Most folks think of the AARP as a membership organization that gives older Americans discounts on magazine subscriptions and cellphone plans. In fact, those business lines are secondary to AARP’s real source of income, a lucrative partnership with United Healthcare.
AARP partners with United Healthcare to offer health insurance plans to its membership. On its face, there’s nothing inappropriate about this type of affinity branding; the problem is that United Healthcare (and, frankly, other insurance companies) have made some decisions at the expense of seniors and the Medicare program, which should run counter to what a seniors-focused advocacy organization endorses. Recent actions by United Healthcare to limit seniors’ access to less expensive versions of Medicare drugs calls into question whether the AARP is looking out for older Americans or its own bottom line.
During the past three years, President Trump has maintained a laser focus on drug prices, causing pharmaceutical companies to respond in a variety of ways, including reducing or, in some instances, halting altogether annual price increases, pledging responsible pricing for new medications and reducing the price of medicines in certain instances.
For example, last year Eli Lilly launched a half-price version of its insulin drug, Humalog, to address affordability barriers for diabetic patients. Gilead created a subsidiary company in order to offer its two revolutionary hepatitis C products, Harvoni and Epclusa, as “authorized generics” at prices more than 70 percent lower than the identical brand version. In 2018, two companies competing in the cardiovascular space, Sanofi and Amgen, each introduced less costly versions of their cholesterol medications for patients who are unresponsive to statins — at 60 percent below the original price. These are all big wins for Mr. Trump’s jawboning campaign.
But the system is not working: These less expensive versions of innovative drugs are not available to many seniors because of how insurance companies and their negotiators (known as “pharmacy benefit managers” or PBMs) design drug coverage via formularies, particularly in Medicare. A perfect case study is cardiovascular disease, the No. 1 cause of death in the United States: For the past 14 months, in many instances, United Healthcare formulary design kept patients on the more expensive versions of the Sanofi and Amgen cholesterol medicines which came coupled with a high out-of-pocket co-insurance for the patient. Further, CVS (which is merging with insurance company Aetna) admitted to creating barriers for patients by requiring doctors to provide a “documented clinical reason” for prescribing the identical, cheaper version of the same medicine. Today in Medicare, CVS continues to block affordable access to the lower cost versions by not covering these medicines anywhere on their national formulary, effectively dissuading a patient at high risk for a heart attack or stroke from purchasing the medicine prescribed by his/her cardiologist.
Why would insurance companies and PBMs want to keep paying for the more expensive version of an identical drug? The answer lies in the backward way drugs are priced in America. Drug manufacturers set the “list price” of a drug the same way a car dealership lists the price of cars or colleges list the price of tuition. What’s actually paid by an insurer in the final transaction is usually steeply discounted from the starting price by the drug company “rebating” a portion — 40 percent on average, oftentimes more — to the PBM/insurance company (which then pocket it). That negotiation should result in reduced out-of-pocket drug costs for seniors. The problem is that this model results in perverse incentives.
Medicines have high “list prices” because the drug company knows that it will need to provide significant discounts/rebates in order to be listed on a health plan’s formulary. Positive formulary placement = patient access to a medicine. Insurance companies and PBMs like the higher list prices because they profit from both the steep, negotiated rebates and the higher co-insurance the patient pays to the plan. In Medicare, once a patient barrels through the initial drug coverage phase, the federal government picks up 80 percent of a senior’s drug costs, reducing the insurer’s liability. In the end, it’s patients who suffer at the pharmacy counter and in the long run.
California is known for progressive everything, including its health care policies, and, just a few weeks into 2020, state leaders aren’t disappointing.
The politicians’ health care bills and budget initiatives are heavy on ideas and dollars — and on opposition from powerful industries. They put California, once again, at the forefront.
The proposals would lower prescription drug costs, increase access to health coverage, and restrict and tax vaping. But most lawmakers agree that homelessness will dominate the agenda, including proposals to get people into housing while treating some accompanying physical and mental health problems.
“This budget doubles down on the war on unaffordability — from taking on health care costs and having the state produce our own generic drugs to expanding the use of state properties to build housing quickly,” Gov. Gavin Newsom said in a letter to the legislature, which accompanied the $222.2 billion budget proposal he unveiled last Friday. About a third of that money would be allocated to health and human services programs.
But even with a Democratic supermajority in the legislature, these proposals aren’t a slam-dunk. “There are other factors that come into play, like interest groups with strong presence in the Capitol,” including Big Pharma and hospitals, said Shannon McConville, a senior researcher at the nonpartisan Public Policy Institute of California.
Newsom’s plan to create a state generic drug label is perhaps his boldest health care proposal in this year’s budget, as it would make California the first state to enter the drug-manufacturing business. It may also be his least concrete.
Newsom wants the state to contract with one or more generics manufacturers to make drugs that would be available to Californians at lower prices. Newsom’s office provided little detail about how this would work or which drugs would be produced. The plan’s cost and potential savings are also unspecified. (Sen. Elizabeth Warren of Massachusetts, who is seeking the Democratic presidential nomination, proposed a similar plan at the federal level.)
Because the generics market is already competitive and generic drugs make up a small portion of overall drug spending, a state generic-drug offering would likely result in only modest savings, said Geoffrey Joyce, director of health policy at USC’s Leonard D. Schaeffer Center for Health Policy & Economics.
However, it could make a difference for specific drugs such as insulin, he said, which nearly doubled in price from 2012 to 2016. “It would reduce that type of price gouging,” he said.
Representatives of Big Pharma said they’re more concerned about a Newsom proposal to establish a single market for drug pricing in the state. Under this system, drug manufacturers would have to bid to sell their medications in California, and would have to offer prices at or below prices offered to any other state or country.
Californians could lose access to existing treatments and groundbreaking drugs, warned Priscilla VanderVeer, vice president for the Pharmaceutical Research and Manufacturers of America, the industry’s lobbying arm.
This proposal could “let the government decide what drugs patients are going to get,” she said. “When the governor sets an artificially low price for drugs, that means there will be less money to invest in innovation.”
Newsom’s drug pricing proposals build on his executive order from last year directing the state to negotiate drug prices for the roughly 13 million enrollees of Medi-Cal, the state’s Medicaid program for low-income residents. He also ordered a study of how state agencies could band together — and, eventually, with private purchasers such as health plans — to buy prescription drugs in bulk.
California has the largest homeless population in the nation, estimated at more than 151,000 people in 2019, according to the U.S. Department of Housing and Urban Development. About 72% of the state’s homeless slept outside or in cars rather than in shelters or temporary housing.
Newsom has asked for $1.4 billion in the 2020-21 state budget for homelessness, most of which would go to housing and health care. For instance, $695 million would boost health care and social services for homeless people via Medi-Cal. The money would fund programs such as recuperative care for homeless people who need a place to stay after they’ve been discharged from the hospital, and rental assistance if a person’s homelessness is tied to high medical costs.
A separate infusion of $24.6 million would go to the Department of State Hospitals for a pilot program to keep some people with mental health needs out of state hospitals and in community programs and housing.
California has some of the strongest protections against surprise medical bills in the nation, but millions of residents remain vulnerable to exorbitant charges because the laws don’t cover all insurance plans.
Surprise billing occurs when a patient receives care from a hospital or provider outside of their insurance network, and then the doctor or hospital bills the patient for the amount insurance didn’t cover.
Last year, state Assembly member David Chiu (D-San Francisco) introduced legislation that would have limited how much hospitals could charge privately insured patients for out-of-network emergency services. The bill would have required hospitals to work directly with health plans on billing, leaving the patients responsible only for their in-network copayments, coinsurance and deductibles.
But he pulled the measure because of strong opposition from hospitals, which criticized it as a form of rate setting.
Chiu said he plans to resume the fight this year, likely with amendments that have not been finalized. But hospitals remain opposed to the provision that would cap charges, a provision that Chiu says is essential.
“We continue to fully support banning surprise medical bills, but we believe it can be done without resorting to rate setting,” said Jan Emerson-Shea, a spokesperson for the California Hospital Association.
Medi-Cal For Unauthorized Immigrants
California is the first state to offer full Medicaid benefits to income-eligible residents up to age 26, regardless of their immigration status.
Now Democrats are proposing another first: California could become the first to open Medicaid to adults ages 65 and up who are in the country illegally.
Even though Medicaid is a joint state-federal program, California must fund full coverage of unauthorized immigrants on its own.
Newsom set aside $80.5 million in his 2020-21 proposed budget to cover about 27,000 older adults in the first year. His office estimated ongoing costs would be about $350 million a year.
Republicans vocally oppose such proposals. “Expanding such benefits would make it more difficult to provide health care services for current Medi-Cal enrollees,” state Sen. Patricia Bates (R-Laguna Niguel) said in a prepared statement.
Dozens of California cities and counties have restricted the sale of flavored tobacco products in an effort to curb youth vaping.
But last year, state legislators punted on a statewide ban on flavored tobacco sales after facing pressure from the tobacco industry.
Now, state Sen. Jerry Hill (D-San Mateo) is back with his proposed statewide flavor ban, which may have more momentum this year. Since last summer, a mysterious vaping illness has sickened more than 2,600 people nationwide, leading to 60 deaths, according to the Centers for Disease Control and Prevention. In California, at least 199 people have fallen ill and four have died.
Hill’s bill would ban retail sales of flavored products related to electronic cigarettes, e-hookahs and e-pipes, including menthol flavor. It also would prohibit the sale of all flavored smokable and nonsmokable tobacco products, such as cigars, cigarillos, pipe tobacco, chewing tobacco, snuff and tobacco edibles.
Newsom has also called for a new tax on e-cigarette products — $2 for each 40 milligrams of nicotine, on top of already existing tobacco taxes on e-cigarettes. The tax would have to be approved by the legislature as part of the budget process and could face heavy industry opposition.
Tobacco-related bills are usually heard in the Assembly Governmental Organization Committee, “and that is where a lot of tobacco legislation, quite frankly, dies,” said Assembly member Jim Wood (D-Healdsburg), who supports vaping restrictions.
Hospitals in the 340B drug discount program spent more on drugs for prostate and lung cancers compared to facilities not in the program, a new analysis found.
But the preliminary analysis from the Medicare Payment Advisory Commission (MedPAC) couldn’t find that the controversial program incentivizes hospitals to pursue higher-priced drugs. The analysis, released Friday as part of MedPAC’s monthly meeting, was requested by Congress on the program, which has faced major cuts by the Trump administration.
Some lawmakers have argued that 340B, which offers safety-net hospitals discounts on drugs, has not worked as intended and led to hospitals specifically choosing higher-priced drugs to get a big discount.
So MedPAC looked at the spending from 2013 to 2017 of 340B and non-340B hospitals as well as physicians’ offices for five types of cancers: breast, colorectal, prostate, lung and leukemia and lymphoma.
MedPAC’s analysis found that 340B hospitals spent between 2% and 5% higher on average on cancer drugs than non-340B hospitals. But there were mixed results when 340B hospitals were compared to physicians’ offices, with 340B facilities spending 1% lower to 7% higher than physicians’ offices on cancer drugs.
The reason 340B hospitals spent more on cancer drugs than hospitals not in the program was linked to two types of cancer: lung and prostate.
For lung cancer, a possible reason for the higher spending is that a larger share of patients in 340B hospitals received new immuno-oncology therapies that are more expensive, MedPAC said. Prostate cancer also had higher drug prices per unit for both drugs in Medicare Part B, which reimburses for physician-administered drugs, and Part D.
However, MedPAC staff cautioned they couldn’t conclude 340B is incentivizing the spikes in spending.
The reason is “we lack access to the discount data,” said MedPAC staffer Shinobu Suzuki at the commission’s meeting Friday in Washington, D.C.
MedPAC also didn’t find that gaining 340B status led to a spike in average cancer drug spending, suggesting that 340B discounts “may not have had any effects on them,” the report said.
The analysis also found that the higher cancer spending would likely have a small, if any, impact on cost sharing for Medicare patients depending on the type of cancer and supplemental coverage.
The study will be finalized and likely included in MedPAC’s March report to Congress. It comes with some caveats, including a small sample size and that it did not examine the impact of a 22.5% cut to 340B payments that went into effect in 2018.
The hospital industry has been fighting the Trump administration in court over the cuts, which the industry claims are unlawful.
Despite the caveats, MedPAC’s findings could play a major part in lawmaker deliberations on the program, which some Republicans claim has gotten too big and led to hospitals bilking the federal government.
The pharmaceutical industry has also led an extensive campaign to shed more light on the program. 340B requires pharmaceutical companies to provide discounts to safety-net hospitals in exchange for participating in Medicaid.
The Government Accountability Office has also called for greater oversight of 340B.
340B industry group 340B Health praised the findings.
“The thoughtful analysis MedPAC presented today sheds important light on the role 340B hospitals play in treating people living with cancer,” said Maureen Testoni, 340B Health president, in a statement.
Congress has yet to pass major legislation lowering U.S. drug prices. But there are signs within President Trump’s newly passed North American trade deal that the pharmaceutical industry’s grip on lawmakers may be slipping.
The Senate gave the president his long-sought win yesterday just ahead of his impeachment trial, approving in an 89-to-10 vote a sweeping economic pact between the United States, Canada and Mexico that governs more than $1.2 trillion worth of trade between the three countries.
Lawmakers stripped from the final deal several provisions favored by the drug industry that would have boosted efforts by makers of brand-name drugs to quash competition. It was hailed by manufacturers of generic drugs, hospitals and other health providers, who said it sets up a strong and fair foundation for how pharmaceutical products could be treated in future trade agreements with China and the United Kingdom.
The altered U.S.-Mexico-Canada Agreement is “the most balanced trade agreement the U.S. has ever signed,” Jonathan Kimball, vice president of trade for the generic drug group Association for Accessible Medicines, told me.
“I think one of the most important parts of the trade deal is Democrats and Republicans realize the system must change and the bipartisan majority who voted for it have put a marker down that things are changing,” Kimball said.
Indeed, an overwhelming majority of senators from both parties supported the agreement, which the House passed last month by a similarly wide margin, my Washington Post colleagues Erica Werner and Rachel Siegel report. It replaces the 25-year-old North American Free Trade Agreement, something Trump repeatedly pledged in 2016 to do.
What’s most significant about the USMCA and prescription drug development is what it didn’t include.
An earlier version would have set the period in which the makers of new brand name drugs are protected from competition at 10 years. That’s two years less than the current 12-year “exclusion period” — but enshrining it in the trade deal would have required Congress to gain permission from Mexico and Canada before altering it in the future.
The original trade deal would also have created additional pathways for makers of branded drugs to extend their exclusivity periods — a practice that’s already common as they seek to maximize earnings off a drug before it has any generic competitors. The companies argue these longer exclusivity periods are necessary to let them reclaim their spending on research and development.
Such practices typically involve biologic drugs, medicines that come from living cells containing proteins and other materials that can treat diseases such as cancer or rheumatoid arthritis. It’s these biologics that are the biggest driver of high drug prices.
So makers of branded drugs were predictably excited about version 1.0 of USMCA and disappointed by version 2.0. Stephen Ubl, president of the Pharmaceutical Research and Manufacturers of America, said the stripped-down final version “removes vital protections for innovators.”
“The only winners today are foreign governments who want to steal American intellectual property and free ride on America’s global leadership in biopharmaceutical research and development,” Ubl said in a statement the group issued when the House passed the deal in December.
But the rest of the health-care industry sees the USMCA as a rebuke of an industry that’s already under fire for hiking drug prices while continuing to pocket huge profits.
“Congress and the White House have rightly recognized that at a time when 58 million Americans struggle to afford their prescription drugs, it would be a step in the wrong direction to further enable Big Pharma’s anti-competitive tactics,” said Lauren Aronson, executive director of the Campaign for Sustainable Rx Pricing, a coalition of health groups that includes hospitals, doctors and insurance plans.
From a pure trade standpoint, USMCA isn’t terribly consequential for the U.S. drug industry. Canada and Mexico are not even close to the U.S.’s top trading partners of pharmaceutical products.
Rather, it’s China that produces many of the ingredients U.S. drugmakers use to develop their medicines. Any trade agreement Trump negotiates with China if he wins a second term as president will be more important commercially to the industry. And if that time comes, supporters of the USMCA are hopeful the deal will be used as a starting point.
“We think we now have a template moving forward where both Democrats and Republicans have a trade agreement that supports access to affordable medicines,” Kimball said.
Americans worry a lot about how to get and pay for good health care, but the 2020 presidential candidates are barely talking about what’s at the root of these problems: Almost every incentive in the U.S. health care system is broken.
Why it matters: President Trump and most of the Democratic field are minimizing the hard conversations with voters about why health care eats up so much of each paycheck and what it would really take to change things.
— 2020 drug price increases unlikely to catalyze cost-cutting action, say experts.
Both House Speaker Nancy Pelosi and Republican Sen. Chuck Grassley cited the initial wave of drug price hikes as examples of why their respective bills tackling the cost of pharmaceuticals should move forward. But when Prescription PULSE spoke with a half dozen experts tracking the industry, not one believed the hikes — which averaged around 5 percent across more than 470 drugs — would sway Congress or the administration to drug pricing reform.
“The increases are a persistent reminder that Congress and the administration have done nothing to reduce drug prices. But the increases also happen so regularly that it’s probably unrealistic to think they’ll spur any action this time around,” said Rob Smith, who tracks the political and policy outlook of the drug industry for Capital Alpha Partners.
“I don’t necessarily think the increases themselves improve or diminish the odds of material drug pricing legislation getting across the finish line,” said John Leppard of Washington Analysis.
Of the 471 drugs whose prices have increased, 466 were brand-name medicines, according to GoodRx, which tracks where consumers can get lower-priced medicines. GoodRx doesn’t track doctor-administered drugs so there were likely other increases not captured by their analysis. Other companies are expected to announce price increases as the month goes on.
Despite the focus on drug costs, companies are continuing their habit of regularly raising the prices, often multiple times a year, said Anna Kaltenboeck, a program director and senior health economist at Memorial Sloan Kettering Cancer Center. “This is the starting volley for the year so to speak,” she said.