How to save $80 billion a year on prescription drugs

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Illustration of a bill with money print on it.

Medicare could have saved almost $80 billion, just in 2018, by matching the U.K.’s prices for prescription drugs that don’t have any competition, according to a new study released in Health Affairs yesterday.

Why it matters: Medicare’s drug benefit was designed to keep prices in check through competition. But competition doesn’t always exist, and the U.S. doesn’t have many options to keep prices down in those cases.

  • Unlike the other three countries examined in the study, the U.S. doesn’t regulate drug prices.

Details: This study focuses on a group of single-source brand-name drugs in Medicare Part D that have been on the market for at least 3 years. Researchers compared U.S. prices for those drugs to prices in the U.K., Japan and Ontario.

  • On average, after accounting for rebates, Medicare paid 3.6 times more than the U.K., 3.2 times more than Japan, and 4.1 times more than Ontario.
  • The longer a drug was on the U.S. market, the larger that gap grew.
  • If Medicare Part D had adopted the average price from those countries, it would have saved an estimated $72.9 billion on sole-source drugs in 2018 alone.

Between the lines: The Trump administration wants to rely on international prices for Medicare Part B, which covers drugs administered in a doctor’s office. But this study shows that there are also a lot of savings to be had in Medicare Part D, which covers drugs you pick up at a pharmacy.

The other side: “An international reference pricing system could result in American seniors losing access to their choice of medicine, and waiting years longer for new breakthrough treatments,” the trade group PhRMA said in a statement.

The bottom line: The political interest in cutting drug prices is real, but we’re still a very long way from President Trump’s stated goal of matching other countries’ prices.

 

Health care giants are dependent on payments Trump wants to end

https://www.axios.com/drug-prices-medicare-cvs-humana-unitedhealth-trump-1d66d7d6-66ea-4150-89f5-e3b357b17bb2.html

An older man grabs his prescription drugs at a pharmacy counter.

The 3 big health insurers that control a majority of Medicare’s prescription drug coverage — CVS Health, Humana and UnitedHealth Group — are arguably the most at risk from the Trump administration’s plan to eliminate rebates within Medicare.

The big picture: These companies rely heavily on rebates to offset the costs of covering seniors’ prescriptions. Losing those rebates would shift billions of dollars away from them, and they could lose customers if they raise premiums to make up the difference.

By the numbers: Axios analyzed the Medicare businesses within the companies’ 2018 filings with state insurance commissioners.

  • UnitedHealthcare paid $7.3 billion in prescription drug claims and received $4.1 billion in rebates, according to its major subsidiary in Connecticut.
  • Humana paid $7.1 billion in prescription drug claims and received $3.9 billion in rebates, according to its major subsidiary in Wisconsin.
  • CVS paid $6.3 billion in prescription drug claims and received $3.5 billion in rebates, according to its SilverScript subsidiary.

Between the lines: Those rebates offset more than half of what these 3 companies had to pay for people’s prescriptions.

  • That’s well above the average for all Medicare drug plans, which was just 25% in 2018 (Table IV.B8).
  • Plans don’t keep Medicare rebates as profit, and instead pass them back to the federal government. (They do, however, keep a small percentage of rebates from their commercial plans.)
  • The companies did not respond to requests for comment.

The bottom line: CVS, Humana and UnitedHealth — all of which vehemently oppose Trump’s proposed rebate rule — are “overly dependent on rebates to keep premiums low [so they can] buy market share, which is what these guys have been doing for the past decade,” said Emily Evans, a health care managing director at investment research firm Hedgeye.

  • If those rebates go away, sooner or later the big 3 would have to raise monthly premiums to avoid losses.
  • And hiking drug plan premiums could persuade seniors to switch to competing plans that don’t rely on rebates and therefore won’t need to raise their premiums as much.

 

 

 

Trump is reading the GOP base wrong on the Affordable Care Act

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The only plausible explanation for President Trump’s renewed effort through the courts to do away with the Affordable Care Act, other than muscle memory, is a desire to play to his base despite widely reported misgivings in his own administration and among Republicans in Congress.

Reality check: But the Republican base has more complicated views about the ACA than the activists who show up at rallies and cheer when the president talks about repealing the law. The polling is clear: Republicans don’t like the ACA, but just like everyone else, they like its benefits and will not want to lose them.

The big picture: About three quarters of Republicans still have an unfavorable view of the ACA, and seven in 10 say repealing the law is a top health priority for Congress — higher than other priorities such as dealing with prescription drug costs. And yes, 7 in 10 Republicans still want to see the Supreme Court overturn the law.

But as the chart shows, majorities of Republicans like many elements of the ACA —especially closing the “donut hole” in Medicare prescription drug coverage (80%), eliminating copayments for preventive services (68%), keeping young adults under 26 on their parents’ plans (66%) and subsidies for low and middle-income households (63%).

  • Nearly half of Republicans want the Supreme Court to keep the protections for pre-existing conditions (49%), and even more show general support for the pre-existing conditions protections (58%).
  • During the repeal and replace debate in 2017, even Republicans were nervous to hear that these sorts of things would go away. The 2020 campaign would drive home to the public, and to Republicans, what they have to lose — and it would become especially real to them if the 5th Circuit Court of Appeals upholds the ruling striking down the ACA.

Maybe Republicans would forget about these lost benefits if they could agree on a replacement plan they liked? But there isn’t one, and many of the ideas thought to be elements of one — such as cutting and block granting both Medicaid and ACA subsidies — are non-starters with Democrats and moderate Republicans on Capitol Hill. They’re unpopular with the public, too. 

The bottom line: It is widely accepted that a renewed debate about repeal hands Democrats a powerful new political opportunity. Deeper in the polling, it’s also clear that’s it’s more of a mixed bag for Republicans than President Trump may realize.  

 

 

 

The GOP’s health problem: They like big chunks of the Affordable Care Act

https://www.axios.com/aca-ruling-republicans-politics-changed-f54f7a3f-53f4-47f2-9deb-2c4c424534b6.html

A protester in New York holds a sign saying, "ACA saves lives"

Now that a Texas judge has ruled that the entire Affordable Care Act is unconstitutional — all because of its individual mandate — Republicans may find themselves wishing for a different outcome.

The big picture: There is little hope of a deal with Democrats on health reform in a divided Congress if the decision is upheld. Democrats will now use the 2020 campaign to paint Republicans as threatening a host of popular provisions in the ACA. And here’s the kicker: protections for pre-existing conditions, the provision that played such a big role in the midterms, is not even the most popular one.

Here are just some of the more popular provisions that would be eliminated — in order of their popularity, according to the Kaiser Family Foundation’s November tracking poll:

  • Young adults can remain on their parents’ health insurance policies until age 26: 82% of the public supports this, including 66% of Republicans.
  • Subsidies for lower and moderate income people: 81% support this, including 63% of Republicans.
  • Closing the “donut hole” so there’s no gap in Medicare prescription drug coverage: 81% like this, as do 80% of Republicans.
  • Eliminating costs for many preventive services: 79% support this, as do 68% of Republicans.
  • Medicaid expansion: 77% like it, as do 55% of Republicans.

The list goes on, but notably, further down but still very popular: 65% of the public supports protecting people with pre-existing conditions, as do 70% of Democrats, 66% of independents and 58% of Republicans. The fact the pre-existing conditions does not top the list shows how popular all of the other provisions are.

The Republican attorneys general brought their lawsuit in a different political environment, when Republicans held the House, Senate and the White House. If that had continued, they could have had reason to hope that a ruling in their favor, if upheld by higher courts, could have helped them achieve their goal of repeal and replace legislation.

The bottom line: Their world has changed politically, with Democrats preparing to take control of the House next year, and Republicans may have been better off settling for the repeal of the mandate penalty that Congress already passed. The mandate was by far the least popular part of the law and gave them something to crow about. Now, they may have bought more than they bargained for.

 

 

 

 

Healthcare Triage News: The Advantages of Medicare Advantage

http://theincidentaleconomist.com/wordpress/healthcare-triage-news-the-advantages-of-medicare-advantage/

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Many studies have demonstrated what economics theory tells us must be true: When consumers have to pay more for their prescriptions, they take fewer drugs. That can be a big problem. This is Healthcare Triage News.