Walmart reportedly in negotiations to buy Humana

http://www.healthcarefinancenews.com/news/walmart-reportedly-negotiations-buy-humana?mkt_tok=eyJpIjoiWkRKaVpHRTBPRFZtWXpobSIsInQiOiJMQWJiXC85cGw1S2hcL3N0VlIzS2I2S3BqamJoRGFJeUxwbzgrUjVmYk5OZ2I5aDAzTmkyMXptQlpONCtsb3oyZVlqV2tZQ3haOVZWeko0cDhFbVVLbTJtU3F6ZGJUNWNNRGpMRHI4R3hBdzVYU0tLUVFpcjhpSlwvRXpmcXFtVUpVbyJ9

Credit: Google Street View

 

Deal has been long speculated since announced $69 billion merger between CVS Health and Aetna.

Walmart is in preliminary negotiations to buy Humana, The Wall Street Journal has reported.

There are few details in the potential deal that has not been announced publicly by either the retailer or the insurer.

But speculation has existed among industry analysts for months after the announced $69 billion merger between CVS Health and Aetna.

Two years ago, Aetna was in a proposed $34 billion deal to buy Humana.

Walmart is facing increased competition from such an integrated pharmacy business and is currently in an arms race against Amazon as the online giant has made strides into the Medicaid market by offering those beneficiaries a discounted Prime membership.

Humana specializes in Medicare Advantage plans for seniors, a fast-growing demographic as baby boomers enter retirement age.

The Centers for Medicare and Medicaid Services has shown support for MA plans, said David Friend, MD, chief transformation officer of The BDO Center for Healthcare Excellence & Innovation.

Friend predicts that due to the partnerships and mergers between healthcare companies, retailers and insurers, the traditional pharmacy benefit model could become extinct.

“The CVS-Aetna merger was a watershed moment in healthcare. But Walmart-Humana signifies the beginning of the avalanche that will cause the entire healthcare system to converge,” Friend said by statement. “And as this deal signifies, the healthcare organization that accurately captures and analyzes the data of the fast-growing U.S. demographic — seniors — stands to lead the industry of the future.”

 

Why DOJ must block the Cigna-Express Scripts merger

http://thehill.com/opinion/healthcare/380522-why-doj-must-block-the-cigna-express-scripts-merger

Why DOJ must block the Cigna-Express Scripts merger

If one message is becoming clear, it’s that increased concentration is harming consumers and leading to less competition, decreased choice and higher cost. The need for corporations to compete is dampened when markets are dominated by a small number of firms. Worse, when consumers don’t have the ability to discipline markets there is a lack of transparency or accountability.

Nowhere is that more true than in the market for Pharmacy Benefit Managers (PBMs) — the unregulated entities that control the reimbursement of drugs. These little known, unregulated middlemen are able to ramp up the cost of drugs by demanding rebates and other payments from drug manufacturersand because of a lack of transparency and choice they are able to pocket much of these rebates, escalating the cost of drugs.

The Council of Economic Advisors, after a comprehensive review of rising drug costs, identified the lack of PBM competition as a major culprit. It found that only three PBMs controlled more than 85 percent of the market, “which allows them to exercise undue market power against manufacturers and against the health plans and beneficiaries they are supposed to be representing, thus generating outsized profits for themselves.”

The effect of market power on rebates and other payments to PBMs is clear. As one study found pharmaceutical manufacturer rebates skyrocketed 108 percent from 2011 to 2016 — rising from $66 billion to $127 billion in those five years.

Do skyrocketing rebates benefit consumers? Not much. As Health and Human Services Secretary Alex Azar has observed, “this thicket of negotiated discounts makes it impossible to recognize and reward value, and too often generates profits for middlemen rather than savings for patients.” Consumers pay more because their copays are based on list prices that are inflated by the rebates and other payments secured by the PBMs.

You do not need a Ph.D. in economics to figure out that the market is not competitive and that consumers are paying more than they otherwise would. FDA Commissioner Scott Gottlieb observed, “Kabuki drug-pricing constructs — constructs that obscure profit taking across the supply chain that drives up costs; that expose consumers to high out of pocket spending; and that actively discourage competition.”

Gottlieb identifies the lack of PBM competition and transparency as the real culprit. “The consolidation and market concentration make the rebating and contracting schemes all that more pernicious. And the very complexity and opacity of these schemes help to conceal their corrosion on our system — and their impact on patients.”

Now the two largest PBMs seek to merge with two insurance giants — CVS Caremark’s proposed acquisition of Aetna and Cigna’s proposed acquisition of Express Scripts. I have already observed how the CVS deal will harm competition and consumers. Adding another deal is like fighting a fire with gasoline.

These mergers rightly face tough scrutiny before the Antitrust Division of the Department of Justice. As the American Antitrust Institute’s recent comprehensive white paper documents in detail, these mergers significantly threaten competition in health insurance, pharmacy and PBM markets and must be blocked.

And as Rep. Rick Crawford’s (R-Ariz.) recent letter to Attorney General Jeff Sessions opposing the CVS/Aetna merger nicely emphasizes, such “vertical integration does not encourage competition or lower prices, but rather, could limit the choices and access for patients, driving out competitors while driving up prices and reimbursements for themselves.”

The reasons are straightforward and compelling. Many insurance companies want the service of an independent PBM — one not aligned with a rival insurance company. PBM services and the ability to control pharmaceutical costs are a crucial input for any insurance company, especially since the costs of drugs is an increasing part of the costs that need to be controlled.

Such reforms would include meaningful transparency and disclosure of rebates to payers, eliminating pharmacy gag clauses that prevent pharmacists from disclosing lower priced drugs, preventing PBMs from egregious reimbursement practices that force pharmacists to dispense below cost, and proper disclosure of pricing to pharmacists. As a basic first step both Express Scripts and Cigna must commit to pass through rebates to lower consumer costs as UnitedHealthcare has done.

But even these commitments are probably not enough. History tells a dismal story — past mergers have harmed consumers through less choice and higher costs as PBM profits have soared. No promises of good conduct can overcome the excessive concentration in the PBM market. The CEA recommended, “policies to decrease concentration in the PBM market … can increase competition and further reduce the price of drugs.” DOJ can begin this process by preventing the market from getting worse and simply blocking these mergers.

 

 

Why Your Pharmacist Can’t Tell You That $20 Prescription Could Cost Only $8

As consumers face rapidly rising drug costs, states across the country are moving to block “gag clauses” that prohibit pharmacists from telling customers that they could save money by paying cash for prescription drugs rather than using their health insurance.

Many pharmacists have expressed frustration about such provisions in their contracts with the powerful companies that manage drug benefits for insurers and employers. The clauses force the pharmacists to remain silent as, for example, a consumer pays $125 under her insurance plan for an influenza drug that would have cost $100 if purchased with cash.

Much of the difference often goes to the drug benefit managers.

Federal and state officials say they share the pharmacists’ concerns, and they have started taking action. At least five states have adopted laws to make sure pharmacists can inform patients about less costly ways to obtain their medicines, and at least a dozen others are considering legislation to prohibit gag clauses, according to the National Conference of State Legislatures.

Senator Susan Collins, Republican of Maine, said that after meeting recently with a group of pharmacists in her state, she was “outraged” to learn about the gag orders.

“I can’t tell you how frustrated these pharmacists were that they were unable to give that information to their customers, who they knew were struggling to pay a high co-pay,” Ms. Collins said.

Alex M. Azar II, the new secretary of health and human services, who was a top executive at the drugmaker Eli Lilly for nearly 10 years, echoed that concern. “That shouldn’t be happening,” he said.

Pharmacy benefit managers say they hold down costs for consumers by negotiating prices with drug manufacturers and retail drugstores, but their practices have come under intense scrutiny.

The White House Council of Economic Advisers said in a report this month that large pharmacy benefit managers “exercise undue market power” and generate “outsized profits for themselves.”

Steven F. Moore, whose family owns Condo Pharmacy in Plattsburgh, N.Y., said the restrictions on pharmacists’ ability to discuss prices with patients were “incredibly frustrating.”

Mr. Moore offered this example of how the pricing works: A consumer filling a prescription for a drug to treat diabetes or high blood pressure may owe $20 if he uses insurance coverage. By contrast, a consumer paying cash might have to pay $8 to $15.

Mark Merritt, the president and chief executive of the Pharmaceutical Care Management Association, which represents benefit managers, said he agreed that consumers should pay the lower amount.

As for the use of gag clauses, he said: “It’s not condoned by the industry. We don’t defend it. It has occurred on rare occasions, but it’s an outlier practice that we oppose.”

However, Thomas E. Menighan, the chief executive of the American Pharmacists Association, said that such clauses were “not an outlier,” but instead a relatively common practice. Under many contracts, he said, “the pharmacist cannot volunteer the fact that a medicine is less expensive if you pay the cash price and we don’t run it through your health plan.”

A bipartisan measure that took effect in Connecticut this year prohibits the gag clauses. It was introduced by the top Democrat in the Connecticut Senate, Martin M. Looney, and the top Republican, Len Fasano.

“This is information that consumers should have,” Mr. Looney said in an interview, “but that they were denied under the somewhat arbitrary and capricious contracts that pharmacists were required to abide by.”

Mr. Fasano said that consumers were sometimes paying three or four times as much when they used their insurance as they would have paid without it. “That’s price gouging,” he said in an interview.

The legislation, Mr. Fasano said, encountered “a lot of resistance” from large pharmacy benefit managers and some insurance companies.

In North Carolina, a new law says that pharmacists “shall have the right” to provide insured customers with information about their insurance co-payments and less costly alternatives.

A new Georgia law says that a pharmacist may not be penalized for disclosing such information to a customer. Maine has adopted a similar law.

In North Dakota, a new law explicitly bans gag orders. It says that a pharmacy or pharmacist may provide information that “may include the cost and clinical efficacy of a more affordable alternative drug if one is available.”

The North Dakota law also says that a pharmacy benefit manager or insurer may not charge a co-payment that exceeds the actual cost of a medication.

The lobby for drug benefit companies, the Pharmaceutical Care Management Association, has filed suit in federal court to block the North Dakota law, saying it imposes “onerous new restrictions on pharmacy benefit managers.”

Specifically, it says, the North Dakota law could require the disclosure of “proprietary trade secrets,” including information about how drug prices are set. “P.B.M.–pharmacy contracts typically preclude a pharmacy from disclosing to the patient the amount of a reimbursement,” the lawsuit says.

Gov. Asa Hutchinson of Arkansas, a Republican, said this past week that he would call a special session of the State Legislature to authorize the regulation of pharmacy benefit managers by the state’s Insurance Department.

He said he feared that some independent pharmacists receiving “inadequate reimbursement” from the benefit managers might go out of business, reducing patients’ access to care, especially in rural areas.

 

 

Expert Advice For The Corporate Titans Taking On Health Care

Expert Advice For The Corporate Titans Taking On Health Care

An announcement Tuesday by three of the nation’s corporate titans — Amazon, Berkshire Hathaway and JPMorgan Chase & Co. — that they are joining forces to address the high costs of employee health care has stirred the health policy pot. It immediately sent shock waves through the health sector of the stock market and reinvigorated talk about health care technology, value and quality.

Though details regarding the undertaking are thin, the companies said in a release that their partnership’s intent is to improve employee satisfaction and hold down costs by bringing “their scale and complementary expertise to this long-term effort.”

They plan to create an independent company, “free from profit-making incentives and constraints,” to focus on “technology solutions.”

Berkshire Hathaway CEO Warren Buffett described health care costs as “a hungry tapeworm on the American economy,” and Amazon founder and CEO Jeff Bezos said the partnership was “open-eyed about the degree of difficulty” ahead. Jamie Dimon, chairman and CEO of JPMorgan, said the results could benefit the employees of these companies and possibly all Americans

But what does all of this mean and how can it be successful when so many other initiatives have fallen short? KHN asked a variety of health policy experts their thoughts on this venture, and what advice they would offer these CEOs as they go forward. Some of the advice has been edited for clarity and length.


Tom Miller, resident fellow, American Enterprise Institute (Courtesy of Tom Miller)

Tom Miller, resident fellow, American Enterprise Institute:

“It’s great that someone theoretically with resources would try to build a better mousetrap. But it’s been difficult to do, and part of it is regulatory and competitive barriers are well-constructed in the health care sphere, which tend to make it less receptive or subject to competitive pressures.

“I welcome any new capital trying to disrupt health care. … The incumbents are comfortable and could use disruption. If Amazon has an idea, and is willing to put some money behind it, that’s wonderful. What they are willing to do other than fly low-cost providers for home visits in drones — I don’t know. They’d probably have to miniaturize them, wouldn’t they?”


Stan Dorn, senior fellow, Families USA (Courtesy of Stan Dorn)

Stan Dorn, senior fellow, Families USA:

“Number one, look at prices. America doesn’t use more health care than European countries, but we pay a lot more and that’s because of prices more than anything else. Look at hospital prices and prescription drug prices. I would also say, look to eliminate middlemen operating in darkness. I’m thinking in particular of pharmacy benefit managers. Often, the supply chain is hidden and complex and every step along the way the middlemen are taking their share, and it winds up costing a huge amount of money.”


Bob Kocher, partner, Venrock (Courtesy of Bob Kocher)

Bob Kocher, partner, Venrock:

“It has been said that health care is complicated. One thing that is not complicated is that the way to save money is to focus on the sickest patients. And that’s the only thing that has proven to work in great primary care. I hope Amazon realizes this early and does not think that [its smart digital assistant] Alexa and apps are going to make us healthier and save any money.

“It would sure be nice if they invest in a ‘post-CPT-ICD-10-and-many-bills-per-visit’ world where we know prices, can easily know what is known about quality and experience, and have same-day service.”


Tracy Watts, senior partner, Mercer (Courtesy of Tracy Watts)

Tracy Watts, senior partner, Mercer:

“Everyone thinks millennials want to do everything on their phones. But that’s not necessarily the case.

“[There was a recent] survey about this — specifically, millennials are the most interested in new health care offerings, but it wasn’t as much high-tech as it is convenience they are interested in — same-day appointments with a family doctor, guaranteed appointments with specialists, home visits, a wider array of services available at retail clinics. That was kind of an ‘aha’ — this kind of convenience and high-touch experience is what they’re looking for. And when you think of ‘health care of the future,’ that’s not what comes to mind.”


John Rother, president and CEO, National Coalition on Health Care (Courtesy of John Rother)

John Rother, president and CEO, National Coalition on Health Care:

“Health care is complex and expensive, so the aim should always be simplicity and affordability. Three keys to success: manage chronic conditions recognizing the life context of the patient, emphasize primary care-based medical homes and aggressively negotiate prescription drug costs.”


Suzanne Delbanco, executive director, Catalyst for Payment Reform (Courtesy of Suzanne Delbanco)

Suzanne Delbanco, executive director, Catalyst for Payment Reform:

“The biggest driver of health care costs is prices. Those are being driven up by health care providers who have consolidated and will continue to consolidate and amass more market power.

“It sounds like they [the companies] are limiting the use of health plans, but if they’re going to get into that business, they’re going to come up with the same challenges health plans face. What would be really innovative would be to build some provider systems from the ground up where they can truly get a handle on the actual costs and eliminate the market power that drives the prices up, and they can have control over their prices.”


Brian Marcotte, president and CEO, National Business Group on Health (Courtesy of Brian Marcotte)

Brian Marcotte, president and CEO, National Business Group on Health:

“They recognize this is [a] long-term play to get involved in this. I’d have to say, this industry is ripe for disruption.

“I think we know technology will continue to play an increasing role in how consumers access and receive health care. We’ve also learned most consumers do not touch the health care delivery system with enough frequency to ever be a sophisticated consumer. What’s intriguing about this partnership is Amazon for many consumers has become part of their day-to-day world, part of their routine. It’s intriguing to consider the possibilities of integrating health care into consumer routine.

“And I think that therein lies the opportunity. Employers offer a lot of resources to their employees to help them maximize their experience, and their No. 1 challenge is engagement.”


Joseph Antos, health economist, American Enterprise Institute (Courtesy of Joseph Antos)

Joseph Antos, health economist, American Enterprise Institute:

“My first suggestion is to look at what other employers have done (some unsuccessfully) and consider how to adapt those ideas for the three companies and more broadly. Change incentives for providers. Change incentives for consumers. Work on ways to reduce the effects of market consolidation. The bottom line: Don’t keep doing what we are doing now. I don’t see that these three companies have enough presence in health markets to pull this off anytime soon, but perhaps this should be viewed as the private-sector version of the Affordable Care Act’s Innovation Center— except, this time, there may be some new ideas to test.”


Ceci Connolly, president and CEO, Alliance of Community Health Plans (Courtesy of Ceci Connolly)

Ceci Connolly, president and CEO, Alliance of Community Health Plans:

“We know that 5 percent of any population consumes 50 percent of the health care dollar. I would encourage this group to focus on how to better serve those individuals who need help managing multiple chronic conditions.”


David Lansky, CEO, Pacific Business Group on Health (Courtesy of David Lansky)

David Lansky, CEO, Pacific Business Group on Health:

“The incumbent providers of services to our members are not doing as much as we need done for affordability and quality. So, we are pleased to see them go down this path. We don’t know what piece of the puzzle they will tackle.

“We know well-intended efforts over the years haven’t added up to material impact on cost and quality. I would suspect they are looking at doing something broader, more disruptive than initiatives we have tried before.

“I think across the board they have the opportunity to set high standards for the health system in whatever platform they use. These companies have a history of raising the bar. Potentially, it could be a help to all of us.”

After Another Merger Monday In Health Care, CVS Is Still The Company To Watch In 2018

https://www.forbes.com/sites/leahbinder/2018/01/23/after-another-merger-monday-in-health-care-cvs-is-still-the-company-to-watch-in-2018/#2dbe116f4d7c

The health care sector rallied yesterday on another “Merger Monday” with the announcement of Sanofi’s (SNY) purchase of Bioverativ (BIVV) for $11.6 billion, and Celgene’s (CELG) $9 billion purchase of 90 percent of Juno Therapeutics (JUNO). But there’s still one transformative merger that will define and reshape the U.S. health care market in 2018: the CVS/AETNA $69 billion deal announced last December.

CVS is best known for its 9,700 retail pharmacies and 1,100 walk-in clinics, but its most significant profit driver is its pharmacy benefits manager (PBM) enterprise—a middleman between pharmaceutical manufacturers and dispensers like drugstores. The company generated $177.5 billion in net revenue in 2016.

With its purchase of Aetna, another bold company and the nation’s third largest health plan, CVS upended uncomfortable business incentives built into its business model. In theory at least, the CVS PBM has new incentive to bring down drug prices and push for the most efficacious—not necessarily the most expensive—treatment choices, to achieve more competitive insurance premiums. They can also favor common sense preventive and primary care through convenience clinics.

This is what makes the CVS/Aetna deal different. It crosses sectors and realigns previously competing business incentives to better target consumer demand. Most of the merger proliferation we have seen over the past few years involves companies in similar categories within the health care industry. Providers merge with other providers, health plans with other health plans, and pharmaceutical companies with others in pharma.

Realigning incentives is the central problem in the health care marketplace, which is built on thorny knots of unintended consequences and senseless rules that resist untangling. The most famous of those knots are fee-for-service payment rules, still largely dominant, whereby payors reimburse for any and all services, regardless of quality. Among its hazards, fee-for-service incentivizes infections because it results in more care and thus pay better. Nobody thinks that is a good idea, but the business model is extremely difficult to unravel. CVS seems up to the challenge.

CVS Chief Executive, Larry J. Merlo, is the man for the job. His signature style is a laser-focus on the company’s core mission of “helping people on their path to better health,” which he is determined to accomplish even when short-term profit incentives nudge in a different direction. That was why Merlo led CVS to discontinue tobacco sales in 2014, and why CVS recently banned digitally altered photos on cosmetic products sold in their stores. Maybe it sounds logical that a health enterprise shouldn’t sell cigarettes or promote eating disorders and depression, but it takes unusual courage to turn away lucrative business.

Many greeted the news of the CVS/Aetna merger as a play to head off new ventures coming from Amazon or other new players. But what makes me optimistic about this particular deal is the new company’s combination of health industry and retail savvy. Many companies have one but not the other. Enterprising outsiders often enter the health care industry with good backing and an idea that would definitely help patients, only to end up six feet under the health care lobbyists, special interests, regulatory twists, and perverse incentives that have dogged the health care system over decades. There are large graveyards full of great companies that naively believed that normal business models work in health care. CVS is not naïve.

 

CVS merger with Aetna: Health care cure or curse?

https://theconversation.com/cvs-merger-with-aetna-health-care-cure-or-curse-88670?utm_medium=email&utm_campaign=Latest%20from%20The%20Conversation%20for%20December%206%202017%20-%2089557547&utm_content=Latest%20from%20The%20Conversation%20for%20December%206%202017%20-%2089557547+CID_461096d86af0ad8c2eedceabf8b8a42f&utm_source=campaign_monitor_us&utm_term=CVS%20merger%20with%20Aetna%20Health%20care%20cure%20or%20curse

The announcement that CVS plans to acquire Aetna for US$69 billion raises hope and concerns.

The transaction would create a new health care giant. Aetna is the third-largest health insurer in the United States, insuring about 46.7 millionpeople.

CVS operates 9,700 pharmacies and 1,000 MinuteClinics. A decade ago, it also purchased Caremark and now operates CVS/Caremark, a pharmacy benefits manager, a type of business that administers drug benefit programs for health plans. CVS/Caremark is one of the three largest pharmacy benefits managers in the United States. Along with ExpressScripts and OptummRXTogether, these three control at least 80 percent of the market.

Should American consumers be happy or concerned about the proposed merger? As a professor of health law and bioethics, I see compelling arguments on both sides.

Good for consumers, or for the companies?

CVS and Aetna assert they are motivated by a desire to improve services for consumers and that the merger will lower health care costs and improve outcomes.

Many industry experts have postulated, however, that financial gain is at the heart of the deal.

CVS has suffered declining profits as consumers turn to online suppliers for drugs. Reports that Amazon is considering entry into the pharmacy business raise the specter of increasingly fierce competition.

The merger would provide CVS with guaranteed business from Aetna patients and allow Aetna to expand into new health care territory.

The heart of the deal

The merger would eliminate the need for a pharmacy benefits manager because CVS would be part of Aetna.

Pharmacy benefits managers, which sprang up in the early 2000s in response to rising costs of care, administer drug benefit programs for health plans. Most large employers contract with pharmacy benefits managers that are different from their health insurers.

Nevertheless, a consolidation along the lines of a CVS/Caremark and Aetna merger would not be unprecedented. The nation’s largest health insurance company, United Healthcare, operates its own pharmacy benefits manager, OptumRx.

Pharmacy benefits managers process and pay prescription drug claims, negotiate with manufacturers for lower drug prices, and can employ other cost-saving mechanisms. They thus act as intermediaries between the insurer and pharmacies.

They also make a lot of money. They have been controversial in recent years for how they do so, allegedly keeping a keener focus on profits than on patients.

The merger has not been finalized and requires approval from government regulators, which isn’t always easy to get. In 2016 the U.S. Department of Justice sued to block two health insurer mergers: one between Aetna and Humana and a second between Anthem and Cigna. The government objected on antitrust grounds, arguing that the mergers would unduly restrict competition. Both efforts were abandoned.

CVS and Aetna argue that their proposed merger is different. It is a vertical rather than a horizontal merger, which means that it would combine companies providing different services for patients (insurance and filling prescriptions) rather than two companies doing the same thing.

However, the Trump administration is currently opposing another vertical merger, that between AT&T and Time Warner. It is unclear whether the administration will likewise oppose the CVS/Aetna merger.

Benefits of a merger

There is some evidence that a merger could help consumers.

A merger could result in more negotiating power. Combining the power of a leading pharmacy and a top insurer may allow CVS/Aetna to negotiate more effectively for price discounts from drug and device manufacturers.

It also could cut out the middleman. PBMs themselves have been blamed for raising health care costs. They often do not pass on negotiated drug discounts to consumers, but rather keep the money themselves. In addition, many believe they “make money through opaque rebates that are tied to drug prices (so their profits rise as those prices do).” With the merger, CVS/Aetna would not need CVS/Caremark to function as an intermediary. Eliminating a profit-seeking middleman from the picture could lower consumer prices.

The merger could provide easy access to health care for minor injuries and illnesses. CVS said it plans to expand its MinuteClinics, walk-in clinics that provide treatment by nurse practitioners for minor conditions. Also, CVS said it would offer more services, such as lab work, nutritional advice, vision and hearing care, and more. Thus, CVS promises that its clinics will become “health hubs.”

Many patients could turn to these clinics instead of seeking more expensive care from physicians or emergency rooms. Furthermore, health hubs could provide “one-stop shopping” convenience for some patients. This could be particularly beneficial to elderly individuals or those with disabilities.

Another benefit could be improved and expanded data analytics, which could result in better care. Combining information from patients’ health insurers with that of their pharmacies, including nonprescription health purchases, may promote better care. CVS pharmacists and health hub providers would be able to monitor and counsel patients regarding chronic disease management, pain management, prenatal care and other matters. Such attention could reduce the risk of complications and hospitalizations and thus also decrease expenditures.

Increase of other risks?

Skeptics argue that the CVS/Aetna merger is unlikely to yield cost savings and improved outcomes. They note that mergers in the health care sector generally lead to higher, not lower, prices and worry about other adverse consequences.

If the market shrinks to fewer pharmacy benefits managers because of consolidation, costs may actually increase. The remaining pharmacy benefits managers may have little incentive to compete with each other by demanding discounts from drug companies. As noted above, they may actually profit from higher pharmaceutical prices and thus welcome increases.

After the merger, Aetna may require those it insures to use only CVS pharmacies. In addition, it may require individuals to turn to CVS MinuteClinics for certain complaints even if patients prefer to visit their own doctors. Such restrictions would mean less choice for consumers, and many may find them to be very distressing.

The merger could also decrease competition and bar other companies from entering the pharmacy market. For example, Aetna may refuse to cover prescription drugs that are not purchased from CVS. In that case, Amazon may find it extremely difficult if not impossible to break into the industry. Less competition, in turn, often means higher prices for consumers.

It is difficult to predict the precise consequences of a CVS/Aetna merger. One way or another, however, its impact will likely be significant.

 

Drug Rebates Reward Industry Players — And Often Hurt Patients

http://khn.org/news/drug-rebates-reward-industry-players-and-often-hurt-patients/

Medicare and its beneficiaries aren’t the winners in the behind-the-scenes rebate game played by drugmakers, health insurers and pharmacy benefit managers, according to a paper published Tuesday in JAMA Internal Medicine.

The paper, which dives into the complex and opaque world of Medicare drug price negotiations, finds that rebates may actually drive up the amount Medicare and its beneficiaries pay for drugs — especially for increasingly common high-priced drugs — and it offers some systemic solutions.

“How these rebates and price concessions happen between the manufacturer of the drug and the PBMs [pharmacy benefit managers] and health plans can directly impact patient cost in a big way,” said the paper’s lead author, Stacie Dusetzina of the University of North Carolina-Chapel Hill’s pharmacy school.

The paper’s findings and proposed solutions come as President Donald Trump’s administration, Congress and state lawmakers grapple with ways to control drug prices and overall health spending. Trump’s administration has said it wants to lower drug prices and hinted at mandating rebates in Medicare. Leaders on Capitol Hill have called for Medicare price negotiations.

In the JAMA paper, Dusetzina cites the EpiPen as one example. Last year, executives at Mylan, the maker of the EpiPen, said the list price of the drug for life-threatening allergic reactions was $600, but the company earned $274 after rebates and other fees.

That savings, though, isn’t necessarily passed on to patients in Medicare’s system. Instead, the money tends to be swallowed up by health insurers and middlemen like pharmacy benefit managers.

And, even though patients don’t pay list prices for their drugs, those high prices (like $600 for the EpiPen) are used to calculate how much Medicare covers for any individual patient — and sometimes what patients pay out-of-pocket, Dusetzina said.

“We’ve heard over the years that the list price doesn’t really matter, that it’s not the real price,” Dusetzina said. “It matters.”

The way it matters is not easily apparent. Here’s what happens: When a Medicare patient picks up a prescription, what they pay toward it is generally based on that higher list price and not the price after rebates, so the amount the beneficiary pays is scaled upward as a result.

And Medicare uses that high-end list price to calculate how rapidly beneficiaries reach the dreaded doughnut hole, where patients pay a bigger share of the price of the drug after their spending hits $3,700, the 2017 benchmark. Once through the doughnut hole, Medicare picks up the bulk of the drug’s cost.

High list prices drive patients into and out of the doughnut hole faster, raising their out-of-pocket costs and Medicare expenditures.

Dusetzina and co-authors Rena Conti, assistant professor of health policy and economics at the University of Chicago, and Dr. Peter Bach, director of Memorial Sloan Kettering Cancer Center’s Center for Health Policy and Outcomes, propose solutions to this problem.

Bach called the current Medicare system “absolutely devastating for people on high-cost specialty drugs.”

Bach’s drug pricing lab at Memorial Sloan Kettering offers an interactive tool for comparing how dollars shift when using the list price and post-rebate price.

The authors recommend that patients should be charged flat-dollar copays rather than coinsurance charges, which are based on a percentage of the drug’s price. The copays could be tiered, depending on the cost of the drug, the paper suggested.

This solution comes, in part, because the number of Medicare enrollees paying coinsurance for their drug, rather than a flat fee, has increased to 58 percent last year from 35 percent in 2014, the paper notes.

Another tactic would be to address the underlying disconnect between rebate negotiations and savings for Medicare and beneficiaries. The authors suggest that incentives for health insurers need to change to require health plans to pay more of the drugs’ costs after beneficiaries pass through the doughnut hole.

In addition, Dusetzina said, using the post-rebate amount in Medicare’s calculations would allow Medicare beneficiaries to move through the doughnut hole more slowly. That would save both patients and Medicare money.

“It really just stops us from accelerating people through the benefit,” Dusetzina said.

Last month, the Pharmaceutical Research and Manufacturers of America, which represents the pharmaceutical and biotechnology industry, launched a “Share the Savings” advertising campaign calling for public education about how the savings from rebates don’t actually get passed on to commercial insurance patients.

In an email, PhRMA’s Holly Campbell said the group’s commissioned research has found that rebates and discounts have nearly doubled from 2013 to 2015. Campbell said PhRMA believes “insurance companies should share more of the rebates and discounts they receive with patients.”

America’s Health Insurance Plans, which represents the insurance industry, calls the assertion that rebates and other discounts aren’t passed along “absolutely inaccurate” and noted the “true issue” is that drug prices continue to skyrocket “with no clear explanation as to how prices are set.” Insurers pass the savings from rebates on in different ways, including lower monthly premiums and co-pays, said AHIP’s Cathryn Donaldson.

Dusetzina said there is one caveat to the Medicare study: It is unclear how many drugs get a rebate and for how much because there is lack of transparency when it comes to rebates.

The paper’s final suggestion is about transparency. It says that federal regulators should require rebate data to be reported for individual drugs and then use that information to change Medicare’s benefit design in a way that “would lead to savings” for Medicare and its enrollees.