Drug Pricing, Shame, and Shortages

By Nicholson Price

Drug prices have been making waves in the news recently.  The most recent case is the huge price hikes of the EpiPen, which provides potentially life-saving automatic epinephrine injections to those with severe allergies.  Mylan, which makes the EpiPen, has raised its price some 450% over the last several years.  The EpiPen is a particularly problematic—and media-friendly—story because the emblematic use case is the kid in school who can’t breathe because she came into contact with peanuts.  Jacking up the price on something that’s not optional—for parents and for schools—seems heartless.  Thoughtful pieces have pointed out how the EpiPen price increases demonstrate problems with our health care system and drug/device approval system in general.

Other big recent cases that have hit the news include huge increases in the price of insulin, and, of course, Turing Pharmaceuticals’/Martin Shkreli’s ~5000% price hike on the drug Daraprim.  The EpiPen and Daraprim are especially notable because patents mostly aren’t involved—the effective monopoly appears to come from the delay or challenge in getting generic products approved by FDA (although the EpiPen itself also seems tough to make).  And, of course, drug prices aren’t regulated in the US the way they are in much of the world.

These stories seem crazy, cruel, and fascinating.  And they raise (for me, anyway) the question: what’s changed?  This seems like a relatively new phenomenon.  But FDA’s had a backlog for a while, and drug prices have long been unregulated. Read More

State Drug Price Cap Laws: How Do They Work?

By Rachel Sachs

Two weeks ago, I blogged here about various state bills designed to encourage transparency in the pharmaceutical industry, by requiring companies to disclose information about their research & development costs, marketing expenses, and prices charged to different purchasers. In that post, I glossed over the state initiatives to cap drug prices directly, but as these initiatives have been more recently in the news, I want to focus on them here and ask a basic question: can someone explain to me how they would work?

Let’s back up. Two states, California and Ohio, are considering ballot initiatives that propose to cap what drug manufacturers can charge to public payers in the state (such as Medicaid).  The texts of the initiatives are nearly identical, with a few state-specific differences in the enumeration of entities eligible to pay the capped price.  As clearly stated in a comprehensive POLITICO article earlier this week by Nancy Cook and Sarah Karlin-Smith, the initiatives “would require the state to pay no more for prescription drugs than the U.S. Department of Veterans Affairs — one of the few federal agencies allowed to negotiate drug prices.”

We can and should debate whether price caps like these are a good idea, as a policy matter, and the Cook & Karlin-Smith piece canvasses a number of the arguments on both sides.  But first, we should be clear that the laws we’re enacting can actually accomplish their intended purpose.  And if they can’t, we should acknowledge that publicly.  I see at least two primary obstacles to the implementation of these price cap initiatives, and since they’ve largely been absent from the public discussion, it’s useful to state them explicitly.

Read More

Can the United States Use Mortgage-Like Loans to Pay for High Cost Drugs?

By Elizabeth Guo

Pharmaceutical companies are making breakthrough drugs to cure diseases, but no one knows how to pay for them. In 2013 and 2014, FDA approved Solvaldi and Harmoni, which can cure hepatitis C in more than 90% of patients. Solvaldi and Harmoni cost $84,000 and $95,000, respectively, for a standard course of treatment. Government payers and health plans, without a good solution for providing Solvaldi and Harmoni to patients who need them, have restricted coverage of the drug to only those patients with advanced hepatitis C. Last year, Germany approved Glybera, a gene therapy that enables patients with lipoprotein lipase deficiency to produce the deficient enzyme. Glybera is expected to cost $1 million, and it is doubtful whether any payer could shoulder such a price.

Last week, MIT professor Andrew Lo proposed a new way of paying for these high-priced therapies: securitized consumer healthcare loans (HCLs). HCLs would function as mortgages for large healthcare expenses. Because the benefits of some therapies occur upfront, HCLs would allow consumers to pay for the value of their therapies over time, instead of in one upfront payment. The paper proposed two frameworks to govern HCLs. The first is a consumer-funded loan, where the patient borrows a loan to pay the upfront costs of the drug, and pays back the loan over time. The second framework operates similarly to the consumer-funded loan, except that private payers and government agencies assume the debt. Under this model, insurance companies could take the debt associated with the patient’s treatment then shift the debt onto the next payer if the patient changes insurance companies. Read More

NHPC 2016: Provider Engagement Can Unify Diverse Payment Reform Efforts

By Cornelia Hall, Master of Public Policy Candidate, Harvard Kennedy School, Class of 2017

This is the first entry in a three-part series on the AcademyHealth National Health Policy Conference, held in Washington, DC, on February 1-2, 2016. 

At AcademyHealth’s 2016 National Health Policy Conference earlier this month, payment reform was a pervasive theme.  Its prominence was not surprising.  Indeed, in early 2015, HHS Secretary Sylvia Burwell announced the agency’s goal to have 30% of traditional, fee-for-service Medicare payments tied to quality or value through alternative payment models by the end of 2016, and 50% by the end of 2018.  As the current sea change in health care moves the system towards these goals, the conference’s panelists explored various aspects of the transition to value-based payment. Speakers who discussed the issue included leaders in government, clinical practice, and private insurance.  They sent an overarching message that payment reform efforts will continue to take a variety of forms — on parallel tracks with cross-cutting themes — rather than a single approach.  Representatives from provider organizations particularly stressed the necessary groundwork for these efforts to be effective.

The Center for Medicare and Medicaid Innovation (CMMI) under the federal Centers for Medicare & Medicaid Services (CMS) is operating dozens of payment- and quality-focused models and demonstrations across the country.  The breadth of payment models and their varying degrees of success represent different approaches to health care reform, such as population- and episode-based payment.  On his panel, CMMI Deputy Director Dr. Rahul Rajkumar noted that this breadth is designed to appeal to diverse providers that differ in type and readiness for payment reform.  Indeed, a health care system that has operated for decades with multiple payers, little care coordination, fragmented use of technology, and inconsistent definitions of quality care is undergoing monumental transformation.  The transition from fee-for-service to value-based payment thus involves some experimentation to identify the most effective approach. Read More

Update: Another Wave of ICD Settlements

By Zack Buck

There has been an update to a story I recently blogged about here.

As announced by the Department of Justice (DOJ) on Wednesday, another 51 hospitals have settled allegations that the hospitals placed implantable cardioverter defibrillators (ICDs) in the chests of patients without complying with Medicare’s mandatory waiting periods.  These 51 settlements amount to $23 million, meaning that the DOJ’s ICD review has now has resulted in settlements with more than 500 hospitals totaling more than $280 million.

According to the DOJ, this is the final stage of the investigation, concluding an initiative that has highlighted the tension that exists between fraud enforcement, medical necessity, and reimbursement standards (recent articles here, here, and here).

President Obama Introduces Evidence Generation Strategy to Reduce High Drug Costs

By Elizabeth Guo

Addressing the high cost of drugs was at the top of President Obama’s list in his fiscal year 2017 budget, released last week. Many of his proposals were familiar. The President hoped to increase manufacturer contributions to prescription drug coverage under Medicare Part D and wanted to shorten the length of biologic market exclusivity from twelve to seven years. These proposals were also in the President’s fiscal year 2016 budget but were not put into place.

However, the budget also included a number of surprising, new proposals that underscore how post-market evidence might play an increasing role in controlling drug prices in coming years. Rachel Sachs has written about the role that the Centers for Medicare and Medicaid Services (CMS) can play in keeping down drug prices, and it seems like some of these ideas are gaining traction:

Modify reimbursement of Part B drugs. The White House estimates that changes to Medicare Part B payments could save the country $7.75 billion over ten years. Medicare Part B covers drugs and services dispensed in an outpatient setting. Many of the most expensive biologic drugs are currently covered under Medicare Part B. The budget proposal did not elaborate on how the White House hopes to change Part B payments, but the proposal likely refers to recommendations released by the Medicare Payment Advisory Commission (MedPAC) last June. MedPAC’s 2015 report recommended that Congress link Part B payments to clinical effectiveness evidence. For example, the government could group drugs with similar health effects and pay all drugs in each group the rate of least costly product in the group. This approach relies on having reliable clinical effectiveness data so that researchers can easily compare the relative effectiveness of two or more drugs. Read More

Happy New Year: From “Weltschmerz” to Pharmaceutical Innovation

By Timo Minssen

Dear readers and colleagues,

I would like to take this opportunity to wish you all a very happy, healthy and peaceful year 2016.

Reaching the end of 2015, I cannot stop thinking about the year that has passed. Being a native German, living in Sweden and commuting every week over the bridge to Copenhagen in Denmark – most recently with thousands of terrified refugees and border controls on the way back to Sweden – this year has left me with much astonishment and concern about the state of the European Union and our global situation. It appears to me as if the EU and other global leaders have focused far too much on tiny technicalities, while leaving the bigger issues untouched and disregarding crucial lessons of history. There are so many things that we must learn from 2015’s terrible events and alarming decisions, but also from the hope-giving agreements, incidents and initiatives. For me one of the most important take-aways is that everything is connected and that sustainable, realistic solutions not only require immediate actions. In my view, we need to think about long-term strategies both in more detail and from a bigger perspective. Due to the complexity of our most pressing problems this is a colossal task. It demands more knowledge, better communications, more collaboration and a more effective coordination of  the considerable skills and different competences that are already out there.

Returning to the actual topic of this blog, it becomes evident that this is also very much true for the health sector and the bio-pharmaceutical area. Not only the Ebola outbreakglobal health crises, IPR debates, dreadful business models and controversial FTA negotiations, but also scientific break troughs, new therapies, legislative action and novel US and EU approaches demonstrate very clearly how this area is left with many challenges and opportunities. The recently approved US 21st Century Cures Act and the new EU Clinical Trials Regulation, for example, show how legislative activities pursuing laudable goals might lead to unwanted adverse effects if they are not carefully enough considered. Read More

The Good, the Bad, and the Ugly: Physician Coverage under the ACA

By Elizabeth Guo

A recent study in JAMA by Dorner, Jacobs, and Sommers released some good and bad news about provider coverage under the Affordable Care Act (ACA). The study examined whether health plans offered on the federal marketplace in 34 states offered a sufficient number of physicians in nine specialties. For each plan, the authors searched for the number of providers covered under each specialty in each state’s most populous county. Plans without specialist physicians were labeled specialist-deficient plans. The good: roughly 90% of the plans covered more than five providers in each specialty. The bad: 19 plans were specialist-deficient and 9 of 34 states had at least one specialty deficient plan. Endocrinology, psychiatry, and rheumatology were the most commonly excluded specialties.

Here’s where it gets ugly.

Excluding certain specialists from coverage can be a way for insurers to discriminate against individuals with certain conditions by excluding them from their plans. By excluding rheumatologists, insurers may prevent enrolling individuals with rheumatoid arthritis; by excluding endocrinologists, insurers may prevent enrolling individuals with diabetes. Individuals with chronic conditions need to see specialists more frequently than healthier adults, and how easily a patient with chronic conditions can see a specialist can affect his health care outcomes.

The study adds to the growing body of empirical research showing that even after the ACA, insurers may be structuring their plans to potentially discriminate against individuals with significant chronic conditions. In January, Jacobs and Sommers published a study showing that some plans were discriminating against patients with HIV/AIDS through adverse tiering by placing all branded and generic HIV/AIDS drugs on the highest formulary tier. Another study found that 86% of plans place all medicines in at least one class on the highest cost-sharing tier. These studies show that despite being on a health plan, individuals with certain chronic conditions may still have trouble accessing essential treatments and services. Read More

Our Curious Medicare Vaccine Reimbursement System

By George Maliha, Harvard Health Law Society

As flu season begins, we are bombarded by ubiquitous reminders to get our flu shot. So, it is a good opportunity to reflect on how we provide vaccines to our fellow citizens 65 and older. By law, Medicare Part B covers 4 preventive vaccines (flu, two pneumococcal, and hepatitis B for medium-to high-risk patients). Part D picks up the rest, namely shingles, TDaP, and any other commercially available vaccine. But, that’s where the trouble begins.

When Congress passed Part D, the vaccines recommended for those 65 or older were basically covered by Part B. Now, they aren’t. In 2006, the zoster (or shingles) vaccine came onto the market. In 2010, the recommendations for the TDaP (the P for pertussis or whooping cough being the most relevant here) changed to include the elderly.

But, so what, they’re still covered, right? Read More

Clarity for an “Unforgiving” and “Potentially Unworkable” Rule

By Zack Buck

In a case previously blogged about here, last week, the Southern District of New York denied Defendants’ motion to dismiss in U.S. ex rel. Kane v. Continuum Health Partners, No. 11-2325, in a major decision for health care entities unclear on the parameters of overpayment liability under the False Claims Act (FCA).

The case centers on Continuum Health Partners, Inc. (Continuum)—which operated three New York City area hospitals—and its erroneous receipt of overpayments from the New York Medicaid program based on a software glitch. The overpayments began in 2009; by September 2010, the New York State Comptroller had notified Continuum. Continuum tapped Robert Kane, an employee, to review the billing data and identify all claims that were incorrect. On February 4, 2011, Kane emailed a spreadsheet to superiors that contained 900 claims that may have been erroneously billed. The spreadsheet was “overly inclusive” and “approximately half of the claims listed therein were never actually overpaid.” On February 8, Kane was terminated.

Read More