Category Archives: High Drug Prices

The Huge Waste in the U.S. Health System

Posted on by • Posted in 2020 Election Issues, Cost Management, Health Policy, Health System, High Drug Prices, High Premiums, High Prices, Patient Outcomes, Patient Satisfaction, Single Payer Healthcare System • Leave a comment

A study finds evidence for how to reduce some of it, but also a large blind spot on how to remove the rest.

Even a divided America can agree on this goal: a health system that is cheaper but doesn’t sacrifice quality. In other words, just get rid of the waste.

A new study, published Monday in JAMA, finds that roughly 20 percent to 25 percent of American health care spending is wasteful. It’s a startling number but not a new finding. What is surprising is how little we know about how to prevent it.

William Shrank, a physician who is chief medical officer of the health insurer Humana and the lead author of the study, said, “One contribution of our study is that we show that we have good evidence on how to eliminate some kinds of waste, but not all of it.”

Following the best available evidence, as reviewed in the study, would eliminate only one-quarter of the waste — reducing health spending by about 5 percent.

Teresa Rogstad of Humana and Natasha Parekh, a physician with the University of Pittsburgh, were co-authors of the study, which combed through 54 studies and reports published since 2012 that estimated the waste or savings from changes in practice and policy.

Because American health spending is so high — almost 18 percent of the economy and over $10,000 per person per year — even small percentages in savings translate into huge dollars.

The estimated waste is at least $760 billion per year. That’s comparable to government spending on Medicare and exceeds national military spending, as well as total primary and secondary education spending.

If we followed the evidence available, we would save about $200 billion per year, about what is spent on the medical care for veterans, the Department of Education and the Department of Energy, combined. That amount could provide health insurance for at least 20 million Americans, or three-quarters of the currently uninsured population.

The largest source of waste, according to the study, is administrative costs, totaling $266 billion a year. This includes time and resources devoted to billing and reporting to insurers and public programs. Despite this high cost, the authors found no studies that evaluate approaches to reducing it.

“That doesn’t mean we have no ideas about how to reduce administrative costs,” said Don Berwick, a physician and senior fellow at the Institute for Healthcare Improvement and author of an editorial on the JAMA study.

Moving to a single-payer system, he suggested, would largely eliminate the vast administrative complexity required by attending to the payment and reporting requirements of various private payers and public programs. But doing so would run up against powerful stakeholders whose incomes derive from the status quo. “What stands in the way of reducing waste — especially administrative waste and out-of-control prices — is much more a lack of political will than a lack of ideas about how to do it.”

While the lead author works for Humana, he also has experience in government and academia, and this is being seen as a major attempt to refine previous studies of health care waste. Reflecting the study’s importance, JAMA published several accompanying editorials. A co-author of one editorial, Ashish Jha of the Harvard Global Health Institute and the Harvard T.H. Chan School of Public Health, said: “It’s perfectly possible to reduce administrative waste in a system with private insurance. In fact, Switzerland, the Netherlands and other countries with private payers have much lower administrative costs than we do. We should focus our energies on administrative simplification, not whether it’s in a single-payer system or not.”

After administrative costs, prices are the next largest area that the JAMA study identified as waste. The authors’ estimate for this is $231 billion to $241 billion per year, on prices that are higher than what would be expected in more competitive health care markets or if we imposed price controls common in many other countries. The study points to high brand drug prices as the major contributor. Although not explicitly raised in the study, consolidated hospital markets also contribute to higher prices.

A variety of approaches could push prices downward, but something might be lost in doing so. “High drug prices do motivate investment and innovation,” said Rachel Sachs, an associate professor of law at Washington University in St. Louis.

That doesn’t mean all innovation is good or worth the price. “It means we should be aware of how we reduce prices, taking into consideration which kinds of products and which populations it might affect,” she said.

Likewise, studies show that when hospitals are paid less, quality can degrade, even leading to higher mortality rates.

Other categories of waste examined by the JAMA study encompass inefficient, low-value and uncoordinated care. Together, these total at least $205 billion.

With more than half of medical treatments lacking solid evidence of effectiveness, it’s not surprising that these areas add up to a large total. They include things like hospital-acquired infections; use of high-cost services when lower-cost ones would suffice; low rates of preventive care; avoidable complications and avoidable hospital admissions and readmissions; and services that provide little to no benefit.

In addition to wasting money, these problems can have direct adverse health effects; lead to unwarranted patient anxiety and stress; and lower patient satisfaction and trust in the health system.

Here the study’s findings are relatively more optimistic. It found evidence on approaches that could eliminate up to half of waste in these categories. The current movement toward value-based payment, promoted by the Affordable Care Act, is intended to address these issues while removing their associated waste. The idea is to pay hospitals and doctors in ways that incentivize efficiency and good outcomes, rather than paying for every service regardless of need or results.

Putting this theory into practice has proved difficult. “Value-based payment hasn’t been as effective as people had hoped,” said Karen Joynt Maddox, a physician and co-director of the Center for Health Economics and Policy at Washington University in St. Louis and a co-author of another editorial of the JAMA study.

So far, only a few value-based payment approaches seem to produce savings, and not a lot. Some of the more promising approaches are those that give hospitals and doctors a single payment “as opposed to paying for individual services,” said Zirui Song, a physician and a health economist with Harvard Medical School.

“Savings tend to come from physicians referring patients to lower-priced facilities or cutting back on potentially lower-value care in areas such as procedures, tests or post-acute service,” he said.

There is evidence of savings from some bundled payment programs. These provide a fixed overall budget for care related to a procedure over a specific period, like 90 days of hip replacement care. Accountable care organizations also seem to drive out a little waste. These give health groups the chance to earn bonuses for accepting financial risk and if they reach some targets on quality of care.

The final area of waste illuminated by the JAMA study is fraud and abuse, accounting for $59 billion to $84 billion a year. As much as politicians love to say they’ll tackle this, it’s a relatively small fraction of overall health care waste, around 10 percent. More could be spent on reducing it, but there’s an obvious drawback if it costs more than a dollar to save a dollar in fraud.

Because health care waste comes from many sources, no single policy will address it. Most important, we have evidence on how to reduce only a small fraction of the waste — we need to do a better job of amassing evidence about what works.

 

 

 

NY Local employers predict 3.6% increase in health benefit costs in 2020

Posted on by • Posted in Chronic Care Management, Chronic Diseases, Consumerism, Cost Management, Health Insurance Coverage Adequacy, Health Insurance Industry, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Highly Specialized Drugs, Hospital, Hospital Industry, Out of Pocket Expenses, Telemedicine • Leave a comment

https://www.crainsnewyork.com/health-pulse/local-employers-predict-36-increase-health-benefit-costs-2020?utm_source=health-pulse-tuesday&utm_medium=email&utm_campaign=20191028&utm_content=hero-readmore

Image result for chronic care management

Employers in the metro area expect their spending on benefits to rise 3.6% next year after accounting for changes designed to hold down costs, according to an analysis by Mercer.

That trend would be lower than the 3.9% increase employers experienced this year, with local organizations spending $16,059 per active employee. That’s more than 20% higher than the average cost per employee nationwide.

The benefits consultant broke out the responses of 170 employers in New York City, its surrounding counties, northern New Jersey and southern Connecticut for Crain’s from its 2019 National Survey of Employer-Sponsored Health Plans.

In the area, the average contribution to premiums for an individual employee is $199 a month in a PPO plan, $169 a month in an HMO and $107 a month in a consumer-directed health plan, which tends to have a higher deductible.

The median deductible for members in a PPO plan was $500 locally.

Nationwide, there was a split, with the average deductible for businesses between 10 and 499 employees increasing nearly 13%, to $2,285, while employers with 500 or more workers raised the average deductible in a PPO plan just $10, or 1%, to $992.

Companies are looking to telemedicine and management programs for their highest-cost members as ways to keep fees down, said Mary Lamattina, a senior consultant at Mercer. She said most clients she works with have at least one beneficiary with $1 million in annual medical expenses.

“Employers are getting away from cost shifting and looking at other ways to tackle affordability,” she said.

Nationwide, employers spent 3% more on health costs this year, driven in part by specialty drug spending. Costs for specialty drugs rose 10.5% this year.

Ninety percent of employers with 500 workers or more said they viewed monitoring or managing high-cost claimants as important or very important. One strategy companies reported using was introducing a tech-enabled chronic care management program for conditions such as diabetes.

About 88% of large employers said they offer telemedicine as an option, but only 9% of eligible employees had taken advantage of the programs.

Lamattina pointed out that utilization was nearly four times higher at organizations that waived a copay for telemedicine use, compared with employers that charged a $40 copay. “

“Utilization can be driven by the cost,” she said. “Convenience is really key to getting people to use the benefit.” —Jonathan LaMantia

 

New Legislation to Control Drug Prices: How Do House and Senate Bills Compare?

Posted on by • Posted in 2020 Election Issues, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, Out of Pocket Expenses, Pharmaceutical Industry • Leave a comment

https://www.commonwealthfund.org/blog/2019/new-legislation-control-drug-prices-how-do-house-and-senate-bills-compare

drug pricing and legislation

House Speaker Nancy Pelosi’s (D–Calif.) long-anticipated drug pricing plan — the Lower Drug Costs Now Act of 2019 (H.R. 3) — has shaken up the drug pricing debate. It gives Medicare the ability to negotiate drug prices, further fueling the partisan divide between Democrats and Republicans, but also includes policies similar to those championed by Senate Finance Committee Chair Chuck Grassley (R–Iowa), such as caps on price increases in Medicare Parts B and D, as well as changes to the Part D benefit design. The way the bill approaches drug price negotiation is similar to the Trump administration’s supposedly soon-to-be-released international price index (IPI) proposal, which has been under review at the Office of Management and Budget since June.

The following tables compare H.R. 3 based on the legislative text advanced by key committees of jurisdiction and key provisions of related proposals: the Prescription Drug Pricing Reduction Act of 2019 (S. 2543), advanced by the Senate Finance Committee in July; and the Advanced Notice of Proposed Rulemaking (ANPRM): Medicare Program, IPI Model for Medicare Part B Drugs, issued by the Centers for Medicare and Medicaid Services last October.

Despite the poor prospects of H.R. 3 as currently drafted gaining traction in the Republican-controlled Senate, House Democratic leaders are moving full-steam ahead. The House Energy and Commerce, Education and Labor, and Ways and Means committees recently advanced similarly amended versions of H.R. 3 that will need to be reconciled before a floor vote that will likely occur after the recess in early November. The advanced bills raise the minimum number of drugs subject to negotiation from 25 to 35; retain drugs on the negotiation list until two generic or biosimilar products are available; and require price negotiation of drugs with launch prices in excess of the median household income, among other policy changes.

Even with these new revisions, House progressives are pushing for policies that would go further. The Ways and Means committee rejected a series of amendments offered by Health Subcommittee Chair Rep. Lloyd Doggett (D–Texas) that included extending government-negotiated prices to uninsured individuals and increasing the minimum number of drugs subject to negotiation to 50 after five years and to 100 after 10 years. In contrast, moderate Democrats are calling for a vote on stand-alone drug pricing legislation that can pass muster in the Senate — a talking point reiterated by Republicans throughout the markups. Despite cracks in Democratic support, House leadership is expected to continue backing Medicare negotiation, especially with the initial analysis from the Congressional Budget Office (CBO) — projecting $345 billion in savings over 2023–29 — further bolstering their position.

In the face of the ongoing impeachment inquiry, President Trump remains open to drug pricing talks with the Speaker, emphasizing his desire to pass drug pricing legislation. Notably, he endorsed government negotiations on drug pricing prior to taking office. Viewing the president’s interest in H.R. 3 as a viable threat, Chairman Grassley pushed his Republican colleagues to support what Grassley calls the “less aggressive, but strongly pharma-opposed drug pricing bill passed by the Senate Finance Committee.” Taxpayer savings of $100 billion, preliminarily projected by CBO, makes S. 2543 an attractive offset for other health care policy priorities. However, the chairman has already signaled the possibility of delaying floor action on drug pricing until early next year, giving him more time to win Republican support but perhaps also lowering the odds of ultimately passing significant legislation in an election year.

Both parties are intent on getting something done on drug pricing ahead of the 2020 elections. Amid escalating partisan tensions, the competing yet overlapping proposals from House Democrats and the Senate Finance Committee may create a scenario in which bipartisan, bicameral compromise may still be possible.

 

 

 

A group of Republicans has unveiled its healthcare plan. Here is what’s new and what isn’t

Posted on by • Posted in 2020 Election Issues, ACA, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, Health Savings Accounts, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, High Risk Pools, Hospital, Hospital Industry, Medicaid, Medicaid Block Grants, Medicaid Expansion, Out of Pocket Expenses, Preexisting Conditions • Leave a comment

https://www.fiercehealthcare.com/payer/a-group-republicans-have-a-new-healthcare-plan-here-what-new-and-what-isn-t?mkt_tok=eyJpIjoiT0RZNE4yTm1PV1psTmpNeSIsInQiOiJ5R3gxMEwrdUhPWUdZVlBTZ3NWWkdMV08xOCtObDdFaGdHaE1hN0o4Z2p5WnBaN3hjd2lDVm5ybnBhWUtUNFdlTW1LcndtaTN1WUtNVzg1NmUrQjJmWEhqTWpJR3BkUmVuZmVNS2FzdmRWdENuMEtNT0tJMXozUW93N0lVQmZ5WSJ9&mrkid=959610

Capitol building in Washington

The Republican Study Committee (RSC), a group of 145 House GOP lawmakers, rolled out a new healthcare plan to counter Democrats’ call for “Medicare for All.”

However, the plan itself closely resembles the Affordable Care Act (ACA) repeal bill called the American Health Care Act (AHCA) that the House passed in 2017 and contributed greatly to the loss of the GOP House majority in 2018.

For the plan to become law, Republicans would have to retake the House in 2020, and President Donald Trump would need to be reelected. However, if those victories happen, the plan could be a blueprint for how a GOP-controlled Congress would move forward on healthcare, as the committee counts among its members both GOP leadership and rank and file.

Here are three takeaways from the plan:

Shifting to high-risk pools

The plan would retain the ACA’s requirement that individual market plans cover pre-existing conditions. However, it takes out provisions that ensure patients with pre-existing conditions get affordable coverage such as requirements that prevent plans from charging sicker people higher premiums than healthy customers.

The plan does introduce high-risk pools that would be used by people with high healthcare costs, a commonly deployed tactic by states for the individual market before the ACA. The high-risk pools would be funded by repackaging the funding used for the ACA’s subsidies and the Medicaid expansion.

However, the plan doesn’t identify the full amount that should be devoted to high-risk pools, which segregate high-cost customers on the individual market.

The plan cites a 2017 report from consulting firm Milliman that estimated a federally supported high-risk pool could require $3.3 billion to $16.7 billion a year. The AHCA also called for high-risk pools but only gave $2.5 billion a year to help states fund them.

While the “$17 billion annual price tag may not seem ideal, it sets up a sustainable path for the individual market,” the RSC report said.

The desire for more funding for high-risk pools is likely a nod to Democratic attacks during the 2018 midterms that the AHCA threatened pre-existing condition protections. The nonpartisan Congressional Budget Office said the AHCA, which let states waive pre-existing condition protections, would lead to people in those states not getting affordable coverage for their pre-existing conditions.

While the AHCA had funding for high-risk pools, experts across the healthcare spectrum said that it wasn’t enough. It would remain to be seen how much more funding would be needed.

Doubling down again on health savings accounts

Bolstering health savings accounts has been a very popular reform idea among Republicans, and that enthusiasm is clear in the RSC plan.

The plan proposes to increase how much an employee can contribute to a health savings account. Currently, an individual can contribute $3,500 and a family can contribute $7,000.

A 2018 bill that passed out of the House but didn’t make it through Congress increased the contribution cap to $6,650 for an individual and $13,300 for a family.

Now, the RSC plan wants to increase the figures again, this time to $9,000 per individual and $18,000 for families, in line with a proposal from libertarian think tank Cato Institute.

“The RSC plan would also expand health savings accounts so that they could be used for a number of health services and products that currently must be paid for with after-tax dollars,” the plan said.

Replace Medicaid expansion with a block grant

This is another common reform in ACA repeal plans. The bill would phase out the enhanced federal matching rate for the Medicaid expansion to pre-expansion levels.

In addition, the bill would replace the existing open-ended federal match with a fixed amount in a block grant.

But the plan has a new twist in a new “flex-grant” that would give more funding to states that adopt a work requirement. However, half of the funding for any flex-grant must go toward supporting the purchase of private plans for low-income individuals.

So far, 12 states have gotten approval from the Trump administration to install work requirements for their Medicaid expansion population. But of those 12 states, three have had their work requirement programs struck down by legal challenges.

Some states are also considering installing their own block grants. Tennessee has released a draft proposal for a block grant but has yet to get federal approval.

 

 

 

Employers aren’t changing their health benefits

Posted on by • Posted in 2020 Election Issues, Employee Benefits, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Out of Pocket Expenses • Leave a comment

https://www.axios.com/employers-health-care-coverage-insurance-2020-election-e0ce92cf-c106-44fe-bb35-1c3c6e452712.html

Image result for Employers aren't changing their health benefits

Companies rarely switch the health plans they offer to their workers, and seem to be especially cautious in the 2020 election year.

The big picture: Medical and drug costs are crushing employers and workers alike. But altering benefits — which could require employees to change their doctors — could provoke even more anger.

By the numbers: Roughly half of employers offering health benefits did not shop around for new plans or insurance companies for 2019, according to the Kaiser Family Foundation’s latest employer benefit survey.

  • Of the half that did shop, just 18% changed to a new insurance carrier.
  • That means fewer than 10% of all employers switched carriers.
  • Large corporations, like GM, are much less likely to tinker with coverage than smaller firms.

“Disruption is the enemy,” Mike Turpin, an employer health care consultant at the brokerage USI Insurance Services, said on a call with Wall Street investors last week.

  • Turpin said he has seen even less switching for 2020 because employers don’t want to make waves over health care in an election year — “which buys another year” for the large, incumbent health insurance companies.

Between the lines: More companies have moved workers into less comprehensive plans since the Affordable Care Act was passed, but those changes often have been met with either immediate condemnation (like Harvard in 2015) or delayed outrage as workers shoulder more costs.

  • “It is telling that brokers perform an analysis for employers that’s called ‘disruption analysis’ — the goal of which is not to be disruptive, but to minimize disruption,” said Katherine Hempstead, a health policy adviser at the Robert Wood Johnson Foundation.

Yes, but: Millions of people still switch health plans every year when they buy it on their own, change jobs, get laid off or retire.

 

 

 

Americans already pay a ‘gigantic’ hidden health-care tax, economists say

Posted on by • Posted in 2020 Election Issues, ACA, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Medicare, Medicare for All, Monopoly, Monopoly Behavior, Underinsured, Uninsured • Leave a comment

https://www.washingtonpost.com/business/2019/10/16/americans-already-pay-gigantic-hidden-health-care-tax-economists-say/?fbclid=IwAR1dG0uH1k6nZ8hC3UL7z8pDZtyTQa55NAWxM1Nni1uh7CLsD0sEaGjqie8

Image without a caption

 

The topic of Medicare-for-all was front and center — again — during Tuesday night’s Democratic presidential debate. Moderators were particularly interested in how its supporters, like Sen. Elizabeth Warren (D-Mass.), would pay for it. Specifically, would it require raising taxes on the middle class?

To some economists, the question is moot: Americans already pay a massive “tax” to fund health care, they say. It just happens to go to private insurance companies, rather than the federal government.

That’s the argument put forth in Emmanuel Saez and Gabriel Zucman’s new book, “The Triumph of Injustice.” The economists at the University of California at Berkeley, who have advised Warren and Sen. Bernie Sanders (I-Vt.) on the creation of a wealth tax, call private health insurance costs “taxes in everything but name.” They are automatically deducted from workers’ paychecks. And they are essentially mandatory for families who don’t want to be crippled by long-term health-care costs or unexpected illnesses.

“Whether insurance premiums are paid to a public monopoly (the government) or to a private monopoly (the notoriously uncompetitive US private health insurance system) makes little difference,” the economists write. “Both payments reduce the take-home pay of workers; and although it’s always possible to evade taxes or to refuse to pay one thin dime to insurance companies, in practice almost everyone abides.”

The issue sparked a spirited discussion during Tuesday’s debate in Ohio for the 12 Democrats vying to take on President Trump in 2020, with Warren and Sanders’s plans getting blasted as being overly expensive and unworkable. Warren was specifically called out for refusing to say whether her proposal would result in higher taxes for the middle class or get into how it would eliminate employer-sponsored coverage for 160 million Americans. Although she vowed that her plan would not raise overall costs for the middle class, she notably evaded the specific issue of taxes.

Saez and Zucman have produced an estimate of just how much we’re already paying for health insurance and find it’s a little north of $1 trillion per year: “close to 6% of national income in 2019 — the equivalent of one-third of all federal income tax payments!” Health insurance costs raise the average effective tax rate on American labor from 29 percent to 37 percent, they said.

Thinking about health-care costs in this way is useful, Saez and Zucman write, because it allows for better tax comparisons between the United States and other wealthy countries, most of which fund health care via their tax codes. “Americans on average keep about the same fraction of their pretax income as their European brethren,” they write.

One of the key uncertainties about transitioning to a Medicare-for-all plan like the ones proposed by Warren and Sanders is whether doing so would raise or lower total health-care costs. Preliminary estimates have so far yielded wildly divergent outcomes, in part, because the financing specifics behind various candidates’ plans are largely still up in the air. How the change would affect the wallet of the typical middle-class tax payer relative to other groups also remains an open question.

But the Saez and Zucman data underscore that Americans already are paying a large health-care levy that is for all intents and purposes mandatory. If you consider health insurance costs as a tax on labor, as they do, it means the extremely rich, who derive most of their income from capital, are carrying a disproportionately light share of the total health cost load.

 

Drug price hikes cost US billions, report finds

Posted on by • Posted in 2020 Election Issues, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, Out of Pocket Expenses, Pharmaceutical Industry, Pharmacy Benefits Management • Leave a comment

https://thehill.com/policy/healthcare/464891-drug-price-hikes-cost-us-billions-report-finds?utm_source=&utm_medium=email&utm_campaign=25262

 

Drug companies raised prices on seven popular drugs during 2017 and 2018 without clinical evidence that the drugs had been improved in any way, according to a new report.

The increases cost patients and insurers more than $5 billion, the Institute for Clinical and Economic Review (ICER) found in its report. None of the drugs examined showed evidence of improved safety or effectiveness, the analysis found.

The report looked at the seven top-selling drugs by sales revenue that had price increases of more than two times inflation, as measured by the medical consumer price index.

The culprits, and how much they added to drug spending over two years:

  • Humira: $1.9 billion
  • Rituxan: $806 million
  • Lyrica: $688 million
  • Truvada: $550 million
  • Neulasta: $489 million
  • Cialis: $403 million
  • Tecfidera: $313 million

Read more here.

 

If a medicine is too expensive, should a hospital make its own?

Posted on by • Posted in Antitrust, Cerebrotendinous Xanthomatosis (CTX), Chenodeoxycholic Acid (CDCA), Food and Drug Administration (FDA), Health Policy, High Drug Prices, High Prices, Monopoly, Monopoly Behavior, Pharmaceutical Industry • Leave a comment

https://mosaicscience.com/story/price-essential-orphan-drug-self-compounding-pharmacy-leadiant-amsterdam-umc-ctx-cdca/?

When the price of an essential medicine rose to an unacceptable level, there was only one thing for pharmacist Marleen Kemper to do – start making it herself.

When Marleen Kemper was a child, she watched two of her primary-school classmates get ill. One had a brain tumour, and the other contracted an infection in his gut. Both of them died. Kemper was around ten at the time, and knew that she didn’t want to see another friend perish. She told her parents she wanted to do something that would prevent others dying. She wanted to be a doctor.

But training is hypercompetitive in the Netherlands, where Kemper was growing up. She didn’t quite have the grades. She liked chemistry, so chose a career in pharmacy instead. She studied for six years, and did a residency for another four. Today, she’s a highly respected hospital pharmacist based at Amsterdam UMC’s Academic Medical Center, a cavernous building crafted out of concrete on the south-east fringe of the Dutch capital.

To understand what happened next, you have to understand several things about Kemper. Two date back to her childhood. One was those early experiences of losing friends to illness, which ensured she’ll do everything she can to make sick people better.

The second is that, though she’s highly accomplished, Kemper is self-admittedly hard-headed, and has always had a rebellious streak. She once dyed her hair black to stand out from the crowd. Sometimes she likes to shock people.

Which leads into the third, more recent trait: a steely determination to do right by her patients, whatever the cost. And the cost can be great. In 2017, when the price of a drug to treat a rare genetic disorder skyrocketed, Kemper wasn’t happy. The result was a dispute that’s still going on today and has spread beyond the four walls of the UMC hospital. It’s spread beyond the city of Amsterdam. And it’s even spread beyond the borders of the Netherlands.

Most of us never have to worry about chenodeoxycholic acid (CDCA), one of the two primary bile acids produced by our livers. But for a tiny fraction of us, a rare genetic trait means we end up short.

Having this gene variant prevents the body from creating sterol 27-hydroxylase, a liver enzyme. Without it, the liver won’t convert enough cholesterol into CDCA. The result is an overabundance of other bile acids and substances, which then get pumped out of the liver and through the body, causing untold damage.

The illness that results is called cerebrotendinous xanthomatosis, or CTX. It can cause cataracts, dementia, neurological problems and seizures, but it can be treated. Since the 1970s, the pharma industry has been able to produce CDCA, and so people who need it can supplement their shortage. The system worked well; the drug was relatively cheap for such a niche illness. A year’s treatment cost around €30,000 per patient.

Until suddenly it didn’t. In 2017, Leadiant Biosciences, which was supplying CDCA to these patients in the EU, raised the price of its version of the drug – known as CDCA Leadiant – to over €150,000 per patient per year.

The price increase soon had an effect. The Netherlands has an insurance-based health system, and in April 2018, Dutch insurers – who had been paying for 50 or so patients across the country to receive the drug – balked at the fivefold increase, refusing to pay. Patients unable to pay themselves would have gone without treatment, so Kemper – whose hospital was one of the treatment centres for CTX – stepped in. Amsterdam UMC would produce the medicine for these patients itself, at cost price.

She was upset, she admits. “Patients have a medical need. If those patients with CTX don’t get their medication, they get neurological implications, they get complications with their cholesterol and dementia, epilepsy… it is an essential medicine.”

Anyone wanting to manufacture a drug must get a marketing authorisation to do so. But Leadiant had become the only game in town, the owner of exclusive rights to manufacture CDCA commercially in the EU.

Yet there was a solution. Under EU rules, pharmacies can make (or ‘compound’) a prescribed drug on a small scale for their patients.

So Kemper began researching where she could find the ingredients to make CDCA. It was difficult: in the pursuit of better margins, vast numbers of manufacturing companies have closed their factories across the world and concentrated their efforts in China, where the costs of producing pharmaceutical ingredients are lower. Just one European company manufactures the ingredients to EU standards.

Kemper approached them, and they declined to supply her the raw material. In the end, she found a Chinese manufacturer instead. She went to the hospital’s executive board and gained approval to manufacture the drug. It cost the pharmacy €28,000 per patient per year – pretty much exactly the same as the price of the drug beforehand.

CDCA wasn’t initially used to treat CTX. Originally it was developed to treat gallstones. This main use of the drug – which from the mid-1970s had been sold in the Netherlands as Chenofalk – became outmoded when the standard procedure to deal with troublesome gallstones became to just cut out the gallbladder entirely.

At the turn of the millennium, Dutch doctors started using Chenofalk off-label to treat CTX – a practice that carried on for several years. At this time, in the mid-2000s, a year’s supply of the drug cost less than €500.

But in 2008, Leadiant acquired the rights to Chenofalk. Then, nine days before Christmas 2014, it succeeded in getting its version of CDCA classified as an “orphan medicine” for treating CTX. That classification gave Leadiant the exclusive right to manufacture its CDCA drug commercially in Europe for the next ten years. Leadiant then took Chenofalk off the market in 2015.

Introduced by EU regulation in the year 2000, orphan drug classification is given to drugs that treat serious illnesses that affect fewer than five in every 10,000 people in the EU. Its purpose is to help companies recoup the costs of developing treatments that would otherwise be unlikely to generate a profit. Without it, the pharma industry wouldn’t be incentivised to seek new drugs for the rarest diseases.

But in this case, CDCA was already known as a CTX treatment, with Chenofalk having been used off-label to treat it for years. Kemper believes that Leadiant is getting the financial benefits of orphan designation, but for a drug that had gone through development and been released to market long ago. “There were publications already in the 1980s,” she says. “There’s no patents, nothing. It’s really bizarre.”

Kemper isn’t the only one concerned about the price rise and CDCA’s orphan drug status. In September 2018, a lobby group, the Dutch Pharmaceutical Accountability Foundation, asked the Dutch competition authority to investigate the price increase. And this spring Test Achats, a nonprofit consumer-protection organisation in neighbouring Belgium, lodged a complaint against Leadiant with the Belgian Competition Authority.

“We noticed that in 2005, the price for the treatment of a patient in one year was around €500. Now it’s more than €150,000,” explains Laura Marcus, legal counsel to Test Achats. “It’s bad for the sick person but also for the Belgian health system, which is paying most of the [cost of the] treatment.”

When a drug company raises the price of its treatment, and a hospital pharmacy decides not to accept the increase but instead endeavours to compound its own version, undercutting the drug company’s price, things tend to get interesting.

In June 2018, Kemper received a phone call from the Dutch health inspectorate. It had received a letter of concern – who it came from, Amsterdam UMC doesn’t know, though the health inspectorate has said it was acting in response to an enforcement request from Leadiant – with a long list of things for the investigators to check.

Kemper took the news in her stride. She had expected a rocky road. “As a pharmacist, I am a professional and I know what I’m doing, and we have standards for compounding,” she explains. So she wasn’t worried when a team of four inspectorate monitors turned up at the door of her pharmacy in Amsterdam that summer. Two were there to take samples of the raw materials she was using to compound CDCA, and to ensure that all the correct processes were being followed. They rifled through the reams of paperwork and procedures that Kemper had spent hours developing for her staff to follow, while the other two inspectors combed through coverage of the case to ensure that Kemper and her team weren’t advertising their work, which isn’t allowed for medicines that haven’t been given market authorisation.

The lab checked out: its processes were up to standard, and the paperwork was all in order. But in July Kemper got a phone call that floored her: the inspectorate’s analysis of the raw materials her pharmacy was using to compound the CDCA had discovered that they weren’t up to snuff. Two components found in it were above allowed limits.

“As a professional you think: what did I miss? It was very emotional, a bit heavy,” she says. With the board of directors at the hospital, Kemper decided to immediately withdraw the product from patients; the health insurers said they’d step in and cover putting the patients back on the Leadiant version of the drug.

Kemper personally called the 50 or so patients she was providing with the drug. “The first one was hard,” she admits. “I expected they’d be angry or something like that. But no, no one [was]. The patients said: ‘Well, please go on with this job.’”

The Dutch inspectorate has said that Kemper can resume compounding CDCA provided she can find a raw material that doesn’t contain impurities – something Kemper is keeping tight-lipped about.

So, if she can get the materials she needs, Kemper is hopeful to be able to continue compounding CDCA in the future.

But for now, it’s back to square one – paying the full price for CDCA Leadiant.

These events have had wider consequences. What was initially a dispute inside the Netherlands has bled across borders, with Belgian patients with CTX now being affected.

It started with a conversation between the Dutch and Belgian health ministers shortly after Kemper’s production of CDCA was halted, says Thomas De Rijdt, head of pharmacy at University Hospitals Leuven. The Dutch minister wanted to know from his Belgian counterpart why Belgian hospitals were able to make the same drug without any issues.

“For Belgium, we have about ten patients,” De Rijdt says. “So ten patients are helped with the preparations from our hospital and the University Hospital in Antwerp.”

These hospitals had been compounding CDCA capsules for CTX patients for years. Leuven had sourced raw materials that had been tested and approved by a laboratory accredited by the Belgian government. But when the case in the Netherlands started entering conversation at diplomats’ dinners, the Belgian government wanted to double-check that its raw materials were OK.

It ran a second battery of tests – with a different accredited laboratory – which came back with a problem. A single impurity was found. The government ordered a quarantine of the raw material and recalled all the CDCA it had made.

“The patients had to return all their medication,” says De Rijdt. Recalling every capsule of the drug from Belgium, and freezing the work of the only two suppliers in the country, meant that people with CTX were suddenly left without any medicine.

“If you know the disease, you know you can deteriorate very quickly,” says De Rijdt. This was a problem. So, he says, the hospital pharmacists, the National Institute for Health and Disability Insurance, the health minister and the pharmaceutical inspectorate hit upon a solution. For a year, the Belgian government would reimburse the costs of Leadiant’s drug, allowing those patients to still be treated (normally the government only reimburses a portion of a person’s health costs, with the rest being picked up by the patient or insurance). Over the course of that year, the relevant authorities would then work together to adapt the requirements a raw material must comply with – to allow versions of drugs with minor impurities, providing they pose no threat to the patient.

“We have bought time to find a solution with the compounding, because we think by compounding we can save healthcare a lot of money for the same quality of therapy,” says De Rijdt. He hopes to have a solution by the end of 2019.

But in early September, things took another turn. Wouter Beke, the Belgian consumer affairs minister, used his price-regulation powers to bring down the price of CDCA Leadiant to just over €3,600 a month – roughly a quarter of the amount Leadiant was charging. If the drug becomes more cheaply available in Belgium, says De Rijdt, then it could end up being exported and available at a lower price elsewhere.

But exactly how this will pan out remains unclear. In the meantime, Beke has urged the Belgian Competition Authority to prioritise investigating Leadiant, following the complaint lodged by Test Achats.

Debate over what constitutes a fair price for drugs isn’t anything new. Nor is it limited to Europe.

Because of his willingness to play the bad guy in the press (and an odd moment when he bought a Wu-Tang Clan record), Martin Shkreli has attracted more criticism on drug pricing than perhaps anyone else. In 2015, Turing Pharmaceuticals, of which Shkreli was CEO, raised the price of its recently acquired antimalarial drug Daraprim, also used to treat AIDS-related illnesses. A pill went from $13.50 to $750 overnight – a 55-fold increase.

Shkreli’s capitalist tendencies were criticised by almost everyone. This was unlike the situation with CDCA Leadiant – there was no argument that this increase was to cover Daraprim’s development costs – and Shkreli himself was unrepentant: “If there was a company that was selling an Aston Martin at the price of a bicycle, and we buy that company and we ask to charge Toyota prices, I don’t think that that should be a crime,” he told reporters.

But the Daraprim situation was just the highest-profile example of a contest that is going on constantly between big pharmaceutical companies seeking to profit from drugs and medical staff on the frontline who worry that such profit-seeking does damage to patients needing treatment. (For what it’s worth, a competitor to Turing Pharmaceuticals announced soon after that it would produce a compound drug containing the same active ingredient in Daraprim – pyrimethamine – for $1 a pill, rather than the $750 Shkreli wanted to charge.)

One front in this battle has recently opened up in the US. In May, more than 40 states filed an antitrust lawsuit against some of the world’s biggest manufacturers of generic drugs, alleging they that have colluded to fix the price of more than a hundred medicines over a number of years. When prices should go down after a drug’s market exclusivity ended, the antitrust lawsuit claims that many prices have instead shot up – in some cases by more than 1,000 per cent.

And back in Europe, the consumer organisation Euroconsumers – of which Test Achats is part – is investigating the prices of other drugs beyond CDCA. “We’ve noticed a few problems with a few other drugs,” says Laura Marcus of Test Achats. “It’s often about drugs that are able to cure or deal with rare diseases. For sure, it’s not only CDCA.”

No one doubts that developing drugs costs money. A 2016 paper in the Journal of Health Economics estimated that the average cost of developing a prescription drug to the point of reaching the market is nearly $2.6 billion.

But the lack of hard, openly available statistics on the cost of drug development is something that many people, including Marcus and Marleen Kemper, want to change. “In most of the cases, society is willing to pay some price,” says Kemper, “but now the discussion is: what is an acceptable price?”

Marcus acknowledges that Leadiant has to cover its costs, but she thinks that cannot explain the rise of CDCA to over €150,000 – “the profit cannot be that high”. When I ask her how much profit she thought Leadiant was making from the drug, she admits she doesn’t know. “Of course we don’t have access to those numbers,” she says. “That’s what the Belgian Competition Authority is opening an inquiry for – to know more about the figures and the costs the company has to bear.” However, when the price for CDCA has surged from €500 to over €150,000, “nothing justifies it, because there was no new research, no new nothing,” she says.

Leadiant rejects this. Although CDCA had been authorised in the past, the company says that “the active pharmaceutical ingredient as well as the manufacturing of the finished product needed to be upgraded” to make sure that its version was compliant with current EU standards. These, Leadiant says, are more extensive and significantly more strict today than they were when earlier CDCA drugs were developed.

Leadiant says that its CDCA “is not a ‘copy’ of an old product”. The very fact that it gained orphan drug status proves this, it argues. The company also says that “there was no robust evidence that CDCA was effective in CTX until Leadiant produced the data”. Demonstrating this, it says, required “entirely new studies, creating new data sets” – which make up “the largest ever collection of clinical data for CTX”.

“CDCA Leadiant has been developed and brought to market at substantial cost,” the company says. “Our pricing is justified by our costs and investments.”

But the problem is not just that Leadiant’s drug is so expensive: potential alteratives have disappeared. Willemijn van der Wel, a lawyer working at European law firm AKD, has written about Leadiant’s connection to competitors who previously produced CDCA. After buying the marketing authorisations for other products that contained CDCA, he says, “Leadiant began to withdraw these alternative CDCA products from the market, until only one CDCA medicinal product remained”. Marcus has also queried what has happened to these products that might have been competitors to Leadiant’s. But, she says, it’s not clear what is behind their CDCA monopoly.

Leadiant, though, says that it’s willing to negotiate a lower price for its drug with the Dutch Ministry of Health and Dutch insurance companies. “The only reason an improvement has not been determined yet, is that the insurers have been uninterested or unwilling to enter into any substantive negotiations,” it claims. (Leadiant did not respond to follow-up questions asking for more details of the negotiations, or what level of price reduction the company was offering.) It also emphasises that it has not taken legal action against the UMC hospital for seeking to compound its own CDCA, but that it is “involved in a legal discussion with the Dutch Inspectorate about the interpretation of EU and Dutch medicines law”.

Regardless of the outcome of such discussions, something needs to be done. Having pharmacies self-compound medicines is not a sustainable model – it might reduce incentives for developing drugs for rare conditions.

It also, Leadiant argues, exposes patients to risk. Pharmacies do not have to have their compounding processes checked by the European Medicines Agency or the national regulator. “There is no product control by any independent regulatory authority before or after compounding.”

When it comes to market authorisation and orphan drugs, Leadiant says, “it should not be about small or large scale, but safe scale”.

Marleen Kemper’s husband warned her that taking on Leadiant would be more difficult than she first thought. “He said, ‘With this initiative, don’t be naive’,” she recalls. “The pharmaceutical industry is very powerful, so you really have to have back-up from the [hospital] board” – which she had. More than a year into her attempt to make her own version of the drug, she’s recognising just how deeply dug in both sides are to their positions.

She’s at pains to point out that she’s not against the pharma industry. “What people forget is that the pharmaceutical industry is responsible for a lot of innovation.” But if drug pricing means that patients potentially get left behind? “Then I’m getting angry,” she says.

But righteous anger alone can’t sustain someone over a months-long case involving lawyers and regulators, not least when they’re also raising a family, running part of a pharmacy that’s actively studying hundreds of drugs, and doing their job keeping patients supplied with medicine. At times Kemper has felt frustrated and worn down by the effort of taking on the price rise – but she vows to continue.

“I’ve said that sometimes I’ve thought, well, I’ll stop and quit doing it because it’s too much work, too emotionally draining. But due to the support, I think we’ll go on. I’m patient,” she says. “It has to be solved, for the patients.”

Kemper’s determined that she’s going to provide affordable care for her patients by following the letter of the law. “I’m using the rules,” she says. “I’m not cheating.” Leadiant, she accepts, has used the rules and followed them to serve its own purposes. So she will too.

“I’m allowed to make medication for patients. They don’t like it? So what. I’m following the rules.”

 

 

 

Health care is getting more and more expensive, and low-wage workers are bearing more of the cost

Posted on by • Posted in 2020 Election Issues, Cost Management, Cost Reduction, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Leadership, Market Trends, Market Uncertainty, Out of Network, Out of Pocket Expenses • Leave a comment

https://www.vox.com/policy-and-politics/2019/9/30/20891305/health-care-employer-sponsored-premiums-cost-voxcare

Is the rapidly rising cost of employer-sponsored health insurance sustainable?

Half of all Americans get their health insurance through work. Trouble is, doing so is becoming less and less affordable — especially for already low-wage workers.

In 2019, the Kaiser Family Foundation Employer Health Benefits Survey — an annual account of roughly 2,000 small and large businesses’ employer-sponsored insurance — found the average annual premium to cover a family through work was a whopping $20,576, and $7,188 for an individual. Employers cover most of that, but families still contributed an average of $6,015 in premiums, and single Americans covered about $1,242 of the annual cost.

The kicker? Over the past 10 years, the cost of the portion of employer-sponsored health insurance premiums that falls on American families has increased by 71 percent. Overall, premiums have gone up 54 percent since 2009. That’s faster than the rate of inflation and faster than the average wage growth.

Nearly half of all Americans get their health insurance through work, a system that covers roughly 153 million people. And for lower-wage workers it’s a system that is increasingly unaffordable.

Workers at companies with a significant number of low-wage employees (which the Kaiser Family survey quantifies as a company in which at least 35 percent of employees are making an annual salary of $25,000 or less) have lower premiums than those who work at companies with fewer low-wage workers, probably because their plans cover less. But at the same time, workers at firms with a significant number of low-wage employees are faced with high-deductible plans, and also pay a larger share of the premium cost than workers at companies with fewer lower-wage employees.

According to the survey, workers at lower-wage companies pay an average of $7,000 a year family plan — $1,000 more than employees at companies with higher salaried workers.

“When workers making $25,000 a year have to shell out $7,000 a year just for their share of family premiums,” Drew Altman, the president of Kaiser Family Foundation, said in a statement, that’s where cost becomes prohibitive. Such employees are putting almost 30 percent of their salaries toward premiums.

The takeaway is clear. Health care is getting more and more expensive, and families and employers are having to bear more of the cost, which research has shown not only has an effect on how much workers are actually getting paid, but how many workers are hired.

As Sarah Kliff reported for Vox, there are a lot of studies spanning decades that show how a rapid rise in health insurance premiums has unfavorable outcomes for workers. This is in large part because employers think of compensation in totality; they lump together an employee’s salary, as well as their benefits as one total cost. So if covering a worker’s health insurance gets more and more expensive, employers see less room to give the worker a raise.

For example, a 2006 study from Katherine Baicker and Amitabh Chandra, both with the National Bureau of Economic Research, found that an overall 10 percent increase in health insurance premiums reduced wages by 2.3 percent and actually reduced the probability of becoming employed by 1.2 percent.

Results such as these, and the high premiums low-wage workers must pay, led the Kaiser survey’s authors to explicitly question the tenability of employer-sponsored insurance: “the national debate about expanding Medicare or creating public program options provides an opportunity to step back and evaluate how well employer­-based coverage is doing in achieving national goals relating to costs and affordability,” the report reads.

The United States is unique in its reliance on employers to provide health insurance. And, as Democratic candidates for president continue to go in circles debating health care, employer-sponsored insurance is often the biggest sticking point.

Several candidates, like Sen. Bernie Sanders, who popularized a plan for Medicare-for-all, a single government-run program, and Sen. Elizabeth Warren, who supports Sanders’s plan, have called for getting rid of the employer-based system, and private insurance, all together.

But their critics always bring up the same talking point: that the people who like their health insurance plans through work, should be able to keep it. The Kaiser survey raises questions as to how affordable those plans really are, and, as Democrats debate ideas like Medicare-for-all, how sustainable the current trajectory is.