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Monthly Archives: June 2017
Cartoon – Try not to lead by example
In Washington state, a healthcare repeal lesson learned the hard way
http://www.latimes.com/politics/la-na-pol-obamacare-washington-state-20170531-story.html
Republicans in the state of Washington didn’t wait long in the spring of 1995 to fulfill their pledge to roll back a sweeping law expanding health coverage in the state.
Coming off historic electoral gains, the GOP legislators scrapped much of the law while pledging to make health insurance affordable and to free state residents from onerous government mandates.
It didn’t work out that way: The repeal left the state’s insurance market in shambles, sent premiums skyrocketing and drove health insurers from the state. It took nearly five years to repair the damage.
Two decades later, the ill-fated experiment, largely relegated to academic journals, offers a caution to lawmakers at the national level as Republicans in the U.S. Senate race to write a bill to repeal and replace the federal Affordable Care Act.
“It’s much easier to break something,” said Pam MacEwan, who served on a Washington state commission charged with implementing the law in the mid-1990s and now oversees the state insurance market there. “It’s more difficult to put Humpty Dumpty back together again. … And that’s when people get hurt.”
The nonpartisan Congressional Budget Office echoed that warning last week, when it concluded that the healthcare bill passed by the House last month would destabilize insurance markets in a sixth of the country and nearly double the number of people without health insurance over the next decade.
Senate Republican leaders contend that their legislation will be different. “We’re working to lower the costs and give people more personal, individual freedom,” Sen. John Barrasso (R-Wyo.) said last week.
There were similar assurances in the Washington statehouse when legislators there began to pull apart the Washington Health Services Act in the mid-1990s.
When An Insurer Balks And Treatment Stops
Gillen Washington, a student at Northern Arizona University, had been getting medication for an immunodeficiency disease since 2011. But when he went to his clinic in November 2014 for the monthly dose, a nurse told him his insurance company had denied it.
Soon after, the plan sent him a letter saying his bloodwork was outdated and didn’t show that the treatment was medically necessary, Washington’s attorney said.
Over the next few months, as Washington appealed the insurance company’s decision, he developed a cough that wouldn’t go away. He moved home to Huntington Beach, Calif., and ended up in the hospital with pneumonia and a collapsed lung.
“It was terrifying,” said Washington, 22. “I have never felt so depressed and so scared in my entire life.”
In 2015, Washington filed a breach of contract lawsuit in Orange County Superior Court against his insurer, Aetna, arguing that the company had improperly denied him the medication. The case is set for trial this month.
From 35,000 to 50,000 people in the U.S. are estimated to be dependent on medications to treat primary immunodeficiency diseases — about 300 rare conditions in which the immune system doesn’t function properly, or at all. The medication, known as immunoglobulin replacement therapy, replaces antibodies that the body doesn’t make. It can cost tens of thousands of dollars each year.
In recent years, patients with these diseases have faced increasing difficulty getting their insurers to approve treatments, according to clinicians and patient advocates. In some cases, insurers interrupt treatments that are already underway. In others, they deny it at the outset. Without medication, patients can get infections or even suffer organ failure.
Aetna, one of the nation’s largest insurers, with a 2016 net income of $2.3 billion, declined to answer questions about Washington’s case, citing the pending litigation. In court documents, attorneys representing the company argued that it didn’t breach its contract with Washington.
In 2014, Aetna denied coverage of the medication that Gillen Washington was taking for an immunodeficiency disease. He was later hospitalized with pneumonia and a collapsed lung. (Courtesy of Gillen Washington)
Dr. Rebecca Buckley, a professor of immunology and pediatrics at Duke University Medical Center, said insurance companies often require patients with immunodeficiency diseases to stop taking their medication and undergo new lab work to demonstrate they still need it. That interruption is a “serious problem” for people with a definitive diagnosis, she said, because the consequences can be so devastating.
“If you stop the treatment, they are going to get sick,” Buckley said. “There are no spontaneous recoveries from any of these genetic defects.”
Buckley acknowledged that some people are put on the medication unnecessarily. But those who definitely have the diseases can’t make antibodies on their own and have no protection without treatment.
The Immune Deficiency Foundation, a national patient advocacy organization, regularly advises patients who receive insurance denials. President and founder Marcia Boyle said the foundation is getting a growing number of calls each year from patients who face treatment delays because of insurance company decisions. Insurers are also more frequently shifting costs to patients by requiring higher copays and coinsurance or using restrictive formularies, she said.
“Some insurers are creating unnecessary roadblocks because of the costly therapy,” she said. “More often than not, when you have someone with a lifelong, preexisting condition that needs very good medical care and expensive therapy, you are going to have issues with access to care and insurance.”
41% of healthcare spending attributed to 12% of Americans, study finds
U.S. adults with five or more chronic conditions spend 14 times more on health services on average than those with no chronic conditions, according to a new RAND Health report prepared for the Partnership to Fight Chronic Disease.
For the study, researchers analyzed the Medical Expenditure Panel Survey from Agency for Healthcare Research and Quality. MEPS is a nationally representative sample of the noninstitutionalized U.S. adult population.
The study revealed 60 percent of U.S. adults had at least one chronic condition in 2014, the most recent year data is available. Forty-two percent of U.S. adults had more than one chronic condition, according to the study.
The study showed people with more chronic conditions require more healthcare services. For example, the study revealed people with five or more chronic conditions average 20 physician visits per year, while those with three or four chronic conditions average 12 physician visits annually.
The study also showed spending on healthcare services rises with the number of chronic conditions a person has. U.S. adults with one or two chronic conditions make up 31 percent of the population and 23 percent of total healthcare spending. Those with five or more chronic conditions make up 12 percent of the population but account for 41 percent of total healthcare spending, according to the study.
For the study, researchers defined healthcare spending as the amount spent on all inpatient and outpatient care across all payers, including out-of-pocket payments.
Recipe for Successful Health System M&A: Ensure Focus on Execution of Transaction Does Not Undermine Key Long-Term Strategic Imperatives
The evolving U.S. healthcare landscape, perhaps more now than ever before, requires that health system executives possess varied and deep skill sets. Not only must executives navigate the changing political and macroeconomic landscape, including the repeal-and-replace uncertainty, but in execution of their well-intentioned strategic transactions, health system leaders must remain focused on the original strategic imperatives and objectives to help ensure long-term, sustainable success. Of 140 surveyed participants, 61% believe their organization’s merger, acquisition or partnership activity will increase within the next three years.
A breakdown in the deal consummation process that results in the strategic imperatives not maintaining primacy but being subordinated or ignored may result in a nice press release or closing ceremony but when measured by the test of time, the transaction may not deliver expected and necessary sustaining strategic benefits. This is exacerbated in complex M&A transactions and strategic partnerships. Such complex transactions cannot be managed in a manner similar to important but more routine operational or capital initiatives (e.g., construction of a new bed tower or implementation of a staff reduction initiative) facing healthcare organizations. Senior leadership must help ensure that the strategic benefits of a transaction do not become deemphasized due to deal fatigue, completion of task bias, arbitrary deadlines, and other pressures that work against the deal team obtaining optimal outcomes.
Healthcare leaders must help ensure that the strategic imperatives are effective guardrails of the deal team’s efforts and not lost in the difficult and dynamic transaction negotiation and consummation process. A successful approach focuses less on arbitrary timelines or goals and embraces an accountability process that monitors the deal progress and documentation to help ensure a true north heading. Effective leaders must remain laser-focused on the strategic imperatives and not allow completion and execution of the deal to subordinate the foundation of the original strategic mandate.
As Healthcare Changes, So Must its CEOs, CFOs, COOs…
To keep up with big changes in how healthcare is administered, financed, and organized, top leaders are finding a need for new talents and organizational structures.
Healthcare reform as a term has become so ubiquitous that it is almost indefinable. At first, and broadly, it meant removing the waste in an excessively expensive healthcare system that too often added to the problems of the people whose health it aimed to improve. Then it became legislative and regulatory, in the form of the Patient Protection and Affordable Care Act and its incentives aimed at improving the continuum of care and expanding the pool of those covered by health insurance.
Now, for many in the industry, healthcare reform has matured into a business imperative: the process of ingraining tactics, strategies, and reimbursement changes so that health systems improve quality and efficiency with the parallel goal of weaning us all off a system in which incentives have been so misaligned that neither quality nor efficiency was rewarded.
That leaders finally are able to translate healthcare reform into action is welcome, but to many health systems trying to survive and thrive in a rapidly changing business environment, the old maxim that all healthcare is local is being proved true. Making sense of healthcare reform is up to individual organizations and their unique local circumstances. Fortunately, there are some broad themes and organizational principles that are helpful for all that are trying to make this transition. What works in one place won’t necessarily work in another, but the innovation level is off the charts as healthcare organization leaders reshape what being a leading healthcare organization means as well as what it requires.
Pharmaceutical Product Hopping: A Proposed Framework For Antitrust Analysis
Skyrocketing drug prices are in the news. Overnight price increases have riveted the attention of the public, media, and politicians of all stripes. But one reason for high prices has flown under the radar. When drug companies reformulate their product, switching from one version of a drug to another, the price doesn’t dramatically increase. Instead, it stays at a high level for longer than it otherwise would have without the switch. Although more difficult to discern than a price spike, this practice, when undertaken to prevent generic market entry, can result in the unjustified continuation of monopoly pricing, burdening patients, the government, and the health care system as a whole.
Not all reformulations pose competitive concerns. Empirical studies have shown that more than 80 percent can be explained by improvements that are not temporally connected to impending generic entry. But a dangerous subset of such reformulations is undertaken for one, and only one, reason: to delay generic entry. In such cases, reformulation is called “product hopping.”
When generics enter the market, the price can fall dramatically overnight, by as much as 85 percent. For that reason, brand firms have every incentive to delay this moment of reckoning as long as possible. Sure enough, making trivial changes to their drugs has that effect. Every state has a substitution law that requires or allows pharmacists to offer a generic drug when the patient presents a prescription for a brand drug. But such substitution is thwarted if the drug is not the same—in particular, if it is not bioequivalent (able to be absorbed into the body at the same rate) and therapeutically equivalent (having the same active ingredient, form, dosage, strength, and safety and efficacy profile). A minor change to a drug’s formulation can prevent the pharmacist from substituting the generic.
Product hopping raises nuanced issues arising at the intersection of patent law, antitrust law, the federal Hatch-Waxman Act, and state drug product substitution laws. It is even more complex given the uniquely complicated pharmaceutical market, in which the buyer (patient, insurance company) is different from the decision maker (doctor).
Courts applying US antitrust law have struggled to create a robust and defensible legal framework for separating anticompetitive product hops from competitively benign, legitimate product development. In this post, we propose a framework that would help courts defer to legitimate reformulations while targeting anticompetitive switches.
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HENRY KOTULA 