Now that Trump’s Forced Drug Prices Into Ads, What’s Next? Lawsuits and Compliance, for Two

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Source: Fierce Pharma

Sorry, pharma. Self-policing didn’t fend off an official rule requiring drug prices in TV ads. And now that the requirement is coming, response from the industry ranges from challenging to cheering—with a few potential lawsuits in the mix.

Last week, the Trump administration said it would in fact require drugmakers put list prices into TV ads, and followed up by publishing the rule Friday in the Federal Register. It’s set to go into effect July 9.

No organization has sued—not yet, at least, because several haven’t ruled it out. The Association of National Advertisers is “seriously considering trying to find a way to block what we think is an unconstitutional proposal by the HHS,” said Dan Jaffe, who heads up ANA’s government relations.

The association is talking to other groups in the industry as it considers a next move, he said, and will likely know which direction they’re going to pursue “in the next week or so.”

The trade group PhRMA is still weighing its options, too. The organization put out an initial statement that echoed its previous stance, saying the rule “could be confusing for patients and may discourage them from seeking needed medical care.” When asked whether the group is considering legal action, Holly Campbell, deputy vice president in public affairs, said, “We are still reviewing the rule, so this is all I can share at the time.”

At least one pharma marketing expert took PhRMA’s confused-patient tack to another level. “Drug prices in TV ads don’t mean a damn thing and may scare patients away from needed prescription drugs to treat health problems. Until we address the lack of transparency around drug costs, adding the list price to ads is like trying to nail jello to the wall,” wrote consultant Richard Meyer on his World of DTC Marketing blog.

GlobalData senior pharma analyst James Mather also cited the murky nature of drug costs and spending as he picked apart the logic of the bill. While it seems to be a sensible approach, he said, the numbers don’t translate into true drug pricing and will cause confusion instead of clarity.

“The intention behind this announcement is clear,” he said. With the move, “Trump is aiming to increase the awareness of high drug prices with the public and apply pressure to companies to lower prices. This short-sighted policy completely ignores one of the core underlying causes of high U.S. drug prices, which is the complex structure of the U.S. healthcare system.”

Meanwhile, the American Medical Association, which has called for a ban on DTC ads in the past, said the rule is “a step in the right direction.”

“This small dose of transparency will help patients have a more complete picture when faced with prescription drug ads,” AMA president Barbara McAneny said in a release. “Patients—especially those who pay a drug’s list price or whose cost-sharing is based on the list price—will now have another tool in their toolbox as they work with their physicians to determine their prescription drug regimens.”

One usually conflicted group that’s largely in favor of the new rule was Congress. Sen. Dick Durbin, D-Illinois, and Sen. Chuck Grassley, R-Iowa, released a bipartisan statement in favor, while a variety of senators and congressional representatives on both sides of the aisle tweeted support for the new rule. Durbin also noted on Twitter that he and Grassley worked to get a similar bill through the Senate in 2018 and will jointly introduce a bill Monday to codify it.

Pharma and healthcare ad agencies will likely bear the brunt of deciphering the new rule and complying with it in creating TV ads.

For instance, one specific detail requires that the price disclosure be in text and use this format: “The list price for a [30-day supply of ] [typical course of treatment with] [name of prescription drug or biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.”

But pharma agencies are used to the highly regulated industry’s requirements and periodic changes to them, and as Leo Tarkovsky, president, McCann Health New York, said, will “do what we need to do for clients.”

“I don’t think we’re fazed or confused or shocked, because if you’re in this business at this particular point in time, you expect that you have to respond to certain developments whether those are regulatory changes, client changes or public discussions,” he said. “It’s our job to figure out communication solutions for our clients and to me that falls squarely in the same bucket.”

Some pharma marketers had already started including list prices and/or links to pricing information. PhRMA members agreed last month to start adding links in ads that would lead to list prices and other detailed cost information, as agreed in the PhRMA DTC Principles announced in October.

Johnson & Johnson was first to add list prices to drug TV ads in February, while Eli Lilly was first to add links to list prices and other detailed cost information in January.

Insurers Focus on Off-Exchange individual Market

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Many health insurers are turning their attention to off-exchange individual plan membership as more consumers withdraw from the exchanges, according to a report by Mark Farrah Associates. Although 4.9 million new members enrolled the exchanges in 2016, individual market enrollment declined 1%. Anthem, UnitedHealth, Aetna, Health Care Service Corporation (HCSC), Humana and Kaiser lead the industry in this segment. Each had more than a million individual medical covered lives in the first quarter of 2016.

 

Growing concerns about sustainability have motivated some insurers to pull out of the exchanges. Citing high medical costs, Unitedhealth said it would operate in only a handful of exchanges in 2017. In June, Humana announced that it would pull out of many exchanges after a year of seeing nearly $1 billion in losses. In August, Aetna announced that it would sharply reduce its participation in the public Marketplaces next year. Several Blue Cross Blue Shield plans and regional competitors have also announced intentions to scale back. Insurers lost almost $6 billion in the segment last year. Sixty-nine percent of the 194 companies that filed the 2015 Supplemental Health Care Exhibit had aggregate net losses in the individual, non-group segment. Factors include high medical claims, adverse selection, challenges with reinsurance, risk corridors, and risk adjustment, immature risk pools, and under-enrollment of younger, healthier individuals.

Still, Marketplace advocates maintain that the ACA is in its formative years and that new companies will enter markets as others exit. The Marketplace shakeout will continue as companies withdraw and enter new exchange markets. Meanwhile, insurers are working to firm up rates for 2017 individual plans and gear up for open enrollment beginning November 1, 2016.

Sixty-three percent of the 20.2 million individual medical members were enrolled through the Marketplace as of March 2016. The remaining 37% were enrolled in off-exchange plans, according to the Centers for Medicare & Medicaid Services (CMS) reports and data from Mark Farrah Associates. As for the future of Obamacare. Some say that the program is unsustainable and will collapse while others say the program can learn from its mistakes and secure a solid footing. The upcoming presidential and congressional elections will strongly influence Obamacare’s future, according to the report.

Many Americans Would Rather Pay the Fine Than Get Coverage

Thirty-eight percent of Americans would rather pay a fine than buy health insurance, according to a survey by insuranceQuotes.com. The survey reveals the following:
• 65% of Americans from 18 to 29 would buy health insurance versus 57% of Americans 30 and older.
• 78% of African Americans would buy health insurance versus 61% of Hispanics and 56% of Caucasians.
• 74% of Democrats would buy health insurance versus 40% of Republicans and 56% of independents.

The results reflect Americans’ responses to a hypothetical scenario (a 45-year-old who earns $50,000 a year). A typical health plan would cost this person $3,000 a year. If this person did not buy health insurance, the fine would be $400.

Laura Adams, insuranceQuotes.com’s senior analyst said, “One of the key questions surrounding the Affordable Care Act is whether young Americans — especially healthy young Americans — will sign up for health insurance. This research sheds a positive light on that segment of the population, but it’s concerning that about three in 10 Americans still don’t know about the possible fines.”

Most Americans are confused about the penalty amounts. The penalty would be $200 for a person who earns $30,000 a year. Only 21% of Americans who know that uninsured people will be fined correctly pegged the amount at $100 to$250 (38% overestimated and 36% underestimated). The penalty would be $650 for a person who earns $75,000 a year. Only 21% of Americans who know about fines correctly pegged the amount at $500 to $1,000 (46% underestimated and 29% overestimated).

Almost eight in 10 Americans who know about fines incorrectly think that children under the age of 18 are exempt from fines. Six in 10 falsely believe that senior citizens over the age of 65 are exempt. Only 64% correctly said the fine would come from their federal income tax refund. For more information, visithttp://www.insurancequotes.com/health/obamacare-penalty

Will Medicare Cuts Reduce the Quality of Hospital Care?

The Affordable Care Act (ACA) permanently slows the growth of Medicare payment rates for inpatient hospital care, raising concerns that hospitals will raise prices for private payers in order to offset lower Medicare revenue. But if history holds true, nonprofit hospitals will reduce operating expenses instead, according to a study by the Center for Studying Health System Change (HSC).

The claim that the ACA will drive large numbers of hospitals to insolvency appears to only hold true with for-profit hospitals. For-profit hospitals, which tend to have lower operating costs, will see profits decline.

But not-for-profit hospitals will adjust their operating expenses to match lower revenues. Hospitals will offset about 90% of lost revenues by through savings on personnel and non-personnel costs. Hospitals will also delay or forgo capital improvements. According to researchers, “Newhouse (1970) describes the hospital industry as aspiring to a Cadillac level of quality. Our results suggest that hospitals, if forced to, will instead turn out Buicks.” If hospitals can maintain or improve their quality of care, the result will be improved efficiency. For more information, visit www.hschange.org/CONTENT/1385/.

Americans Divided Over Repealing Obamacare

Americans are evenly divided about whether the Affordable Care Act should be repealed, according to a Bankrate.com report. This deadlock among Americans (46% on both sides of the issue) mirrors the divisions in Congress. Americans’ opinions of Obamacare differ greatly with age. Americans 18 to 29 are most likely to be uninsured (22%). They also respond most favorably to Obamacare, with 51% against repealing it. Americans 65 and older are the least likely to be uninsured (3%) and the most likely to object to Obamacare, with only 32% against repeal.

Sixty-four percent of rural residents would vote to repeal Obamacare versus 31% of urban residents and 48% of suburban residents. The Midwest is most in favor of repealing Obamacare (55%) while the Northeast is most in favor of keeping it (just 38% would vote to repeal). Not surprisingly, 74% of Democrats would vote to keep Obamacare and 79% of Republicans would vote to repeal. Independents sided with repealing, 49% to 41%.

Thirty-one percent of Americans say they are more negative about the Affordable Care Act compared to 12 months ago while 11% say they are feeling more positive. Upper-middle-income households (annual income $75,000 and up) are the most likely to feel worse about their health insurance situation compared to  year ago. Twenty-five percent say it’s harder to handle medical expenses while 75% say it is easier). For more information, visit http://www.bankrate.com/finance/insurance/health-insurance-charts-1013.aspx

The Evolution of ACO Partnerships in California

Unique market factors in California are driving interest in commercial accountable care organizations (ACO), according to a study by the Center for Studying Health System Change (HSC) on behalf of the California HealthCare Foundation. (ACOs are groups of providers that take responsibility for the cost and quality of care of a defined patient population.)

In California, large physician organizations are experienced in managing financial risk for patient care. Also, the growing dominance of Kaiser Permanente Health Plans has put more competitive pressure on insurers and providers.

Hospitals, physicians, and other providers are collaborating with public and private TPAs on reforming delivery and payment systems to slow health care spending growth and improve the quality of care. Medicare initiatives to develop ACOs have spurred interest in commercial ACO contracting arrangements among private insurers and providers.

On a national basis, most commercial ACO initiatives focus primarily on new provider payment approaches with existing insurance products. In contrast, California ACO collaborations have combined payment changes with new limited-network ACO insurance products. These limited-network products include financial incentives for enrollees to use ACO providers. They are usually structured as health HMO products that provide access only to ACO providers. Also, PPO products provide reduced patient cost sharing for using ACO providers.

Initial experiences reveals that some significant savings are possible. But ACO efforts require intensive collaboration and investment to support care management and exchange of sensitive performance data. These commitments present challenges even in California communities where market conditions are more favorable for ACOs. For more information, visit www.hschange.org/CONTENT/1383.

Insurers Face Challenges in Attracting Consumers to Exchanges

Carriers will face significant challenges and new competition in attracting and retaining customers in the exchanges, according to a study by PwC’s Health Research Institute. “Large national insurers and new players, some from other industries, are jockeying for position in the new exchange market,” said Ceci Connolly, managing director, PwC’s Health. New exchange entrants will include Medicaid managed care companies, new health plans run by large provider systems, healthcare start-ups, and non-insurer players, such as web brokers and tax preparers. Their participation won’t come without challenges, as many will need to learn how to operate in the new exchange market and manage the needs of a largely unknown population.

It will be crucial for insurers to invest in retention programs to gain the loyalty of a new crop of technologically savvy buyers. Companies should think beyond initial implementation challenges and focus on building a meaningful customer experience, with an eye on cost reduction and personalized communication, said Connolly.

For the study HRI interviewed insurance executives, consumer experts, and health policy leaders about exchange strategies. The following are some key results:

  • 69% plan to offer coverage on the exchanges, reflecting the rising significance of this new business opportunity
  • Ten of 18 national health insurer executives say their companies won’t offer exchange coverage in all the states where they have business, and 50% expect to enter additional states after 2014.
  •  63% say technology integration is a major barrier to implementation; and 61% cite coordination of subsidies.
  • Only 34% say understanding newly eligible customers is a major barrier to implementation, suggesting they may not thoroughly understand the challenges.
  • 91% expect premium costs and total out-of-pocket costs to be what consumers care about most. Yet, industry and consumer experts expect the ultimate differentiators to be factors, such as personalized communication, tangible rewards and health management programs, and brand recognition.

Sandra Hunt, principal with PwC’s Health Industries practice said, “Organizations that are planning to offer coverage on the exchanges should prepare to compete in new ways to earn consumers’ business and loyalty. Transparency around pricing, quality, and customer satisfaction should be foremost in their minds as consumers become much more aware of the cost of healthcare and how to access it.” For more information, visit www.pwc.com/us/hix.

IRS is Accused of Abusing it Power in the Seizure of Medical Records

An unnamed insurance provider has filed a class-action suit against the IRS in the Superior Court of The State of California for San Diego for illegally seizing the medial records of millions of Americans.

IRSRepublicans on the House Energy and Commerce Committee sent a letter to the IRS asking for an explanation of the Agency’s procedures for seizing documents. The plaintiff says that the IRS abused its power during a raid of “John Doe Company.” The following is a summary of the plaintiff’s complaint.

The search warrant authorized the IRS to seize the financial records of of one former employee; it did not authorize the IRS to seize any medical records — least of all third parties completely unrelated to the matter.

And yet, IRS agents confiscated more than 60 million medical records of more than 10 million Americans, including at least 1 million Californians. The seizure may have included intimate medical records on every state judge in California, every state court employee, leading and politically controversial members of the Screen Actors Guild and the Directors Guild, and prominent citizens in the world of entertainment, business, and government, from all walks of life.

Before executing the warrant, IRS agents were notified that John Doe Company had a HIPPA secure facility. When IRS agents came to the facility, they were warned again, by company officials, that the private medical records were HIPPA-protected and were for people who were not related to the search warrant. The IRS agents threatened to rip the servers, containing the medical data, out of the building if IT personnel did not hand them over.

IRS agents also seized personal mobile phones without attempting to protect private and privileged information on the phones, all of which was completely unapproved by the search warrant. To add insult to injury, the 15 IRS agents enjoyed soda and pizza from a pizza delivery while watching a basketball game on the company’s media system. Defendants are asking that the IRS to be prohibited from sharing the records with anyone. They also want the records to be returned as well as any copies of the records.

Tough Questions About Navigators
The National Association of Professional Insurance Agents (PIA) is thanking Rep. Duncan Hunter (R-Calif.) for raising significant concerns about healthcare navigators. In a June 7 letter to HHS Secretary Kathleen Sebelius, Rep. Hunter and 32 other Members of Congress focused on the need for appropriate oversight and the fact that navigators are not required to be licensed or carry liability insurance to protect consumers against errors or omissions (as are professional insurance agents ).

The letter notes that HHS’s proposed rule governing navigators and non-navigator assisters does not ensure that clients will get information on the plan that may best suit their needs, whether that plan is available in the marketplaces or through the traditional market. The letter also notes that navigators will not be allowed to help consumers determine the appropriate plan. PIA says that, while it is appropriate that unlicensed navigators or assisters to not be permitted to make plan recommendations, this puts the consumer in the position of lacking needed information.

The letter states that the complexities of these plans is best handled by licensed insurance agents or brokers who are trained and state-certified to sell such products. Also, insurance agents and brokers carry errors and omission (E&O) insurance to protect themselves and consumers from accidental wrongdoing. If an error occurs, consumers have recourse to recoup any losses that they may have endured. “It is our understanding that your Department will not recommend E&O coverage for navigators, resulting in possible large gaps in consumer protections,” the letter states.

The lawmakers also note that the ACA preserves state regulatory authority of insurance and that many state legislatures have passed legislation to strengthen consumer protections, such as further defining the role of a navigator.

The letter prompts HHS to provide the Department’s perspective on key areas of consumer protection, including inquiries into background checks, training, and oversight. For more information, visitwww.pianet.com.

How Expanding Medicaid Coverage May Affect Private Plans

A paper by the American Academy of Actuaries highlights how states’ decisions to expand
Medicaid coverage could affect private health-care plans. The U.S. Supreme Court’s June 28 decision on the Affordable Care Act (ACA) makes the implementation of the ACA’s Medicaid expansion optional for states. Many states are considering whether and to what extent to implement the expansion, which would increase Medicaid eligibility to 133% of the federal poverty level. “States need to consider the impact on private plan premiums and on employer penalties as they make their decisions on implementing the Medicaid expansion provisions in the ACA,” said Mita Lodh, member of the Academy’s Health Practice Council.

The Academy makes the following observations:

• Individual market premiums could increase in states that opt out of the Medicaid expansion, due to health status differences of new enrollees.
• Exchange premiums may also increase because fixed reinsurance subsidies would be spread over larger enrollee populations.
• Basic Health Program decisions by states, pending clarifications from the Department of Health and Human Services, could affect the risk profile of enrollees in an exchange.
• Employers may be at greater risk of penalties in states that don’t expand Medicaid eligibility.

For more information, visit www.actuary.org

Last Updated 01/13/2021

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