Frederick Banting discovered insulin in 1921 and didn’t want to profit off of such a life-saving drug. Fast forward to 2019, and the price of insulin continues to increase year over year. Why is that?
Frederick Banting discovered insulin in 1921 and didn’t want to profit off of such a life-saving drug. Fast forward to 2019, and the price of insulin continues to increase year over year. Why is that?
The ceaseless battle over the 2010 law has made it difficult to address the high cost of American health care.
The Obamacare wars have ignored what really drives American anxiety about health care: Medical costs are decimating family budgets and turning the U.S. health system into a runaway $3.7 trillion behemoth.
Poll after poll shows that cost is the number one issue in health care for American voters, but to a large extent, both parties are still mired in partisan battles over other aspects of Obamacare – most notably how to protect people with pre-existing conditions and how to make insurance more affordable, particularly for people who buy coverage on their own.
That leaves American health care consumers with high premiums, big deductibles and skyrocketing out-of-pocket costs for drugs and other services. Neither party has a long-term solution — and the renewed fight over Obamacare that burst out over the past 10 days has made compromise even more elusive.
Democrats want to improve the 2010 health law, with more subsidies that shift costs to the taxpayer. Republicans are creating lower-cost alternatives to Obamacare, which means shifting costs to older and sicker people.
Neither approach gets at the underlying problem — reducing costs for both ordinary people and the health care burden on the overall U.S. economy.
Senate HELP Committee chair Lamar Alexander, the retiring Tennessee Republican with a reputation for deal-making, has reached out to think tanks and health care professionals in an attempt to refocus the debate, saying the interminable fights about the Affordable Care Act have “put the spotlight in the wrong place.”
“The hard truth is that we will never get the cost of health insurance down until we get the cost of health care down,” Alexander wrote, soliciting advice for a comprehensive effort on costs he wants to start by summer.
But given the partisanship around health care — and the fact there have been so many similar outreaches over the years for ideas, white papers and commissions — it’s hard to detect momentum. Truly figuring how to fix anything as vast, complex and politically charged as health care is difficult. Any serious effort will create winners and losers, some of whom are well-protected by powerful K Street lobbies.
And the health care spending conversation itself gets muddled. People’s actual health care bills aren’t always top of mind in Washington.
“Congress is looking at federal budgets. Experts are looking at national health spending and the GDP and value. And the American people look at their own out-of-pocket health care costs and the impact it has on family budgets,” said Drew Altman, the president and CEO of the Kaiser Family Foundation, which extensively tracks public attitudes on health.
But Congress tends to tinker around the edges — and feud over Obamacare.
“We’re doing nothing. Nothing. We’re heading toward the waterfall,” said former CBO director Doug Elmendorf, now the dean of the Harvard Kennedy School, who sees the political warfare over the ACA as a “lost decade,” given the high stakes for the nation’s economic health.
The solutions championed by the experts — a mix of pricing policies, addressing America’s changing demographics, delivering care more efficiently, creating the right incentives for people to use the right care and the smarter use of high-cost new technologies — are different than what the public would prescribe. The most recent POLITICO-Harvard T.H. Chan School of Public Health poll found the public basically wants lower prices, but not a lot of changes to how — or how much — they consume health care, other than spending more on prevention.
Lawmakers are looking at how to start chipping away at high drug prices, or fix “surprise” medical bills that hit insured people who end up with an out-of-network doctor even when they’re at an in-network hospital. Neither effort is insignificant, and both are bipartisan. While those steps would help lower Americans’ medical bills, health economists say they won’t do enough to reverse the overall spending trajectory.
Drug costs and surprise bills, which patients have to pay directly, “have been a way the public glimpses true health care costs,” said Melinda Buntin, chair of the Department of Health Policy at Vanderbilt University School of Medicine. “That information about how high these bills and these charges can be has raised awareness of health care costs — but it has people focused only on that part of the solution.”
And given that President Donald Trump has put Obamacare back in the headlines, the health law will keep sucking up an outsized share of Washington’s oxygen until and quite likely beyond the 2020 elections.
Just in the last week, the Justice Department urged the courts to throw out Obamacare entirely, two courts separately tossed key administration policies on Medicaid and small business health plans, and Trump himself declared he wants the GOP to be the “party of health care.” Facing renewed political pressure over the party’s missing Obamacare replacement plan, Trump last week promised Republicans would devise a grand plan to fix it. He backtracked days later and said it would be part of his second-term agenda.
Democrats say Trump’s ongoing assaults on the ACA makes it harder to address the big picture questions of cost, value and quality. “That’s unfortunately our state of play right now,” said Rep. Raul Ruiz (D-Calif.). “Basic health care needs are being attacked and threatened to be taken away, so we have to defend that.”
The ACA isn’t exactly popular; more than half the country now has a favorable view of it, but it’s still divisive. But for Republicans and Democrats alike, the new POLITICO-Harvard poll found the focus was squarely on health care prices — the cost of drugs, insurance, hospitals and doctors, in that order.
The Republicans’ big ideas have been to encourage less expensive health insurance plans, which are cheaper because they don’t include the comprehensive benefits under Obamacare. That may or may not be a good idea for the young and healthy, but it undoubtedly shifts the costs to the older and sicker. The GOP has also supported spending hundreds of millions less each year on Medicaid, which serves low-income people — but if the federal government pays less, state governments, hospitals and families will pay more.
Last week, courts blocked rules in two states that required many Medicaid enrollees to work in order to keep their health benefits, and also nixed Trump’s expansion of association health plans, which let trade groups and businesses offer coverage that doesn’t include all the benefits required under the ACA.
House Democrats last week introduced a package of bills that would boost subsidies in the Obamacare markets and extend that financial assistance to more middle-class people. The legislation would also help states stabilize their insurance markets — something that the Trump administration has also helped some states do through programs backstopping health insurers’ large costs.
These ideas may also bring down some people’s out-of-pocket costs, which indirectly lets taxpayers pick up the tab. These steps aren’t meaningless — more people would be covered and stronger Obamacare markets would stabilize premiums — but they aren’t an overall fix.
The progressive wing of the Democratic party backs “Medicare for All,” a brand new health care system that would cover everyone for free, including long-term care for elderly or disabled people. Backers say that the administrative simplicity, fairness, and elimination of the private for-profit insurance industry would pay for much of it.
The idea has moved rapidly from pipe dream to mainstream, but big questions remain even among some sympathetic Democrats about financing and some of the economic assumptions, including about how much of a role private insurance plays in Medicare today, and how much Medicare puts some of its costs onto other payers. Already a political stretch, the idea would face a lot more economic vetting, too.
The experts, as well as a smattering of politicians, define the health cost crisis more broadly: what the country spends. Health care inflation has moderated in recent years; backers of the Affordable Care Act say the law has contributed to that. But health spending is still growing faster than the overall economy. CMS actuaries said this winter that if current trends continue, national health expenditures would approach nearly $6 trillion by 2027 — and health care’s share of GDP would go from 17.9 percent in 2017 to 19.4 percent by 2027. There aren’t a lot of health economists who’d call that sustainable.
And ironically, the big fixes favored by the health policy experts — the ones that Alexander is collecting but most politicians are ignoring — might address many of the problems that keep aggravating U.S. politics. If there were rational prices that reflected the actual value of care provided for specific episodes of illness and treatment, instead of the fragmented system that largely pays for each service provided to patients, then no medical bill would be a surprise, noted Mark McClellan, who was both FDA and CMS chief under the President George W. Bush and now runs the Duke-Margolis Center for Health Policy.
“But taking those steps take time and will be challenging,” McClellan noted. “And they’ll be resisted by a lot of entrenched forces.”
After multiple delays, the Health Resources & Services Administration (HRSA) has finally launched an online tool that 340B hospitals can use to determine the maximum that pharmaceutical companies can charge for drugs.
HRSA’s new pricing site went live on Monday morning and is one of the elements mandated in the long-delayed final rule for the 340B drug discount program. That rule, which took effect on Jan. 1, also adds monetary penalties for drug companies that overcharge hospitals in the program.
The final rule was first issued in January 2017 and was delayed five times by the Trump administration before going into effect this year. HRSA finally rolled out the rule as it determined the provisions would not interfere with the administration’s broader drug pricing policy.
Provider groups and 340B advocates cheered the website’s launch. Maureen Testoni, CEO of 340B health, a group that represents more than 1,300 providers participating in the program, said in a statement that the new tool’s release “marks a positive milestone in the history of the 340B program.”
“Today’s launch of a secure website listing the maximum allowable prices for all 340B covered drugs brings a healthy dose of sunshine into a marketplace that has, for far too long, been a black box,” Testoni said. “Until today, hospitals, clinics and health centers participating in 340B had no way to be sure they were paying the correct amount for the drugs they purchase.”
340B Health was joined by the American Hospital Association (AHA), America’s Essential Hospitals and the Association of American Medical Colleges on a lawsuit filed in September with the goal of pushing HRSA to implement the rule.
Tom Nickels, executive vice president at AHA, said in a statement that the group was “pleased” that its lawsuit led to the site’s launch.
“As prescription drug prices continue to skyrocket, the 340B program is as crucial as ever in helping hospitals provide access to healthcare services for patients in vulnerable communities,” Nickels said.
Amid the drug price debate, the 340B program has been under the microscope. The program has enjoyed traditionally bipartisan support, but intense lobbying from the pharmaceutical industry has led to criticism that it has grown too large.
The Centers for Medicare & Medicaid Services also slashed the program’s payment rate in 2017, a shift in a longstanding Medicare policy that culled $1.6 billion in payments from the program. Hospital groups are currently battling the payment changes in court.
Since 2000, more than 500 new medicines have been approved by the Food and Drug Administration. Because of those medicines, many Americans are living longer, better and more active lives. However, new medicines often come with high price tags. And in an environment of rising drug costs, affordability isn’t just a simple matter of economics — it can play a significant role in determining health outcomes.
Perhaps no other drug better illustrates the effect of cost on health than insulin. Over the past decade, insulin prices in the United States have tripled. Most of that increase has been driven by analog insulin medications, which are the newest forms of synthetic insulin. For example, the price of one brand of analog insulin, Humalog, was just $20 per vial in 1996. Today, it’s $275 per vial — a 1,275% increase. (Eli Lilly, the drug’s manufacturer, announced it will soon offer an “authorized generic” of the drug at a 50% discount.)
With insurers’ and patients’ out of pocket costs on the rise, a new report from researchers at Yale University finds that one-quarter of patients with Type 1 or 2 diabetes say they ration their medication.
This is, to put it simply, bad news all around. When patients don’t take their medications as prescribed, they not only get sicker, but their ailments also become more expensive to treat. One report showed that patients who didn’t take their Type 2 diabetes medications developed complications that cost the U.S. health system $4 billion a year.
Studies like these often leave doctors and nurses scratching their heads, wondering if anything can be done to bridge the affordability gap in order to make it more likely that patients will purchase and take life-saving medicines. One obvious solution is to prescribe less expensive medications. But that only works if the less expensive medications are just as effective as their more costly counterparts.
Which can sometimes be the case with insulin.
Last year, CareMore, the healthcare system that I lead, partnered with independent researchers from Brigham and Women’s Hospital and Harvard Medical School to study the effects of a program CareMore implemented to switch Type 2 diabetic patients from analog insulin to less expensive humaninsulin. Human insulin first came on the market in the early 1980s and costs about one-tenth as much as analog insulin. (The names can be a bit confusing; both medications are synthetic forms of insulin produced in a laboratory.)
However, our study, published in the Journal of the American Medical Association (JAMA), found that human insulin was just as effective as analog insulin at stabilizing blood sugar levels. This conclusion, frankly, wasn’t entirely surprising. A 2018 study conducted by Kaiser Permanente found that patients who took human insulin were no more likely to need additional health care than their counterparts who took analog insulin.
Crucially, our study found that the switch to human insulin also translated into lower costs for patients. Before the switch, one-fifth of the patients we studied reached the Medicare Part D coverage gap, or “donut hole,” where patients pay substantially higher costs for prescription drugs. After the switch, just 11.1% reached that gap.
Moreover, our analysis found that the program can be replicated safely and at-scale. If even a small proportion of Medicare beneficiaries with Type 2 diabetes switched to human insulin, the resulting savings to the health care system would be substantial.
Switching to lower-cost, older, equivalent medications is one way to increase medication adherence and improve health outcomes. Another, it turns out, is simply to charge patients less.
In a landmark 2011 study, researchers studied patients who had suffered heart attacks. Normally, these patients have a low rate of medication adherence. But Harvard Medical School professors Niteesh Choudhry and William Shrank, two of the study’s lead authors found that when drug copayments were eliminated, medication adherence rates increased while overall health costs remained constant.
One might wonder why costs didn’t go up. After all, the co-pays were eliminated and, as adherence improved, the volume of prescriptions filled increased. University of Michigan researchers A. Mark Fendrick and Rajender Agarwal may have the answer.
In a 2018 report, they found that when insurers eliminated co-payments or took other actions to make drugs more affordable, their drug costs went up — but the total cost of insuring patients did not. In fact, in some cases the cost of providing care actually decreased. Fendrick and Agarwal say that’s because patients who take their medications stay healthier and are less likely to require hospitalizations and other expensive types of care.
None of this is to say that new drug therapies or other cutting-edge treatments don’t have value. On the contrary, they help people live longer, better lives. But in a world of increasing health costs, prescribing life-saving medications for our patients isn’t enough. Physicians, health plans and pharmaceutical manufacturers have to ensure that patients can afford to take them, as well.
People focus on the health costs that are most tangible and sometimes outrageous to them: their deductibles, and drug costs, and surprise medical bills, and the annual increase in the share of the premium they pay. But there’s more that gets less attention because it’s not as visible to them.
Why it matters: To really understand how Medicare for All or any other big change in health care financing would affect them, people need to understand how they would impact their overall family health budgets. Few people think about the other health costs they pay: their taxes to support health care, or what their employers are paying towards premiums (which is depressing their wages).
A new study found net prices for medicines grew just 1.5% last year. Unfortunately, it doesn’t feel that way for you. Forty percent of a medicine’s list price is given as a rebate or discount to the government and middlemen, like insurers and pharmacy benefit managers (PBMs).
These rebates and discounts exceed $150 billion annually, but insurers don’t always share these savings with you.
Visit LetsTalkAboutCost.org to find out more.
The clash over free trade in North America has long been fought over familiar issues: low-paid Mexican workers. U.S. factories that move jobs south of the border. Canada’s high taxes on imported milk and cheese.
But as Democrats in Congress consider whether to back a revamped regional trade pact being pushed by President Donald Trump, they’re zeroing in on a new point of conflict: drug prices. They contend that the new pact would force Americans to pay more for prescription drugs, and their argument has dimmed the outlook for one of Trump’s signature causes.
The president’s proposed replacement for the 25-year-old North American Free Trade Agreement is meant to win over Democrats by incentivizing factories to hire and expand in the United States. Yet the pact would also give pharmaceutical companies 10 years’ protection from cheaper competition in a category of ultra-expensive drugs called biologics, which are made from living cells.
Shielded from competition, critics warn, the drug companies could charge exorbitant prices for biologics.
“This is an outrageous giveaway to Big Pharma,” Rep. Rosa DeLauro, a Connecticut Democrat, said in an interview. “The government guarantees at least 10 years of market exclusivity for biologic medicine. It’s a monopoly. It’s bad policy.”
The objections of DeLauro and other Democrats suddenly carry greater potency. The need to curb high drug prices has become a rallying cry for voters of all political stripes. Trump himself has joined the outcry. The revamped North America trade deal must be approved by both chambers of Congress, and Democrats have just regained control of the House.
Rep. Earl Blumenauer of Oregon, the new chairman of the House Ways and Means subcommittee on trade, told The Associated Press that “I don’t think candidly that it passes out of my trade subcommittee” with the biologics provision intact.
“The biologics are some of the most expensive drugs on the planet,” Blumenauer said.
Still, the politics of NAFTA 2.0 are tricky for Democrats and not necessarily a sure-fire winner for them.
The original NAFTA, which took effect in 1994, tore down most trade barriers separating the United States, Canada and Mexico. Like Trump, many Democrats blamed NAFTA for encouraging American factories to abandon the United States to capitalize on lower-wage Mexican labor and then to ship goods back into the U.S., duty-free.
Having long vilified NAFTA, Trump demanded a new deal — one far more favorable to the United States and its workers. For more than a year, his top negotiator, Robert Lighthizer, held talks with Canada and Mexico. Lighthizer managed to insert into the new pact provisions designed to appeal to Democrats and their allies in organized labor. For example, 40 percent of cars would eventually have to be made in countries that pay autoworkers at least $16 an hour — that is, in the United States and Canada and not in Mexico — to qualify for duty-free treatment.
The new deal also requires Mexico to encourage independent unions that will bargain for higher wages and better working conditions.
Late last year, the three countries signed their revamped deal, the U.S.-Mexico-Canada Agreement. But it wouldn’t take effect until their three legislatures all approved it. In the meantime, the old NAFTA remains in place.
The question now is: Are Democrats prepared to support a deal that addresses some of their key objections to NAFTA and thereby hand Trump a political victory? Some Democrats have praised the new provisions that address auto wages, though many say they must be strengthened before they’d vote for the USMCA.
Protection for drug companies is another matter. Many Democrats had protested even when the Obama administration negotiated eight years of protection for biologics— from cheap-copycat competitors called “biosimilars” — in a 12-country Pacific Rim trade pact called the Trans-Pacific Partnership, or TPP.
Trump abandoned the TPP in his first week in office. But the pharmaceutical industry is a potent lobby in Washington, and Trump’s negotiators pressed for protection for U.S. biologics in the new North American free trade deal. They ended up granting the drug companies two additional years of protection in the pact.
Top biologics include the anti-inflammatory drug Humira, the cancer fighter Rituxan and Enbrel, which is used to treat rheumatoid arthritis.
The administration and drug companies argue that makers of biologics need time to profit from their creations before biosimilars sweep in, unburdened by the cost of researching and developing the drugs. Otherwise, they contend, the brand-name drug companies would have little incentive to invest in developing new medicines.
They note that a 2015 law authorizing presidents to negotiate trade deals requires American officials to push other countries toward U.S.-level protections for intellectual property such as biologic drugs. (The same law, somewhat contradictorily, directs U.S. negotiators to “promote access to medicines.”)
Supporters also note that existing U.S. law gives makers of biologics 12 years’ protection. So the new pact wouldn’t change the status quo in the United States, though it would force Mexico to expand biologics’ monopoly from five years and Canada from eight years. In fact, supporters of the biologics monopoly argue that the pact might cut prices in the United States because drug companies would no longer face pressure to charge Americans more to compensate for lower prices in Canada and Mexico.
But critics say that expanding biologics’ monopoly in a trade treaty would prevent the United States from ever scaling back the duration to, say, the seven years the Obama administration once proposed.
“By including 10 years in a treaty, we are locking ourselves in to a higher level of monopoly protection for drugs that are already taking in billions of dollars a year,” said Jeffrey Francer, general counsel for the Association for Accessible Medicines, which represents generic drug companies. “The only way for Congress to change it is to back out of the treaty. … Does the United States want to be in violation of its own treaty?”
For Democrats, higher drug prices are shaping up as a powerful political argument against approving the president’s new North American trade deal. In December, Stanley Greenberg, a leading Democratic pollster and strategist, conducted focus groups in Michigan and Wisconsin with Trump voters who weren’t affiliated with the Republican Party. Some had previously voted for Barack Obama. Others called themselves political independents. They’re the kinds of voters Democrats hope to attract in 2020.
Greenberg said he was “shocked” by the intensity of their hostility to drug companies — and to the idea that a trade pact would shield those companies from competition.
“It was like throwing a bomb into the focus group,” said Greenberg, who is married to DeLauro. He said the voters’ consensus view was essentially: “The president was supposed to go and renegotiate (NAFTA) so that it worked for American workers. But it must be that these lobbyists are working behind the scenes” to sneak in special-interest provisions.
That perception gives Democrats reason to reject the new pact as the 2020 election approaches.
“Democrats have no incentive to do this,” said Philip Levy, a senior fellow at the Chicago Council on Global Affairs and a White House economist under President George W. Bush. “Before you know it, the presidential election season is going to be upon us.”
U.S. trade rules are designed to force Congress to give trade agreements an up-or-down vote — no nitpicking allowed. Still, there are ways to bypass those restrictions. Congressional Democrats could, for example, push the administration to negotiate so-called side letters with Canada and Mexico to address their concerns. President Bill Clinton did this with the original NAFTA.
“Lighthizer and his team are very creative,” said Blumenauer, chair of the House trade subcommittee. “This is something that can be handled.”