and Manufacturers of America, contend that the disclosure requirement would be a form of “compelled speech” in violation of the First Amendment. Their comments on the proposed rule provide a road map for possible lawsuits challenging the mandate.

The required disclosure of list prices has no rational connection to the government’s stated goal of reducing drug prices paid by Medicare and Medicaid beneficiaries, said Rick Kaplan, an executive vice president of the broadcasters association.

James C. Stansel, the top lawyer at the drug makers lobby known as PhRMA, said there were “other, much less intrusive ways to make cost information available to patients.” For example, he said, Congress could authorize the Medicare agency to disclose list-price data itself, along with cost-sharing information for beneficiaries, on a government-sponsored website.

When the White House issued a “blueprint to lower drug prices” with several dozen ideas last year, it directed the Food and Drug Administration to consider requiring drug makers to include list prices in advertising. The agency has clear legal authority to regulate drug ads, but it is not issuing the new rule. Rather, it was drafted by the Centers for Medicare and Medicaid Services.

The Trump administration says this is justified because the agency that runs Medicare and Medicaid is “the single largest drug payer in the nation.”

But its authority is sure to be challenged. Federal law “delegates regulatory power over prescription drug advertising to F.D.A., not C.M.S.,” Mr. Stansel said. Both agencies are part of the Health and Human Services Department.

The drug industry is poised to roll out an alternative to Mr. Trump’s plan. PhRMA companies say they will voluntarily include information in TV ads directing viewers to company websites that provide data on list prices, typical out-of-pocket costs and sources of financial assistance for patients who need it. With many drugs now costing more than $50,000 a year, many people do need assistance.

Johnson & Johnson is going further. It plans to disclose the list prices of its prescription drugs, as well as potential out-of-pocket costs, in television ads. It will start in the next couple of weeks with its most widely prescribed medicine, Xarelto, a blood thinner, which has a list price of $448 a month.

The administration plan to require disclosure of drug prices is supported by the American Medical Association, the American Hospital Association, America’s Health Insurance Plans and the Blue Cross Blue Shield Association, as well as by Senator Charles E. Grassley, the Iowa Republican who is the chairman of the Finance Committee, and Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat.

UnitedHealthcare Will Expand a Drug Discount Program Aimed at Lowering Consumer Costs

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Source: New York Times

The insurance giant UnitedHealthcare said Tuesday that it will expand a program that passes drug discounts directly to consumers, a move that could lower costs for many who have struggled with high deductible payments and other out-of-pocket expenses.

United said the plan would take effect next year and would be required for all new employer clients, although existing clients would be permitted to continue under the older system. Those clients will be “encouraged” to adopt the new plan when their contracts expire, but will not be required to do so, according to Matthew Stearns, a spokesman for OptumRx, the pharmacy benefit manager that is owned by United.

Other insurers have offered employers the option to apply the after-the-fact discounts, called rebates, to consumers’ out-of-pocket expenses, but United appears to be the first major insurer to require it of new clients.

“This expanded point-of-sale discount program demonstrates our commitment to delivering better prices for consumers,” John Prince, the chief executive of OptumRx, said in a statement.

Rebates have come under harsh criticism and are blamed for helping to push up the list price of drugs, which consumers are increasingly responsible for paying. Even though insurers and employers pay a lower net price (after rebates have been accounted for), many consumers have been forced to pay the equivalent of a drug’s list price at the pharmacy when they have not yet met their annual deductible, or when their plan requires that they contribute a percentage of a drug’s price.

As consumer anger over drug prices has grown, pharmaceutical companies and insurers have increasingly pointed fingers at each other, with drug companies accusing insurers of profiting from their share of the rebates they collect, while insurers say the manufacturers are the ones that decide what a drug costs. Both industries have come under scrutiny by the Trump administration and members of Congress, and have struggled to show that they are doing something to address the issue.

In January, the Trump administration proposed a similar move for government health care programs like Medicare. Under the proposed rule, pharmacy benefit managers — the intermediaries that negotiate with drug makers on behalf of insurers and employers — would lose the legal protections that allow them to accept rebates from drug companies for brand-name drugs covered under the Medicaid and Medicare government programs. Any such discounts would instead have to be credited at the pharmacy counter when patients filled a prescription.

United said its analysis of employers who have voluntarily adopted such a program shows that consumers are more likely to fill their prescriptions, which can improve their health. The company also said the existing voluntary program, which began this year, has lowered drug costs for consumers by an average of $130 per eligible prescription.

Employers and insurers have typically used rebates to lower premiums for all members, and under the Trump plan, Medicare beneficiaries’ drug-plan premiums are expected to rise slightly.

Mr. Stearns, the OptumRx spokesman, said that the company expects the new requirement will result in “modest increases” in premiums, which he said would be in the low single digits. “But it will also put money back in consumers’ pockets,” he said.

Health System Consolidation: Can Employer Groups, Brokers Survive It?

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Source: Benefits Pro

Health care systems have been buying up one another, and physician practices, at an alarming rate. The 115 announced health care system deals in 2017 was a record, with 2018’s 90 close behind.

This level of consolidation activity 2017 “shook the health care landscape,” said consulting firm Kaufman Hall, which produces an annual mergers and acquisitions review. “These tremors continued into 2018 and are beginning to fundamentally reshape the health care landscape,” KH said in its 2018 review.

The consolidation within the physician practice sector was no less titanic. Hospital systems acquired more than 5,000 standalone practices in 2015 and 2016 alone. Meantime, practices are also being swallowed up by UnitedHealthcare and other non-hospital enterprises.

Analysts tend to focus on two major outcomes of this consolidation craze: financial and quality of care. So far, evidence suggests that consolidation among health care systems leads to higher prices for services and thus costs to users, and stable or lower quality of care.

These trends are not the friends of two very specific groups: health insurance brokers, and employer groups created to negotiate better terms for their members with hospitals.
“It is frustrating,” admits Brian Marcotte, CEO, The National Business Group on Health. “Scale for the sake of scale leads to higher costs, and that’s what we are seeing. When we look at what actually happens when hospitals buy hospitals or physician groups, we see higher cost and price.”

One of the primary objectives of NBGH’s 435 enterprise level members–all of which are self insured–has been to negotiate better terms with medical providers. As consolidation creates ever larger health care systems, its members report that “consolidation has not led to the efficiencies you’d see in other industries. … Most report that costs went up or were unchanged. Very few saw them go down.”

Employer groups are promoting Centers of Excellence and encouraging plan members to seek care from top performing practitioners. But consolidation among hospitals can erode quality of care for employer plan members by bringing into an existing system underperforming hospitals and physicians, Marcotte says.

“Let’s say you have a 12-hospital system that dominates a market or several markets,” he says. “The health plan is looking to contract with eight higher performing hospitals, but not all 12. The hospital system’s negotiating position is, ‘You take the whole system or you don’t get any of our system.’ These are the tactics that go on when providers are dominating a particular market.”

The decline of bargaining power
Smaller employers that band together into health care purchasing groups lose negotiating power when consolidation sweeps through a market. Employer groups negotiate locally or regionally for terms for their members with hospital systems. Their cache is numbers: They guarantee a large number of patients in exchange for favorable terms.

But, says Den Bishop, president, Holmes Murphy, an insurance advisor, as the systems expand, the group’s bargaining power diminishes.

Meantime, consolidation among physician practices is driving costs up for plan members. Physicians are highly incentivized to merge practices and then sell to a health care system. “They want to get out from under the administrative burden and just practice medicine,” Bishop says. “As soon as they buy the practice, the hospital system goes to the insurance company and says, ‘Our contract rate is much higher than the physicians, so you will now pay us this rate.’ That rate gets passed on to the employer. By paying higher prices for physician services, employers are paying the acquisition price for the hospital.”

In Atlanta not long ago, a major health system purchased a large physician practice–and employer plan costs for those physicians increased 40 percent, says Suzannah Gill, benefits strategy consultant with EPIC in Atlanta. “Sadly, when hospitals buys practices, the hospital wins and the member loses,” she says.

The national movement toward greater price and cost transparency among providers faces a threat from consolidation, Marcotte and others say. As systems expand, “you see a reluctance to have a price listed in transparency tools,” Marcotte says. “They refuse to list their prices, effectively eliminating any real ability for a consumer to choose a cost effective site of service.”

Josh Luke, MD, a former hospital CEO who now writes and lectures on hospital system strategies, believes the transparency issue may prove to be a turning point battleground for hospitals.

“There’s a transparency movement uprising coming with overall health and cost,” he says. “That momentum will be tough for any market to turn away from. Pricing transparency may outweigh a monopoly’s ability to gouge employers.”

Broker adaptation
On the broker side, a major threat to traditional brokers comes from the hospitals themselves. As they expand, many are moving into the health insurance business.

“The hospital systems are moving quickly, while they still have the most money, to compete with insurers. They are becoming insurers,” says Luke. “The bottom line is that is the [hospital] model of the future is an insurance model.”

To adapt to this new model, brokers need to become advisors and consultants to their clients. Their role may revolve more around transparency, advising clients on negotiating specific terms with health care systems, guiding them through the opaque pricing lens hospitals have thrown up.

Longer term, the health care system as insurer could have a positive effect on plan design and cost, several experts agree. The insurance component of a hospital system benefits from a healthier patient population, on more efficient use of services and facilities, and on a leaner brick-and-mortar footprint. These systems will focus more on convenience for patients and on value-based cost structures, and will be more responsive to negotiating with large employer groups.

“If the hospital system becomes big enough, it can negotiate directly with employers,” Bishop says. “They don’t need the insurance broker. The great hope [for employers] is that the hospital companies become insurers and have an incentive to provide better quality at a lower cost. It is still a ways off. We are in the cocoon period right now.”

EPIC’s Gill agrees that hospital systems that branch out into insurance will seek to contain the costs of medical care. “Health care providers have an incentive to increase costs. Insurance carriers have incentives to reduce or maintain costs. So when a health system develops an insurance business, there are incentives for them to do things efficiently,” she says.

The broker/advisor can play a crucial role in a consolidating market, Gill and others say.

“Employers need advisors to guide them today. They are focused on running their business, so you are seeing more advisors introducing interesting, cutting edge practices to meet their needs,” she says. “Sometimes when you tell a provider or facility, ‘My client will pay on the spot and you won’t have to worry about collections later,’ [the health care provider] will take it. I see all of the changes as very good for the broker/advisor market. The market is evolving, becoming more complex, and that’s where employers turn to brokers for guidance.”

The overall effects of hospital consolidation in a major market “are probably indifferent to most forward-thinking brokers,” says Allison De Paoili, founder and owner, De Paoli Professional Services, San Antonio. “But in the smaller markets, where you have two health systems that merge, then you have a problem,” she says. “With no competition, there is no incentive to negotiate price.”

In the end, the final chapters on health system consolidation have yet to be written. The merger frenzy of the past two years is still working itself out. As hospital systems seek market domination, creative brokers, concerned large employers, and national organizations like NBGH are still developing their responses.

Pockets of positive physician practice and hospital system consolidation do exist, NBGH’s Marcotte says. The hospital-as-insurer places the parent company in a position to accept some of the risks, he says, and that’s where innovation and efficiencies will emerge. It’s mostly happening on the Medicare Advantage side, but could translate to commercial insurance, he says.

“What I worry about with provider consolidation is when I have the whole market, I have no incentive to move to a value based direction, unless I have to do it to get paid differently,” he says.

Total market domination may be the goal of health systems. But it could also be their undoing.

“When there’s a monopoly, people will walk away,” says Josh Luke. “People are getting fed up. The public pressure is starting to rival the doctor and hospital lobby. Major employers, like Disney and Amazon, are saying ‘We are gonna blow it up and start over.’ Hospitals haven’t started feeling the pain yet. But it’s coming.”

Last Updated 04/24/2019

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