Big Pharma’s lobbyists are losing despite their ‘pass the buck’ campaigns

Big Pharma's lobbyists are losing despite their 'pass the buck' campaigns

As policymakers and the administration focus on high drug prices, the brand drugmaker lobby has responded by unleashing millions of dollars in an attempt to shift blame.

They’ve blamed price gouging scandals on a “broken system” and claim to want to reform. They bankroll more than 1,400 lobbyists along with many “patient groups” and so-called “experts” to carry these messages to the media outlets and politicians on whom they lavish millions in advertising dollars and campaign contributions.

However, their polling numbers remain as low as before their advertising blitz began as Americans have overwhelmingly negative views of drugmakers and the pricing schemes of “Pharma Bro” Martin Shkreli and others who increased drug prices simply because they found that they could.

The response from the drugmaker lobby has been to rollout slick public relations slogans like “Share the Savings” and “Let’s Talk About Cost” that use fancy infographics in an attempt to move the conversation away from those setting the price of the drug (drug companies) to everyone else who uses or pays for their products, like employers, hospitals, pharmacy benefit managers, insurers, and others.

This isn’t surprising and certainly not unpredictable, but ignores the basic challenge facing drug companies: no amount of money can change the fact that Republicans and Democrats know the problem is high drug prices and that drugmakers alone set those prices.

So despite all this overwhelming lobbying and financial firepower, the question remains: Why are drugmakers losing?

In the recent budget bill, drugmakers were singled out by both parties to pay billions more in discounts to help seniors in the Medicare prescription drug benefit “donut hole.”

This comes as states across the country are taking a harder look at drugmaker pricing schemes and passing legislation in California and Nevada that faced significant pushback from drug companies (and their surrogates).

Like the emperor who wore no clothes, drugmakers have confused politician’s fear of speaking out against them with support for their pricing practices. It appears that most politicians will tolerate, but not believe in the drug lobby’s messages or goals.

Drug manufacturers have a number of options to alter public perception of their pricing strategies. They can assert that their products are a great value at any price but there is definitely a level where that argument fails. They can also compete on price and refrain from automatic pricing increases that obviously impact healthcare affordability.

Instead, they peddle distracting narratives and government mandates that undermine federal programs and result in huge industry profit windfalls. One recent example would be to prevent brand discounts and rebates from being used to lower premiums for seniors.

According to the White House’s budget proposal, this mandate alone would cost the government about more than $42 billion and lead to higher premiums for Medicare beneficiaries.

This is yet another distraction from the real problem of excessive drug pricing. If the drugmakers were truly concerned about affordability, the drug companies would simply reduce their prices. That would have a direct impact on the cost of health care to every American consumer.

Simply put, drugmakers have failed to give policymakers the one thing they need: real solutions that reduce costs. They’ve offered no solutions that score savings — in fact, they all raise costs.

Their relentless, ongoing PR blitz is simply an effort to pass the buck and direct attention away from their pricing strategies. The drug lobby has underestimated the one politician, with whom their money and power doesn’t carry much weight: President Trump. It was only last year that he said drugmakers were “getting away with murder.”

If the record is any indicator, he still thinks Big Pharma is one of the creatures lurking in the swamp he intends to drain.



U.S. Prescription Drug Costs Are a Crime


And just tweaking the system won’t solve the problem.

President Donald Trump has complained that U.S. drug companies are “getting away with murder.” For once the hyperbole is forgivable: It suggests he takes the problem of drug costs seriously and might be willing to do something about it. Unfortunately, his administration’s efforts up to now suggest the opposite.

The White House has proposed tweaks to government health-care programs. Some of these measures are worth trying — they could help at the margin — but tweaks aren’t enough. The underlying problem is drug prices that are indeed murderous: Americans and their insurers often pay many times what people in other developed countries pay for the same medicines. That’s what policy needs to confront.

The administration wants insurers participating in Medicare’s prescription-drug program, for instance, to share more directly with beneficiaries the discounts they arrange with drug companies. Out-of-pocket drug costs for some people on Medicare would be capped, and reimbursement for medicines administered by doctors would be trimmed. In Medicaid, a handful of states would be allowed to decline coverage for certain drugs, increasing their leverage in negotiating discounts.

Such changes could lower drug spending for some Medicare and Medicaid beneficiaries. But they miss the main point by shifting costs within the health-care system rather pressing down on the costs themselves. Unless this changes, the U.S. will continue to be overcharged for its drugs.

The companies often say that high U.S. prices pay for research into new lifesaving products. Leaving aside why U.S. patients should be asked to shoulder that burden for the entire world, the evidence shows that the argument is false: The premium companies collect in the U.S. market is substantially greater than the amount they spend on research and development.

State legislatures have aimed closer to the mark with efforts to expose the math behind price increases. Vermont, Nevada and California have new lawsrequiring that drug companies provide cost breakdowns to justify big price hikes on popular drugs (including, in Nevada’s case, drugs for diabetes). Several other states are considering doing the same.

Even if these laws stand — they’re being challenged in court — transparency gets you only so far. Pushing prices down will take stronger efforts from the federal government to increase competition.

One good way to do that is to speed the uptake of generics. Scott Gottlieb, commissioner of the Food and Drug Administration, has been pressuring drug makers to stop trying to extend the monopolies they’ve been granted (via FDA approval and patents) for brand-name drugs. But only Congress can forbid those practices, and it has yet to act on bipartisan legislation that would do the job. Trump could show he’s serious about lowering drug prices by urging Congress to pass the law.

Another way to boost competition would be to let people and pharmacies import some drugs from other countries with sound pharmaceutical regulation, such as Canada. Almost one in 10 Americans say they already do, despite the official prohibition.

The U.S. should also do what so many other countries do: negotiate. The Centers for Medicare and Medicaid Services ought to use its enormous purchasing power on behalf of the 42 million Americans in the Medicare drug-benefit program, ensuring that prices better reflect the drugs’ actual medical value. Again, for this to happen, Congress would need to change the law. Incredible as this will seem elsewhere in the world, the U.S. government has denied itself permission to apply pharmaceutical cost-benefit analysis and negotiate prices.

Trump is right to deplore the cost of drugs in the U.S. There’s no great mystery about the causes — and no doubt that much bolder measures than the administration has in mind will be needed to bring prices down.

California confronts the complexities of creating a single-payer healthcare system

California confronts the complexities of creating a single-payer healthcare system

California Assembly Speaker Anthony Rendon may have expected to torpedo the idea of a statewide single-payer healthcare system for the long term last June, when he blocked a Senate bill on the issue from even receiving a hearing in his house.

He was wrong, of course. His shelving of the Senate bill created a political uproar (including the threat of a recall effort), forcing him to create a special committee to examine the possibility of achieving universal health coverage in the state. On Monday and Wednesday, the Select Committee on Health Care Delivery Systems and Universal Coverage held its final hearings.

The panel ended up where it started, with the recognition that the project is hellishly complex and politically daunting but still worthwhile — yet can’t happen overnight. “I’m anxious to see what it is that we can actually be working on this year,” committee Co-Chair Jim Wood (D-Healdsburg) said toward the end of Wednesday’s seven-hour session. “Some of the logistics and the challenges we have to deal with are multiyear challenges.”

The No. 1 experience missing from the American healthcare system is peace of mind.

Little has changed since last year, when a measure sponsored by the California Nurses Assn., SB 562, passed the Senate in June and was killed by Rendon (D-Paramount) in the Assembly. The same bill, aimed at universal coverage for all residents of the state, including undocumented immigrants, is the subject of the select committee’s hearings and the template for statewide reform.

Backers of the Healthy California program envisioned by the bill feel as if they’re in a race with federal officials intent on dismantling healthcare reforms attained with the Affordable Care Act, and even those dating from the 1960s with enactment of Medicare and Medicaid.

In just the last few weeks, the U.S. Department of Health and Human Services has approved adding a work requirement to Medicaid in Kentucky and begun considering a plan to place lifetime limits on Medicaid benefits — profound changes in a program traditionally aimed at bringing healthcare to needy families.

The Republican-controlled Congress effectively repealed the individual mandate in the Affordable Care Act. That is likely to drive up premiums for unsubsidized middle-income insurance buyers and has prompted California and other states to consider implementing such a mandate on their own. (Idaho is moving distinctly in the opposite direction from California, proposing to allow “state-based health plans” that allow insurers to discriminate against applicants with pre-existing conditions.

Healthy California would be the most far-reaching single-state project for universal health coverage in the nation. That’s to be expected, since the state’s nation-leading population (39 million) and gross domestic product ($2.6 trillion) provide the impetus to solve big social and economic issues on its own.

The program would take over responsibility for almost all medical spending in the state, including federal programs such as Medicare and Medicaid, employer-sponsored health plans, and Affordable Care Act plans. It would relieve employers, their workers and buyers in the individual market of premiums, deductibles and co-pays, paying the costs out of a state fund.

All California residents would be eligible to obtain treatment from any licensed doctor in the state. Dental and vision care and prescription drugs would be included. Insurance companies would be barred from replicating any services offered by the program.

Doctors and hospitals would be paid rates roughly analogous to Medicare reimbursements, and the program would be expected to negotiate prices with providers and pharmaceutical companies, presumably by offering them access to more than 39 million potential patients.

Wood stressed that the goal of reform is to lower healthcare prices, or at least to slow the rate of growth. Yet that may mean focusing on the wrong challenge.

The mechanics of cost reduction aren’t much of a mystery. As several witnesses at the latest hearings observed, the key is reducing unit prices — lower prices per dose of drug, lower reimbursements for physicians and hospitals, all of which are higher in the U.S. than the average among industrialized countries. It will also help to remove insurance industry profit and overhead (an estimated 15% of healthcare spending), not to mention the expenses they impose on billing departments at medical offices and hospitals, from the system.

The real challenge, however, lies in the politics of transitioning to a new healthcare system. Advocates of reform often overlook an important aspect of how Americans view the existing system. Although it’s roundly cursed in the abstract, most people are reasonably satisfied with their coverage.


That’s because most people seldom or never experience difficult or costly interactions with the healthcare system. Horror stories of treatments denied and astronomical bills charged are legion. But the truth is that annual healthcare spending is very heavily concentrated among a small number of people.

The top 5% of spenders account for half of all spending, the top 20% of spenders for about 80%. According to the National Institute for Health Care Management, the bottom 50% of spenders account for only about 3% of all spending.

These are annual figures, so over a lifetime any person may have more contacts with the system. But that may explain why it’s hard to persuade Americans to abandon a system many consider to be just good enough for something entirely new, replete with possibilities that it could turn out to be worse.

The nurses association is pegging its reform campaign to the uncertainties built into the existing system. “The experience of most Americans is that they’re satisfied with what they’re getting, but there’s a great deal of anxiety,” says Michael Lighty, the group’s director of public policy. “The No. 1 experience missing from the American healthcare system is peace of mind. People are not afraid that what they have will be taken away, but that what they have will not be adequate for what they need.”

In terms of funding, the idea is for the state to take over the $370 billion to $400 billion a year already spent on healthcare in California. (The higher estimate is from the state Legislative Analyst’s Office, the lower from the nurses association.) That includes $200 billion in federal funds, chiefly Medicare, Medicaid, and Obamacare subsidies; and an additional $150 billion to $200 billion in premiums for employer insurance and private plans and out-of-pocket spending by families.

University of Massachusetts economist Robert Pollin, the nurses’ program consultant, estimates that the program will be about 18% cheaper than existing health plans, thanks to administrative savings, lower fees for drugs, physicians, and hospitals, and a step up in preventive services and a step down in unnecessary treatments.

That would leave about $106 billion a year, as of 2017, needed to replace the employer and private spending that would be eliminated. Pollin suggests doing so through an increase of 2.3% in the sales tax and the addition of a 2.3% gross receipts tax on businesses (or a 3.3% payroll tax, shared by employers and workers), instead of the gross receipts tax. Each levy would include exemptions for small businesses and low-income families.

Anyone with experience in California tax politics knows this is a potential brick wall. Taxes of this magnitude will generate intense opposition, despite the nurses’ argument that relief from premiums and other charges means that families and business will come out ahead.

But that’s not the only obstacle. A workaround would have to be found for California Constitution requirements that a portion of tax revenues be devoted to education. A California universal coverage plan would require “a high degree of collaboration between the federal government and the state,” Juliette Cubanski of the Kaiser Family Foundation told the committee Monday. Waivers from Medicare and Medicaid rules would have to be secured from the Department of Health and Human Services; redirecting Medicare funds to the state might require congressional approval.

A federal law that preempts state regulations of employee health benefits might limit how much California could do to force employer plans into a state system.

Obtaining the legal waivers needed from the federal government to give the state access to federal funds would take two to three years “with a friendly administration,” Wood said. “We don’t have a friendly administration now.”

Advocates of change are understandably impatient in the face of rising healthcare costs and the federal government’s hostility to reform. Shocked gasps went up from the hearing audience Wednesday when Wood casually remarked, “It is absolutely imperative that we slow this down.” Startled by the reaction, he quickly specified that he meant “slow the costs down.”

The desire to pursue the goal of universal coverage, whether through a single-payer model or a hybrid, plainly remains strong in Sacramento, in the face of the vacuum created by the Republican Congress and Trump White House.

As Betsy Estudillo, a senior policy manager for the California Immigrant Policy Center put it at Wednesday’s hearing, “The nation needs California’s leadership, now more than ever.”


Trump’s Budget Would Cut HHS Funding 21%; Azar Approves

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The White House calls for an increase in funding for veterans healthcare services, while proposing cuts to HHS and a repeal of the Affordable Care Act.

President Donald Trump released his budget proposalMonday for fiscal year 2019. It includes overall reductions in nondefense spending while also increasing funding for veterans healthcare services.

The White House’s $4.4 trillion budget request to Congress comes days after a two-year, $300 billion bipartisan budget deal was signed into law following the second government shutdown in as many months.

Though Congress is unlikely to vote on a singular budget, the various provisions listed in the executive proposal outline the legislative agenda the Trump administration would like to pursue in 2018.

“I applaud President Trump for laying out his vision for the country in today’s budget request and welcome his partnership as the Energy and Commerce Committee works to tackle several shared priorities,” said Rep. Greg Walden, R-Ore., chairman of the House Committee on Energy and Commerce in a statement. “Many of the administration’s other proposals to lower health care costs complement our continued commitment to addressing the cost drivers across every facet of our nation’s health care system.”

Below is a breakdown of the proposals affecting the healthcare world, including cuts to the Department of Health and Human Services (HHS), Medicare, a repeal-and-replace plan for the Affordable Care Act (ACA), and more money for veterans healthcare.

Major cuts to HHS

The proposal features a $68.4 billion budgetary line for HHS, a 21% reduction in funding compared to FY 2017. The budget also proposes a $451 million cut to training programs for health professionals, arguing the initiatives “lack evidence that they significantly improve the nation’s health workforce.”

If adopted, the policies would extend Medicare’s solvency by eight years, according to the budget proposal. Current projections estimate Medicare will become insolvent by 2029. The Trump administration also proposed a limit on Medicaid reimbursements to federal providers at no more than the cost of providing services to beneficiaries.

“The President’s budget makes investments and reforms that are vital to making our health and human services programs work for Americans and to sustaining them for future generations,” said HHS Secretary Alex Azar in a statement. “In particular, it supports our four priorities here at HHS: addressing the opioid crisis, bringing down the high price of prescription drugs, increasing the affordability and accessibility of health insurance, and improving Medicare in ways that push our health system toward paying for value rather than volume.”

Bundled payments for community-based medication-assisted treatment would see an opportunity to expand through the budget proposal, with the White House highlighting a new Medicare reimbursement for methadone treatment.

Medicare beneficiaries would also be able to save for out-of-pocket costs by allowing tax deductible contributions to health savings accounts associated with high deductible health plans offered by employers or Medicare Advantage.

The budget proposes a ‘$5 returned for every $1 spent’ policy for the Medicare Health Care Fraud and Abuse Control, a $45 million increase compared to FY 2017 which totals $770 million,. The White House believes the additional funding will bolster the program’s efforts to “identify and prevent fraudulent or improper payments from being paid in the first place.”

Two-part ACA repeal

Arguing that “national healthcare spending trends are unsustainable,” the budget offers a solution in the form a two-part repeal of the Affordable Care Act.

Modeled on the Graham-Cassidy proposal, the first step would focus on providing block grants to states for healthcare spending plans.

The Market-Based Health Care Grant Program, the new block grant program, would offer states and consumers with options outside of the ACA’s “insurance rules and pricing restrictions.” The administration believes this will address high premium costs and rising deductibles.

The second part of the plan focuses on Medicaid reform, specifically the repeal of Medicaid expansion spurred on by the ACA, as well as reducing “state gimmicks” like provider taxes. This move would shift federal authority over healthcare access to states, which could in turn design individualized plans.

Major increase for veterans healthcare

Continuing with a campaign promise to address issues facing veterans, Trump’s budget proposal includes an increase in spending for veterans healthcare programs over the next three fiscal years.

For FY 2019, the Veterans Health Administration would receive $70.7 billion, a 9.6% increase compared to FY 2017. By 2020, that number rises to $75.6 billion in advance appropriations for VA medical care program costs.

This covers 9.3 million enrollees in the Veterans Affairs health system.

Additionally, the budget provides $8.6 billion for veterans mental health and suicide prevention programs, and $11.9 billion would be used to enhance and expand veterans’ access to high-quality community care.

The administration proposes the consolidation of the Veterans Choice Program and other community care programs into a new, unified program: the Veteran Coordinated Access & Rewarding Experiences program.


Budget, White Paper Provide Insight Into Trump Administration’s Strategy On Drug Pricing

During his first year in office, President Donald Trump spoke often about the problem of high drug prices but took no action on the subject. President Trump’s new budget proposal and a newly released white paper from the White House Council of Economic Advisors (CEA) aim to change that by laying out a strategy for action moving forward. These documents are, of course, aspirational, but they do provide a window into the administration’s priorities, and they should be evaluated to consider whether the administration has a possibility of achieving its stated goals.

In this post, I review several of the key elements of those proposals, considering their impact on a range of relevant dimensions. I discuss what’s included in the proposals, and, as importantly, what’s left out.

Medicare Reforms

The bulk of the proposed reforms would act on the Medicare and Medicaid programs. For Medicare, the Trump administration’s proposals are largely targeted at 1) assisting beneficiaries with high out-of-pocket costs and 2) realigning incentives to alter prescribing and reimbursement practices.

First, the administration is advancing a set of proposals to assist Medicare Part D beneficiaries with high out-of-pocket costs. Both the white paper and budget proposal argue that plans should be required to share with beneficiaries at the point-of-sale some amount of the rebates the plan negotiates with drug manufacturers. In November, the Centers for Medicare and Medicaid Services (CMS) already requested public comments on the implementation of this proposal, and it seems as if the budget document’s inclusion of the proposal is evidence that the administration is hoping to move it forward.

However, like many of the other reforms in the budget proposal and white paper, there are few details proposed. In CMS’s November proposal, the agency modeled a set of scenarios in which insurers pass through 33 percent, 66 percent, 90 percent, or 100 percent of their negotiated rebates. Each scenario comes with a set of advantages for beneficiaries, but also costs for the federal government. That is, CMS anticipated that reducing cost-sharing for particular high-cost beneficiaries would increase premiums for all beneficiaries, and therefore increase CMS’ overall spending through premium subsidies. How much the proposal would increase overall spending depends on the amount of rebates being passed through.

The budget proposal simply says that sponsors must pass through “at least one-third” of total rebates, so it does not provide further clarity on this proposal. However, it states that this proposal will cost the government $42.2 billion over 10 years. That estimate lies between CMS’s November estimates for 33 percent ($27.3 billion in spending) and 66 percent ($55.1 billion in spending), so it is possible that the administration has in mind a pass-through provision at 50 percent or so.

Another proposal aimed at out-of-pocket costs would establish an out-of-pocket maximum for patients who enter the Medicare Part D catastrophic phase. Currently, patients who reach the catastrophic phase of the Part D benefit are responsible for 5 percent of the costs of their prescription drugs, with no upper limit. The budget proposal would reduce their payments to 0 percent, although it is light on the details as to how this would be accomplished. The Henry J. Kaiser Family Foundation estimated that just over one million Part D enrollees have out-of-pocket costs above this threshold, and those patients would likely be the primary beneficiaries of this proposal. At the same time, however, the budget proposes to exclude manufacturer discounts from patient out-of-pocket cost calculations, which would likely slow the rate at which patients move into the catastrophic phase.

Second, the Trump administration proposes a number of changes to drug classification and reimbursement that would both enable plan sponsors to negotiate more effectively and alter prescribing behavior. The budget proposal would change current Part D plan formulary rules, requiring sponsors to cover just one drug per class, rather than two. The proposal also mentions increased use of utilization management tools for the six protected classes of drugs, suggesting that the general coverage requirement for those classes would remain as-is. This proposal is projected to save $5.5 billion over ten years.

More interestingly, both the budget proposal and CEA white paper suggest the possibility of moving a set of Part B drugs (those administered in an outpatient setting) into Part D coverage. Medicare Part B does not presently have a number of the tools that enable Part D plan sponsors to negotiate discounts with drug manufacturers, and Secretary Alex Azar spoke during his confirmation hearing about the need to “take the learnings from Part D and apply them to Part B.” This proposal would accomplish that goal, just through the reverse mechanism: by shifting drugs from Part B into Part D. The budget proposal envisions giving the authority to do this to the Secretary, noting that “[t]he Secretary will exercise this authority when there are savings to be gained from price competition.” As such, it does not provide any particular budgetary impact.

The budget proposes two other changes to Part B reimbursement. At present, when a physician is reimbursed for providing a drug under Part B, she is reimbursed based on the Average Sales Price (ASP) of the drug plus 6 percent. There is widespread concern that this reimbursement system encourages physicians to prescribe and administer more expensive drugs than may be medically necessary. The Obama administration proposed a demonstration project that would have moved from the current ASP+6 percent system to a system of ASP+2.5 percent+a flat fee for prescribing the product. After extensive criticism from a range of stakeholders, the administration shelved the initiative. Now, the administration is proposing to reduce payment rates for new drugs (for which the ASP information is not yet available, and so for which the only price available is the Wholesale Acquisition Cost (WAC)). Instead of paying 106 percent for these new products, the administration would pay 103 percent of the WAC during the period before ASP information has yet to be provided. This proposal is quite narrow in its scope, applying only to new drugs and only during the brief period before ASP information is available; it is therefore unlikely to save much money.

The Trump administration is also proposing to establish an inflation limit for the reimbursement of Part B drugs more generally. Instead of continually updating the ASP+6 percent figure if the ASP increases, this proposal would limit the growth of the reimbursement to the Consumer Price Index for all Urban Consumers. CMS would therefore pay “pay the lesser of (1) the actual ASP +6 percent or (2) the inflation-adjusted ASP +6 percent.” At present, Medicaid is protected from price increases when the Average Manufacturer Price (AMP) for a drug increases faster than inflation. The Department of Health and Human Services Office of Inspector General has proposed that CMS and Congress consider extending this provision to Medicare Part D, but as yet Congress has not moved to do so. This budget proposal can be thought of as proposing a similar constraint on Part B pricing.

Medicaid Reforms

The Medicaid portion of the budget proposal puts forth an idea which is potentially ground-breaking, but which is also potentially a sign of the administration’s recalcitrance to move on drug pricing (depending on the details). Specifically, the administration is proposing “new statutory demonstration authority to allow up to five states more flexibility in negotiating prices with manufacturers, rather than participate in the Medicaid Drug Rebate Program, and to make drug coverage decisions that meet state needs.” The idea is something like this: at present, state Medicaid programs must cover essentially all drugs approved by the U.S. Food and Drug Administration (FDA), which limits their ability to extract discounts. To be sure, Medicaid programs are already entitled by statute to large discounts off of the AMP, and to the inflation clawback as noted above. But many state Medicaid programs are worried that pharmaceutical spending has become an unsustainable part of their budget and are seeking ways to control their costs in this area. This proposal might empower them to do so.

Here’s the thing: Massachusetts has already submitted an 1115 waiver to CMS along these lines. Massachusetts is seeking 1) to pay for a single drug in each therapeutic class (as noted above, this is a reform the administration is proposing to make to Medicare Part D), and 2) to exclude entirely from coverage drugs “with limited or inadequate evidence of clinical efficacy,” likely to be those approved through the FDA’s accelerated approval process. This budget proposal may be a sign that the administration is interested in approving Massachusetts’ waiver. However, the fact that the budget explicitly calls for new statutory authority to do so suggests that the administration may not think it has the legal authority to approve Massachusetts’ waiver, as is. And given Congress’ inability to act thus far on drug pricing, the administration may be seeking to hide behind Congress’ inaction here.

Yet the call for new statutory authority is puzzling. At present, pharmaceutical coverage is an optional benefit under the Medicaid program. States do not have to cover drugs and therefore are not required to participate in the Medicaid Drug Rebate Program, although all have chosen to do so, and choosing to do so comes with a set of requirements. But it is not clear to me why CMS could not conduct this demonstration at present, under the Center for Medicare and Medicaid Innovation’s (CMMI) existing authority.

A potential clue may lie in the administration’s statement that the demonstration would “exempt prices negotiated under the demonstration from best price reporting.” Having written recently on the topic of the Medicaid best-price rule and innovative contracting for pharmaceuticals, it is not clear to me exactly why this is a sticking point. The Medicaid best price rule entitles Medicaid to the “best price” available for a particular drug for a particular set of providers. The statute contains large carve-outs—for instance, discounts provided to the Department of Veterans Affairs or to Medicare Part D are exempt from the best-price calculation. But it is strange to talk about needing to exempt Medicaid programs from the best-price rule when the best-price rule was intended to benefit Medicaid itself. I imagine that the administration sees the 340B program as a potential concern here, but again it is not obvious why CMMI could not waive the best-price rule as part of its existing authority.

FDA Activities

As I have written here previously, FDA Commissioner Scott Gottlieb has been at the forefront of the Trump administration’s efforts on drug pricing. He has taken a number of actions to promote generic competition, and although it will take some time to observe their benefits, the FDA’s existing legal authority to address drug pricing issues is quite narrowly circumscribed. The CEA white paper and budget proposal largely acknowledge this point, with the white paper lauding the actions the FDA has taken thus far on expediting review of generic drug applications, providing guidance on the development of complex generics, and other similar activities.

President Trump’s budget proposal calls for Congress to give the FDA more power to promote generic competition, by “ensur[ing] that first-to-file generic applicants who have been awarded a 180-day exclusivity period do not unreasonably and indefinitely block subsequent generics from entering the market beyond the exclusivity period.” More specifically, the concern is that first-to-file generic applicants—perhaps those whose initial applications may be rejected—can unduly delay generic entry while they remedy the deficiencies in their application. The administration projects that this reform will save the government $1.8 billion in Medicare savings over 10 years.

Other pieces of legislation have called for reform of the 180-day exclusivity period in different ways. Last year, Democrats in both the House and Senate introduced the Improving Access to Affordable Prescription Drugs Act, which included provisions preventing generic entrants from receiving the statutory 180-day exclusivity benefit if they had engaged in pay-for-delay conduct (Sections 402 and 403). But the idea in the president’s budget proposal may dovetail nicely with the FDA’s efforts to improve first-cycle approval rates for abbreviated new drug application products, as well.

What’s Missing

Perhaps what’s most notable about the budget proposal and the CEA white paper is not what’s included, but rather what is missing. Gone are some of President Trump’s older arguments that Medicare should negotiate drug prices, or that drug importation should be permitted more widely. Some of the more significant cost-saving provisions from President Obama’s budget, like a reform that would have put low-income patients back on Medicaid prices, are also absent.

A key set of missing proposals are those which would directly assist privately insured patients. The budget’s focus on Medicare and Medicaid may well have a positive impact on the more than 100 million Americans enrolled in those programs. But for the roughly half of Americans (closer to 160 million) with employer-sponsored insurance, these reforms will provide no assistance. Growing numbers of Americans with employer-sponsored insurance are enrolled in high-deductible plans, and many of them may face the same affordability concerns that Medicare beneficiaries are facing.

You could imagine proposals that would address the drug pricing problem more broadly, rather than just within the publicly-insured population. The above-mentioned Improving Access to Affordable Prescription Drugs Act would have addressed the problem of drug pricing for a broader segment of the population. As I’ve explained here, the Act would have taxed companies which engage in large, year-over-year list price increases. It would also have capped patient out-of-pocket costs in Affordable Care Act-regulated plans, at $250 per month for an individual or $500 per month for a family.

More generally, even these proposals which would affect drug companies directly would have a minimal impact on their bottom lines. This set of proposals is largely very friendly to the pharmaceutical industry and is primarily aimed at curtailing patients’ financial burdens and tweaking incentives for stakeholders at the margin.

In this blog post, I have covered just a handful of the many different drug pricing-related proposals included in the new budget proposal and in the CEA white paper. As usual, observers should stay tuned to the actions CMS and the FDA take on this front, as they will show whether the administration is serious about these proposals or is merely posturing.


Trump signs spending bill into law: Here are health IT’s biggest wins

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HIMSS Senior Director of Congressional Affairs broke down how the massive spending bill will boost telehealth, Medicaid and other crucial health IT.

Congressional leaders passed the spending bill last night, after a 5-hour government shutdown. Senate passed the spending bill around 1:45 a.m. with a 71-28 vote, while the House pushed through the legislation at about 5:30 this morning with a 240-186 vote.

The shutdown was caused by a one-man protest by Sen. Rand Paul, R-Kentucky, who opposed adding another $320 billion to the federal budget deficit. Indeed the massive spending bill adds hundreds of billions of dollars for the military, disaster relief and domestic programs.

While budget appropriators will have until Mar. 23 to determine how to specifically dole out the funding, there are a lot of wins for healthcare, according to Samantha Burch, senior director of congressional affairs for HIMSS.

The bipartisan agreement will raise the budget cap to allow the total budget allocation for defense, non-defense and non-discretionary items, which is “a big win for HIMSS priorities,” Burch said. Those caps will not only help federal agencies with military needs, but it will support health needs and threats for the country.

One of the biggest gains from the budget was the inclusion of the CHRONIC Care Act, which unanimously passed the Senate in September. HIMSS provided technical feedback on for developing the bill, which Burch said is aimed at modernizing Medicare to streamline care coordination and improve outcomes.

Not only will the bill expand telehealth to Medicare beneficiaries, it will also generate patient data on those beneficiaries.

“We’ve been huge supporters of the CHRONIC care act,” said Burch. “Getting that bill over the finish line is an important first step. There’s all of this momentum around health IT on Capitol Hill, but it’s been incredibly hard to get bills across the finish line and signed into law.”

“This is really the first time that we’re seeing a complete package that would expand telehealth access to Medicare beneficiaries,” she continued. “It’s an incredible step forward.”

The spending bill also included provisions for Community Health Centers, National Health Service Corps and Medicare programs that help rural area providers, said Burch. CHIP was also extended for a longer period than anticipated, which provides some stability and certainty to the industry as a whole.

The budget also provides at least $2 billion for the National Institutes of Health for two years and $6 billion for the opioid epidemic.

What’s incredibly valuable is that the two-year budget gives appropriators a “longer runway for the FY19 budget.”

“But there’s much more work to be done,” said Burch. “It’s never a silver bullet… like with the CHRONIC Care bill, we’re trying to bridge this major gap where technology and innovation is, and where regulation and policy is.”

“The bill takes us a little way there, but there’s certainly more to do,” she added.

HIMSS will be continuing to work on progressing these needs moving forward, while concentrating on cybersecurity, interoperability and infrastructure.

Although the industry has come a long way, cybersecurity continues to be a major issue for healthcare, said Burch. HIMSS played a major part of Sec. 405 of the Cybersecurity Act of 2015, which it developed with the Senate HELP committee.

“[That work] got the attention of the Department of Health and Human Servicesand got the ball rolling, which created a more active relationship between HHS and the private sector,” said Burch.

But one of the biggest needs — and perhaps the biggest push — will continue to be around infrastructure needs. Burch explained that while Congress continues to have these conversations around infrastructure and public and rural health, there’s a lot of work to be done.

“We’re still trying to impress upon lawmakers that yes, our roads and bridges may be crumbling, but we still have those with no access to broadband,” said Burch. And that has some of the best use cases for health IT and telehealth.

Fewer doctors are opting out of Medicare

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The CMS saw a sharp decrease in the number of providers opting out of Medicare in 2017, after several years where thousands indicated that they did not want to participate in the program.

Physicians and practitioners who do not wish to enroll in the Medicare program may file an “opt-out” affidavit that will prevent the provider and beneficiaries seeing them from submitting bills to the CMS.

For years, the CMS had few providers opting out of Medicare, with the number first hitting triple digits in 2010, with 130. But those numbers jumped to over 1,600 opt-out requests going into effect in 2013, more than doubling to over 3,500 in 2015, and spiking at 7,400 in 2016. Opt-outs dropped to just 3,732 in 2017, according to data released by the CMS Monday.

The agency did not elaborate on why it may have seen such a change.

One theory is that MACRA ended the need for providers to renew opt-out affidavits every two years; now opt-outs can be indefinite, and providers must ask to rejoin the program.

“Figures from 2015 and 2016 may represent the first wave of physicians opting out and lower 2017 data may reflect the fact that physicians no longer need to file affidavits to renew,” said Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association.

Doctors have shown less and less interest in Medicare participation as the program’s reimbursement has not kept up with the cost of providing care and regulations have increased, according to Donna Kinney, director of research and data analysis at the Texas Medical Association.

“Between price controls and the administrative burden, there is real concern about Medicare,” Kinney said.

Medicare remains a vital part of many doctor practices. But some clinicians, particularly in wealthy metropolitan areas, feel they can opt out of the program because they can fill their practice with patients who have commercial insurance or are willing to pay out-of-pocket for care, according to Dr. Charles Rothberg, president of the Medical Society of the State of New York.

“Patients in these areas are not as price-sensitive as they may be in other places,” Rothberg said.

New York City, for instance, had a 76% acceptance rate for Medicare patients in 2017 compared to a 100% acceptance rate in Fargo, N.D., according to Merritt Hawkins, a physician search firm.

Some groups like the American Medical Association have noted that by and large, doctors are staying in Medicare and accepting patients. The CMS estimates that just over 1.3 million providers now bill Medicare.

However, in a time when overall wait times are growing longer, even a few thousand doctors choosing to opt out of Medicare could mean restricted access to care for some individuals, especially in rural areas, Rothberg said.

Even if doctors chose to not opt out of Medicare, there are increasing reports that some are capping the number of Medicare patients they’re seeing, Kinney said.

The Texas Medical Association found in a 2016 survey that 35% of its members said they would not accept new Medicare patients, up from 22% in 2000.

The drop in opt-outs may also stem from the nation’s aging population. As many as 10,000 Americans become eligible for Medicare every day, thus decreasing the number of patients in other forms of coverage.

“As the percentage of Medicare patients goes up it makes it harder to walk away from that program,” said Dr. Jaan Sidorov, CEO of the Care Centered Collaborative, a consulting firm founded by the Pennsylvania Medical Society to help independent physicians with regulatory matters.

Another reason may be that physicians are increasingly employed versus being in private practice, and their contracts may prohibit them from opting out of Medicare, according to Dr. Jane Orient, an internist and executive director of the Association of American Physicians and Surgeons, a far-right provider group.