Sen. Orrin Hatch, the Utah Republican retiring from 42 years in the Senate as a new generation is sworn in, leaves a long list of achievements in health care. Some were more controversial than others.
Hatch played key roles in shepherding the 1983 Orphan Drug Act to promote drug development for rare diseases, and the 1984 National Organ Transplant Act, which helped create a national transplant registry. And in 1995, when many people with AIDS were still feeling marginalized by society and elected leaders, he testified before the Senate about reauthorizing funding for his Ryan White CARE Act to treat uninsured people who have HIV.
“AIDS does not play favorites,” Hatch told other senators. “It affects rich and poor, adults and children, men and women, rural communities and the inner cities. We know much, but the fear remains.”
Hatch, now 84, co-sponsored a number of bills with Democrats over the years, often with Sen. Ted Kennedy of Massachusetts. The two men were sometimes called “the odd couple,” for their politically mismatched friendship.
In 1997, the two proposed a broad new health safety net for kids —the Children’s Health Insurance Program.
“This is an area the country has made enormous progress on, and it’s something we should all feel proud of — and Senator Hatch should too,” said Joan Alker, executive director of Georgetown University’s Center for Children and Families.
Before CHIP was enacted, the number of uninsured children in America was around 10 million. Today, it’s under half that.
Hatch’s influence on American health care partly came from the sheer number of bills he sponsored — more than any other living lawmaker — and because he was chairman of several powerful Senate committees.
“History was on his side because the Republicans were in charge,” said Dr. David Sundwall, an emeritus professor in public health at the University of Utah and Hatch’s health director in the 1980s.
When Ronald Reagan was elected president in 1981, the Senate became Republican-controlled for the first time in decades. Hatch was appointed chairman of what is now known as the Health, Education, Labor and Pensions Committee. The powerful legislative group has oversight of the Food and Drug Administration, Centers for Disease Control and Prevention and the National Institutes of Health.
“He was virtually catapulted into this chairmanship role,” Sundwall said. “This is astonishing that he had chairmanship of an umbrella committee in his first term in the Senate.”
In 2011, Hatch was appointed to the influential Senate Finance Committee, where he later became chairman. There he helped oversee the national health programs Medicare, Medicaid and CHIP.
Hatch’s growing influence in Congress did not go unnoticed by health care lobbyists. According to the watchdog organization Center for Responsive Politics, in the past 25 years of political campaign funding, Hatch ranks third of all members of Congress for contributions from the pharmaceutical and health sector. (That’s behind Democratic senators who ran for higher office — President Barack Obama and presidential nominee Hillary Clinton).
“Clearly, he was PhRMA’s man on the Hill,” said Dr. Jeremy Greene, referring to the trade group that represents pharmaceutical companies. Green is a professor of the history of medicine at Johns Hopkins University School of Medicine. Though Hatch did work to lower drug prices, Greene said, the senator’s record was mixed on the regulation of drug companies.
For example, an important piece of Hatch’s legislative legacy is the 1984 Hatch-Waxman Act, drafted with then-Rep. Henry Waxman, an influential Democrat from California. While the law promoted the development of cheaper, generic drugs, it also rewarded brand-name drug companies by extending their patents on valuable medicines.
The law did spur sales of cheaper generics, Greene said. But drugmakers soon learned how to exploit the law’s weaknesses.
“The makers of brand-name drugs began to craft larger and larger webs of multiple patents around their drugs,” aiming to preserve their monopolies after the initial patent expired, Greene said.
Other brand-name drugmakers preserved their monopolies by paying makers of generics not to compete.
“These pay-for-delay deals effectively hinged on a part of the Hatch-Waxman Act,” Greene said.
Hatch also worked closely with the dietary supplement industry. The multibillion-dollar industry specializing in vitamins, minerals, herbs and other “natural” health products, is concentrated in his home state of Utah.
“There was really no place for these natural health products,” said Loren Israelsen, president of the United Natural Products Alliance and a Hatch staffer in the late 1970s.
As the industry grew, there was a debate over how to regulate it: Should it be more like food or like drugs? In 1994, Hatch sponsored the Dietary Supplement Health and Education Act, known as DSHEA, which treats supplements more like food.
“It was necessary to have someone who was a champion who would say, ‘All right, if we need to change the law, what does it look like,’ and ‘Let’s go,'” Israelsen said.
Some legislators and consumer advocacy groups wanted vitamins and other supplements to go through a tight approval process, akin to the testing the Food and Drug Administration requires of drugs. But DSHEA reined in the FDA, determining that supplements do not have to meet the same safety and efficacy standards as prescription drugs.
That legislative clamp on regulation has led to ongoing questions about whether dietary supplements actually work and concerns about how they interact with other medications patients may be taking.
DSHEA was co-sponsored by Democrat Tom Harkin, then a senator from Iowa.
While that kind of bipartisanship defined much of Hatch’s career, it has been less evident in recent years. He was strongly opposed to the Affordable Care Act, and in 2018 called supporters of the heath law among the “stupidest, dumb-ass people” he had ever met. (Hatch later characterized the remark as “a poorly worded joke.”)
In his farewell speech on the Senate floor in December, Hatch lamented the polarization that has overtaken Congress.
“Gridlock is the new norm,” he said. “Like the humidity here, partisanship permeates everything we do.”
As part of the Bipartisan Budget Act of 2018 (BBA), Congress made changes to the Medicare prescription drug benefit program, or Part D, to lower spending for both beneficiaries and the federal government. Specifically, the BBA increased the size of the discount on brand-name drugs that manufacturers are required to offer beneficiaries who are in the Part D coverage gap, or “donut hole,” from 50 percent to 70 percent. (The donut hole, in which Medicare beneficiaries who have spent over a certain amount on prescription drugs must pay all drug costs out of pocket, was designed to help contain federal costs.) By increasing the size of the manufacturer discount, Congress was able to shrink the share of spending in the donut hole covered by Part D plan sponsors and beneficiaries.
Pharmaceutical manufacturers have continued to put pressure on Congress to make two changes: 1) roll back the discount from manufacturers from 70 percent to 63 percent (and increase Part D plan-sponsor liability) and 2) block an increase in the total amount beneficiaries must spend out of pocket on their prescription drugs before catastrophic coverage kicks in.
According to our analysis, these proposals would financially benefit drug manufacturers more than Medicare beneficiaries: while beneficiaries’ spending in the coverage gap would be slightly reduced, manufacturers’ spending would be reduced far more. Moreover, Medicare spending under Part D would increase to cover the savings to beneficiaries and manufacturers.
Key Definitions Under Part D
Donut Hole: The third phase of Medicare Part D coverage in which beneficiaries pay all drug costs out of pocket.
TrOOP (True Out-of-Pocket) Threshold: The total amount beneficiaries need to spend out of pocket before reaching catastrophic coverage.
Part D Plan Sponsors: Typically insurance companies and pharmacy benefit managers
Part D Coverage Gap Discount: A program established by the ACA that requires drug manufacturers and Part D plan sponsors to give beneficiaries price discounts on brand-name drugs when beneficiaries reach the coverage gap. It also reduces the share of spending that Part D plan sponsors cover.
When the Medicare Part D program was created in 2003, Congress required all Part D plan sponsors — typically insurance companies and pharmacy benefit managers — to establish a standard benefit package with four phases of coverage that beneficiaries move through depending on their drug spending. In the first phase, the federal government covers 100 percent of cost-sharing until beneficiaries reach their deductible. In the second phase, the federal government covers 25 percent of cost-sharing. In the third phase, known as the coverage gap or donut hole, beneficiaries pay all drug costs out of pocket. In the final phase, catastrophic coverage is reached and beneficiaries cover just 5 percent of cost-sharing.
The amount beneficiaries need to spend out of pocket before reaching catastrophic coverage is called the TrOOP (“True Out-of-Pocket) threshold; it was $5,000 in 2018. The TrOOP threshold increases each year to account for growth in Medicare per-beneficiary spending under Part D, which includes prescription drug prices.
As part of the Affordable Care Act (ACA), Congress included two changes to Part D to help fill the donut hole. First, Congress established the Part D Coverage Gap Discount Program that requires participating drug manufacturers and Part D plan sponsors give beneficiaries price discounts on brand-name drugs when beneficiaries reach the coverage gap. Between 2011 and 2020, this program reduces beneficiary cost-sharing in the gap from 100 percent to 25 percent. The discounts were phased in and scheduled to fill the coverage gap by 2020.
Second, Congress slowed the annual update to the TrOOP threshold through 2019 by basing the update on the consumer price index (CPI) plus 2 percentage points rather than drug spending growth. The purpose was to give certainty to the size of the donut hole during the phase-in of the manufacturer discount program. Because the CPI has grown far less rapidly than drug prices under Part D, this change has kept the size of the donut hole smaller, enabling beneficiaries to reach the catastrophic benefit sooner than they would have under the original Part D benefit. This also helps manufacturers, who don’t have to offer as many discounts when people are in the coverage gap for a shorter period of time. And once the federal government is covering more costs under catastrophic coverage, manufacturers no longer have to provide discounts at all.
While Congress slowed growth in the TrOOP threshold through 2019, under the ACA, the threshold amount reverts back to the pre-ACA calculation in 2020. When the threshold is based on drug price spending growth again, the amount a beneficiary must spend in the coverage gap will jump from $5,100 to $6,350. (If manufacturer price growth had been at or close to CPI growth in recent years, there would be no increase in 2020.) But if Congress wants to block the spike in the TrOOP amount, it must take action no later than June 2019, the deadline for Part D plans bidding to offer coverage in 2020.
In February 2018, the BBA made changes to the Part D Coverage Gap Discount Program to help fill the donut hole in 2019 (a year earlier than the ACA provision) by increasing the manufacturer discount for beneficiaries from 50 percent to 70 percent and reducing the share that Part D plan sponsors cover. This change will require manufacturers to offer a larger discount and reduce beneficiaries’ out-of-pocket drug costs in the donut hole. By reducing the share that insurance companies or pharmacy benefit managers are responsible for, Congress intended to lower premiums, which in turn will save the federal government on premiums subsidies.
While Congress established the Part D Coverage Gap Discount Program at the same time it slowed growth in the TrOOP threshold — and both relate to the donut hole — the two policies function independently and need not be conflated in terms of making changes to them in statute.
Moreover, the financial implications of proposals to change these components differ markedly. Beneficiaries spend an average of $1,321 on cost-sharing in the coverage gap today and would spend $1,156 in 2020 — or $165 less — if Congress amends the BBA and blocks the TrOOP increase as proposed by the pharmaceutical industry.
However, manufacturers would save even more under these proposed policies. Brand-name manufacturer discounts in the donut hole would fall from $3,698 per beneficiary today to roughly $2,998 — a reduction of $785 per beneficiary. Part D plan sponsors would spend $555 per beneficiary in the coverage gap or $291 more if both policies were addressed.
Understanding the implications of these proposals beyond their impact on Medicare spending and the federal budget is important. Even if Congress were only to block the increase in the TrOOP threshold — and not undo the increase in manufacturer discounts — beneficiary spending would be slightly lower (as a lower limit on TrOOP spending would enable beneficiaries to get out of the donut hole and into the most generous level of federal coverage more quickly) but manufacturers would still come out far ahead of both Part D plan sponsors and beneficiaries. Given the financial implications of these two policies, Congress may want to consider broader changes to Part D that would lower drug prices, provide more cost savings to beneficiaries, and avoid higher spending under the Medicare program.
28 pharmaceutical companies will raise their drug prices next year going back on the price freezes that they instituted this summer after public shaming from Administration officials, according to press reports.
Allergan, Bayer, Novartis, Amgen, AstraZeneca, Biogen, and GlaxoSmithKline are among the companies who filed disclosures with California earlier this year that they planned to raise prices within at least 60 days, in accordance with the state’s 2017 notification law.
Payers have reported that they anticipate drug price increases about 20 percent higher than previous years with the average price increase for a pharmacy-dispensed drug to be in the high single digits and the increase for physician-administered drugs to be around 3 percent.
Click here for the Reuters report.
If there’s one thing political centrists claim to value, it’s compromise. It’s “the way Washington is supposed to work,” writes Third Way’s Bill Schneider. “Centrists, or moderates, are really people who are willing to compromise,” The Moderate Voice‘s Robert Levine tells Vice.
What does this mean when it comes to health care and the developing lefty push for Medicare-for-all? The fresh new centrist health-care organization, the Partnership for America’s Health Care Future (PAHCF), says it is a “diverse, patient-focused coalition committed to pragmatic solutions to strengthen our nation’s health-care system.” In keeping with the moderate #brand, PAHCF may not support Medicare-for-all. But perhaps they might support a quarter-measure compromise, like allowing people under 65 to buy into Medicare?
Haha, of course not. Their offer is this: nothing.
Valuing compromise in itself in politics is actually a rather strange notion. It would make a lot more sense to determine the optimal policy structure through some kind of moral reasoning, and then work to obtain an outcome as close as possible to that. Compromise is necessary because of the anachronistic (and visibly malfunctioning) American constitutional system, but it is only good insofar as it avoids a breakdown of democratic functioning that would be even worse.
However, “moderation” is routinely not even that, but instead a cynical veneer over raw privilege and self-interest. The American health-care system, as I have written on many occasions, is a titanic maelstrom of waste, fraud, and outright predation — ripping off the American people to the tune of $1 trillion annually.
And so, Adam Cancryn reports on the centrist Democrats plotting with Big Medical to strangle the Medicare-for-all effort:
Deep-pocketed hospital, insurance, and other lobbies are plotting to crush progressives’ hopes of expanding the government’s role in health care once they take control of the House. The private-sector interests, backed in some cases by key Obama administration and Hillary Clinton campaign alumni, are now focused on beating back another prospective health-care overhaul, including plans that would allow people under 65 to buy into Medicare.
Behind the preposterously named “PAHCF” stands a huge complex of institutions that benefit from the wretched status quo. This includes the PhRMA drug lobby (Americans spend twice what comparable countries do on drugs, almost entirely because of price-gouging), the Federation of American Hospitals (Americans overpay on almost every medical procedure by roughly 2- to 10-fold), the American Medical Association (U.S. doctors, especially specialists, make far more than in comparable nations), America’s Health Insurance Plans, and BlueCross BlueShield (the cost of average employer-provided insurance for a family of four has increased by almost $5,000 since 2014, to $28,166).
The human carnage inflicted by this bloody quagmire of corruption and waste is nigh unimaginable. Perhaps 30,000 people die annually from lack of insurance, and 250,000 annually from medical error. America is a country where insurance can cost $24,000 before it covers anything, where doctors can conspire to attend each other’s surgeries so they can send pointless six-figure balance bills, where hospitals can charge the uninsured 10 times the actual cost of care, where gangster drug companies can buy up old patents and jack up the price by 57,500 percent, and on and on.
One might think this is all a bit risky. Wouldn’t it be more prudent to accept some sensible reforms, so these institutions don’t get completely driven out of business?
But wealthy elites almost never behave this way. John Kenneth Galbraith, explaining the French Revolution, once outlined one of the firmer rules of history: “People of privilege almost always prefer to risk total destruction rather than surrender any part of their privileges.” One reason is “the invariable feeling that privilege, however egregious, is a basic right. The sensitivity of the poor to injustice is a small thing as compared with that of the rich.”
And so we see with the Big Medical lobby. The vast ziggurat of corpses piled up every year from horrific health-care dysfunction is just a minor side issue compared to the similar-sized piles of profits these companies accumulate — which they will fight like crazed badgers to preserve.
As Paul Waldman points out, this means a big resistance to the prospect of doing anything at all, let alone Medicare-for-all. However, the political implication is clear. If compromise is impossible, then liberals and leftists who want to improve the quality and justice of American health care should write off the corrupt pseudo-centrists, and go for broke. Democrats should write a health-care reform bill so aggressive that it drastically weakens the profitability of Big Medical, and drives many of them out of business entirely. If you cannot join them, beat them.
PhRMA says the ‘overly burdensome’ final rule fails to address hospital abuse of the program.
The new rule provides drug pricing information to 340B participants through a closed website.
Proponents scoff at drug makers’ claims that more time is needed before the oft-delayed final rule is implemented.
After several delays, hundreds of public comments, a lawsuit, and an eight-year-old Congressional mandate, the federal government on Thursday bumped up the starting date of its 340B drug pricing final rule by six months.
In a notice published this week in the Federal Register, the Department of Health and Human Services said the final rule—which is designed to protect hospitals from being overcharged by drug manufacturers—would take effect on January 1, 2019, instead of July 1, 2019.
The final rule was supposed to take effect on January. 5, 2017, but HHS delayed implementation because it said it was in the midst of “developing new comprehensive policies to address the rising costs of prescription drugs.”
Hospitals got tired of waiting and filed suit, asking a federal judge to order the Trump Administration to launch the final rule on January 1, 2019. The hospitals allege that the delays are causing significant financial harm to the nearly 2,500 hospitals nationwide that participate in the 340B Drug Pricing Program.
In late October, the Trump Administration said it was considering accelerating implementation.
In bumping up the final rule implantation by six months, HHS said it “has determined that the finalization of the 340B ceiling price and civil monetary penalty rule will not interfere with HHS’s development of these comprehensive policies.”
Under the new rule, federal regulators will provide pricing information to 340B hospitals through a closed website, which proponents of the rule say is essential for ceiling price enforcement.
As expected, hospitals praised the action, and drug makers expressed disappointment.
“This rule is good for patients and for essential hospitals, which rely on 340B savings to make affordable drugs and health care services available to vulnerable people and underserved communities,” said America’s Essential Hospitals President and CEO Bruce Siegel, MD.
“It also ends years of delay for much-needed measures to hold drug companies accountable for knowingly overcharging covered entities in the 340B program,” Siegel said.
Maureen Testoni, interim president and CEO of 340B Health, called the announcement “a big step toward stopping drug companies from overcharging 340B hospitals, clinics, and health centers.”
“The next step toward ensuring true 340B drug maker transparency is for the administration to launch its ceiling price website so hospitals, clinics, and health centers can ascertain that they are paying the correct amounts for 340B medications,” Testoni said.
“We are encouraged that HHS says it will release that pricing reporting system shortly and that the department will communicate additional updates through its website,” she said.
PhRMA said it was “disappointed the Administration did not issue new proposals for this rule as it repeatedly stated it would.”
The pharmaceutical industry advocates said HHS “ignored the numerous concerns raised by stakeholders on the proposed ceiling price calculations, offset policy and civil monetary penalty provisions.”
Drug makers allege that hospitals have been scamming the 340B program, and PhRMA said Thursday that the final rule’s “flawed policies are not in line with the 340B statute and fail to address root problems in the 340B program that have enabled private 340B hospitals to generate record profit without commensurate benefit to patients.”
“Not only is the final rule itself overly burdensome in its requirements, but moving up its effective date also leaves manufacturers with very little time to make operational changes to systems and procedures,” PhRMA said.
Testoni scoffed at claims that more time was needed.
“The regulation now will be going into effect more than eight years after Congress mandated it—and only after a lawsuit filed by 340B Health and other hospital organizations to stop repeated administrative delays to the effective date,” Testoni said.
“As today’s final rule notes, these delays have given drug makers ‘more than enough time to prepare for its requirements.'”
The Trump administration has labored zealously to cut federal regulations, but its latest move has still astonished some experts on health care: It has asked for recommendations to relax rules that prohibit kickbacks and other payments intended to influence care for people on Medicare or Medicaid.
The goal is to open pathways for doctors and hospitals to work together to improve care and save money. The challenge will be to accomplish that without also increasing the risk of fraud.
With its request for advice, the administration has touched off a lobbying frenzy. Health care providers of all types are urging officials to waive or roll back the requirements of federal fraud and abuse laws so they can join forces and coordinate care, sharing cost reductions and profits in ways that would not otherwise be allowed.
From hundreds of letters sent to the government by health care executives and lobbyists in the last few weeks, some themes emerge: Federal laws prevent insurers from rewarding Medicare patients who lose weight or take medicines as prescribed. And they create legal risks for any arrangement in which a hospital pays a bonus to doctors for cutting costs or achieving clinical goals.
The existing rules are aimed at preventing improper influence over choices of doctors, hospitals and prescription drugs for Medicare and Medicaid beneficiaries. The two programs cover more than 100 million Americans and account for more than one-third of all health spending, so even small changes in law enforcement priorities can have big implications.
Federal health officials are reviewing the proposals for what they call a “regulatory sprint to coordinated care” even as the Justice Department and other law enforcement agencies crack down on health care fraud, continually exposing schemes to bilk government health programs.
“The administration is inviting companies in the health care industry to write a ‘get out of jail free card’ for themselves, which they can use if they are investigated or prosecuted,” said James J. Pepper, a lawyer outside Philadelphia who has represented many whistle-blowers in the industry.
Federal laws make it a crime to offer or pay any “remuneration” in return for the referral of Medicare or Medicaid patients, and they limit doctors’ ability to refer patients to medical businesses in which the doctors have a financial interest, a practice known as self-referral.
These laws “impose undue burdens on physicians and serve as obstacles to coordinated care,” said Dr. James L. Madara, the chief executive of the American Medical Association. The laws, he said, were enacted decades ago “in a fee-for-service world that paid for services on a piecemeal basis.”
Melinda R. Hatton, senior vice president and general counsel of the American Hospital Association, said the laws stifle “many innocuous or beneficial arrangements” that could provide patients with better care at lower cost.
Hospitals often say they want to reward doctors who meet certain goals for improving the health of patients, reducing the length of hospital stays and preventing readmissions. But federal courts have held that the anti-kickback statute can be violated if even one purpose of the remuneration is to induce referrals or generate business for the hospital.
The premise of the kickback and self-referral laws is that health care providers should make medical decisions based on the needs of patients, not on the financial interests of doctors or other providers.
Health care providers can be fined if they offer financial incentives to Medicare or Medicaid patients to use their services or products. Drug companies have been found to violate the law when they give kickbacks to pharmacies in return for recommending their drugs to patients. Hospitals can also be fined if they make payments to a doctor “as an inducement to reduce or limit services” provided to a Medicare or Medicaid beneficiary.
Doctors, hospitals and drug companies are urging the Trump administration to provide broad legal protection — a “safe harbor” — for arrangements that promote coordinated, “value-based care.” In soliciting advice, the Trump administration said it wanted to hear about the possible need for “a new exception to the physician self-referral law” and “exceptions to the definition of remuneration.”
Almost every week the Justice Department files another case against health care providers. Many of the cases were brought to the government’s attention by people who say they saw the bad behavior while working in the industry.
“Good providers can work within the existing rules,” said Joel M. Androphy, a Houston lawyer who has handled many health care fraud cases. “The only people I ever hear complaining are people who got caught cheating or are trying to take advantage of the system. It would be disgraceful to change the rules to appease the violators.”
But the laws are complex, and the stakes are high. A health care provider who violates the anti-kickback or self-referral law may face business-crippling fines under the False Claims Act and can be excluded from Medicare and Medicaid, a penalty tantamount to a professional death sentence for some providers.
Federal law generally prevents insurers and health care providers from offering free or discounted goods and services to Medicare and Medicaid patients if the gifts are likely to influence a patient’s choice of a particular provider. Hospital executives say the law creates potential problems when they want to offer social services, free meals, transportation vouchers or housing assistance to patients in the community.
Likewise, drug companies say they want to provide financial assistance to Medicare patients who cannot afford their share of the bill for expensive medicines.
AstraZeneca, the drug company, said that older Americans with drug coverage under Part D of Medicare “often face prohibitively high cost-sharing amounts for their medicines,” but that drug manufacturers cannot help them pay these costs. For this reason, it said, the government should provide legal protection for arrangements that link the cost of a drug to its value for patients.
Even as health care providers complain about the broad reach of the anti-kickback statute, the Justice Department is aggressively pursuing violations.
A Texas hospital administrator was convicted in October for his role in submitting false claims to Medicare for the treatment of people with severe mental illness. Evidence at the trial showed that he and others had paid kickbacks to “patient recruiters” who sent Medicare patients to the hospital.
The owner of a Florida pharmacy pleaded guilty last month for his role in a scheme to pay kickbacks to Medicare beneficiaries in exchange for their promise to fill prescriptions at his pharmacy.
The Justice Department in April accused Insys Therapeutics of paying kickbacks to induce doctors to prescribe its powerful opioid painkiller for their patients. The company said in August that it had reached an agreement in principle to settle the case by paying the government $150 million.
The line between patient assistance and marketing tactics is sometimes vague.
This month, the inspector general of the Department of Health and Human Services refused to approve a proposal by a drug company to give hospitals free vials of an expensive drug to treat a disorder that causes seizures in young children. The inspector general said this arrangement could encourage doctors to continue prescribing the drug for patients outside the hospital, driving up costs for consumers, Medicare, Medicaid and commercial insurance.