Tagged Chronic Disease Care

Measure To Cap Dialysis Profits Pummeled After Record Spending By Industry

Record-breaking spending by the dialysis industry helped doom a controversial California ballot measure to cap its profits.

The industry, led by DaVita and Fresenius Medical Care, spent nearly $111 million to defeat Proposition 8, which voters trounced, 62 to 38 percent, and appeared to approve in just two of 58 counties. The measure also faced strong opposition from medical organizations, including doctor and hospital associations, which argued it would limit access to dialysis treatment and thus endanger patients.

The opposition presented a powerful message that “if you can’t get dialysis, you will die,” said Gerald Kominski, a senior fellow at the UCLA Center for Health Policy Research. “If you didn’t know that, the commercials made it clear.”

Despite arguments about the outsize profits of dialysis companies, Kominski said the “Yes on 8” case wasn’t as clear. The measure, sponsored by the Service Employees International Union-United Healthcare Workers West, sought to cap dialysis clinic profits at 115 percent of the costs of patient care. Revenues above that amount would have been rebated primarily to insurance companies. Medicare and other government programs, which pay significantly lower prices for dialysis, wouldn’t have received rebates.

The union raised nearly $18 million — a large sum for most initiatives but about 16 percent of what the opposition mustered.

The proposition also was poorly written and difficult for voters to understand, said Erin Trish, associate director of health policy at the USC Schaeffer Center for Health Policy and Economics. Trish said she wasn’t surprised by the landslide defeat given the widespread ads against the initiative about the potential harms to patients. “The message came through loud and clear,”  she said.

Trish said health care industry groups genuinely viewed Proposition 8 as a poor initiative — but they also didn’t want to see rate regulation. “This is not what most of these associations want to open the door to,” Trish said.

Generally speaking, said Jessica Levinson, a professor at Loyola Law School, voters’ default on initiatives is “no.” In addition, money spent against an initiative is usually more effective than money spent for it. Levinson said people weren’t 100 percent sure what they were voting on with Proposition 8. All of those factors made passage “an uphill battle,” she said.

Kathy Fairbanks, a spokeswoman for the opposition, credited the electorate for properly sorting out the facts. “Voters did their homework and saw who lined up on both sides,” Fairbanks said. “All the leaders of the medical community were against Proposition 8 because of the negative impact it would have had on patients and access to dialysis.”

Proponents of the measure argued that highly profitable dialysis companies don’t invest enough in patient care and that they need to hire more staff and improve clinic safety. Opponents said passage would have forced clinics to cut their hours or close altogether, resulting in more emergency room visits by dialysis patients.

SEIU-UHW said the opponents tried to “scare and mislead” voters. It vowed to continue targeting profitable dialysis companies with another measure on the 2020 ballot, as well as through legislation.

“We exposed problems within the dialysis industry and we put a spotlight on a sector that has operated in the shadow for far too long,” said Sean Wherley, spokesman for the “Yes” campaign. “But we are not finished yet. … The need is still there to hold this industry accountable.

He added that the union is proud to have put a spotlight on “the inflated charges that drive up health care costs for all California.”

Critics say that SEIU-UHW, which represents more than 95,000 workers in California, uses state and local ballot initiatives as a way to pressure legislators and gain bargaining power. They’ve sponsored measures on such topics as hospital and clinic funding, access to affordable insurance and training for in-home caregivers.

The union maintains its goal is simply to improve health care.

Two other Bay Area initiatives sponsored by SEIU, aiming to limit hospital pricing, also were defeated Tuesday, indicating that the ballot box may not be the best place to address concerns about costs in the health care industry.

“This is too complicated to do by ballot proposition,” Trish said.

Dialysis patients participated heavily in both the pro and con sides of the initiative, appearing in dramatic television ads and presenting their personal stories on social media.

Lili Hernandez, 27, who began treatment four years ago, showed up to her appointments at a DaVita clinic in Hollywood with “Yes on Prop. 8” placards even as  the clinic posted “No” signage, she said.

Hernandez supported the initiative because she believes the corporations should be held accountable, she said. “They take advantage of how much money they can charge, but don’t give the best service,” she said. “Too many people are at risk of infection and neglect.”

She woke up Wednesday feeling defeated. “I was awake last night, checked results online, had my cry and went to sleep,” she said, adding that she thinks people were confused about the initiative and believed the “false ads.”

Meanwhile, DeWayne Cox, a dialysis patient from Los Angeles, expressed relief. “This means that voters got the message, they understood,” he said.

Cox, 56, said he comes from a union family and believes in unions, but this was a “terrible” move by SEIU because it could lead to cutbacks in services. “Not only was this scary for me, but they made me angry,” he said, noting concerns about potential cutbacks in services. “If their motive was truly to help patients, they would have written a better, more precise measure.”

The measure became the most expensive race in California this year. Industry giants DaVita and Fresenius Medical Care, which operate nearly three-quarters of the chronic dialysis clinics in California, were responsible for more than 90 percent of the contributions in opposition to the measure

The California Medical Association, the California Hospital Association and the California chapter of the American College of Emergency Physicians all opposed Proposition 8. “Our concern was the impact on patient care,” said hospital association spokeswoman Jan Emerson-Shea. “If dialysis clinics were forced to close and patients needed care, we are the only place within the health care system that is open 24/7.”

Municipal ballot initiatives sponsored by SEIU-UHW targeted Stanford Health Care in Livermore and Palo Alto by attempting to cap prices at 115 percent of the “reasonable” cost of care. Under the initiatives, hospitals and other medical providers would have been required to pay back any charges above the cap each year to private commercial insurers. The initiatives failed dramatically, losing 77 to 23 percent in Palo Alto and in Livermore, 82 to 17 percent.

Voters did approve three statewide health care initiatives Tuesday, however:

  • Proposition 2 won 61 to 39 percent, allowing the state to issue $2 billion in bonds for housing for homeless people in need of mental health services. Bond money will be distributed to counties and repaid with proceeds from the Mental Health Services Act, which levies a 1 percent tax on personal incomes of $1 million and above.
  • Proposition 4, which won by the same margin, allows the state to distribute $1.5 billion in bonds to help the state’s 13 children’s hospitals’ pay for construction and equipment. It was the third time in 14 years that voters had agreed to subsidize the hospitals.
  • Proposition 11, passing with  59 percent of the vote, requires private ambulance employees to remain on call during their breaks — just as firefighters, policemen and other public emergency workers do.

Samantha Young and Harriet Rowan contributed to this report.


KHN’s coverage of these topics is supported by
California Health Care Foundation
and
Blue Shield of California Foundation

This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

Ad Check: What Happens If California Limits Dialysis Center Profits?

California voters are being bombarded with ads in what is the most expensive ballot measure campaign this year. They are being asked to decide Tuesday whether the state should limit the profit of kidney dialysis centers to 15 percent over the cost of patient care, with revenue above that rebated primarily to insurers.

What exactly would happen if voters approve Proposition 8 is still vague, and the $127 million raised to persuade voters hasn’t made it any clearer.

Both sides are making bold statements. But even the Legislative Analyst’s Office, nonpartisan officials who advise the state Legislature, said Prop 8 could result in a “net positive impact in the low tens of millions of dollars to net negative impact in the tens of millions of dollars.” In other words: No one knows.

Here’s what both sides had to say and what they base it on.

Against Proposition 8

The dialysis companies, mostly DaVita and Fresenius Medical Care, have contributed more than $110 million to fight Prop 8, more than six times what the “Yes on 8” campaign has raised. Their ads feature concerned health care professionals and dialysis patients warning voters of the terrible effects Prop 8 would have on dialysis patients and taxpayers in California.

This ad is just one in a series in heavy rotation on TV stations across the state. Like most of the “No on 8” advertisements, it prominently cites the Berkeley Research Group when claiming Prop 8 “would force many dialysis clinics to shut down, and threaten the care that patients need to survive.”

The narrator of the ad goes on to say “studies show Prop 8 will increase health care costs by hundreds of millions of dollars,” again citing the Berkeley Research Group.

The Berkeley Research Group is a large international consulting firm hired by the “No on 8” committee to analyze the proposition’s economic impact. It was paid more than $200,000 by the committee, according to campaign finance reports filed with the California secretary of state.

The consulting firm — which is not affiliated with the University of California — based its analysis on financial data from dialysis clinics around the state, including self-reported totals for direct patient care, quality improvements and “non-allowable” costs. Non-allowable costs, which might include some management staff positions and corporate overhead costs, will be ironed out through a public rule-making process if Prop 8 is passed.

The researchers used their own interpretation of non-allowable costs, took that to calculate how many clinics would surpass the 15 percent margin, and then applied the reimbursements that Prop 8 would require to conclude that “most clinics will migrate to having negative operating margins.” The analysis estimated that Prop 8 would increase health care costs for taxpayers by between $12 million and $2.6 billion annually.

Whether that happens depends on how clinics could adjust their operations to decrease their expenses that are not considered allowable patient care costs.

There is nothing unusual about relying on consultants to supply ammunition for a political campaign. “The effort to marshal research to support an advocacy campaign is not at all uncommon,” said Edward Walker, a sociology professor at UCLA specializing in political lobbying by businesses. He also pointed out that the advocacy campaigns often try to distance themselves from the research they pay for.

The Berkeley Research Group report leaves no room for uncertainty. “It is certain that Prop 8 will result in the closure of numerous clinics and the withdrawal of dialysis services from hundreds of thousands of patients,” the report said.

For Proposition 8

The Yes committee is funded almost exclusively by the Service Employees International Union-United Healthcare Workers West. The union has long fought to organize workers at dialysis clinics. Rather than focus on Prop 8’s possible effects, the “Yes” ads criticize the dialysis industry in general. The labor union has contributed more than $17 million to the “Yes on 8” committee, the largest amount SEIU has ever shelled out.

This ad starts out dramatically: “$150,000 a year,” the narrator intones. “That’s how much big dialysis corporations charge some patients, a 350 percent markup over the cost of care.” The ad doesn’t cite a source, but the figure roughly matches what industry financial analysts say private health insurance pays for dialysis.

Dialysis companies argue that the low reimbursement rate from Medicare — which covers about 90 percent of patients — is the reason they are forced to charge more for the 10 percent who are covered by private insurance. Those private insurance payments allow them to remain profitable. SEIU argues that high rates for private insurance contributes to higher overall health care costs and points out that the dialysis companies have a higher profit margin than hospitals in the state.

DaVita, a for-profit company that runs half of all dialysis clinics in California and is the biggest contributor to the “No on 8” campaign, reported profits of $1.8 billion on revenue of $10.9 billion last year, almost all of which came from its dialysis business.

The “Yes on 8” ad also cites an investigation by ProPublica, a nonprofit news organization, which found that the U.S. has one of the highest fatality rates for dialysis in the industrialized world. The narrator says, “Dialysis corporations make a killing, driving up insurance rates while patients report blood stains and cockroaches in their clinics,” while a quote from the ProPublica article is flashed on the screen. It says: “dangerous conditions, inadequate care, higher-than-expected mortality rates.”

While the ProPublica report did find troubling conditions in dialysis clinics around the country, the allegation of cockroaches was from a different report. ProPublica’s investigation examined records from more than 1,500 clinics in a number of states, including California, and it noted filthy or unsafe conditions in almost half of the units. But it doesn’t say the problem is any better or worse in California.

The “Yes on 8” committee’s communications approach is part of an ongoing campaign to challenge the power and profits of large dialysis companies, and organize their workers.

“This is in part a proxy battle between the labor unions and the dialysis centers,” Walker said. “It’s a way to increase the pressure and the leverage.”


This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

New Heart Drug Spotlights Troubling Trends In Drug Marketing

At the end of September, Amarin Corp. teased some early findings for Vascepa, its preventive medicine for people at risk of heart disease. The claim was astounding: a 25 percent relative risk reduction for deaths related to heart attacks, strokes and other conditions. Headlines proclaimed a potential game changer in treating cardiovascular disease. And company shares quickly soared, from $3 a share to about $20.

Vascepa is Amarin’s only product. The company wants to turn its pill made of purified fish oil into a cash cow, allowing it to staff up both in the United States and abroad so it can sell doctors and millions of consumers on its medical benefits. Although the product has been on the market for more than five years, its first TV ad campaign rolled out this summer in anticipation of the study findings.

Except there is one problem. The particulars of the scientific study on which this claim was based remain a mystery.

Amarin’s preliminary announcement came via a news release on Sept. 24. The company plans to release detailed findings in November at the national American Heart Association conference. Then early next year, it plans to seek Food and Drug Administration approval to use the drug as a preventive for a range of heart conditions, beyond its current role targeting high triglyceride levels.

In the interim, a battle is brewing among physicians, cardiovascular experts and pharma watchers who say Vascepa brings to the foreground troubling trends in the marketing and advertising of new drugs. Companies sometimes promote new products, but withhold the detailed findings until much later. The consequences for both consumers and the health system are vast.

“Until all the data is available for review by the public and medical community, it’s really premature to see some of the cheerleading that’s being done,” said Dr. Eric Strong, a hospitalist and clinical assistant professor at Stanford School of Medicine. “It’s harder to change people’s minds once you have these rosy pictures.”

John Thero, Amarin’s CEO, argued that the imminent release of the drug’s complete picture should alleviate those concerns.

In unveiling topline findings in a news release, he said, the company’s playbook doesn’t diverge from that of other pharmaceutical makers, and provides a necessary level of disclosure for shareholders.

But it’s the specifics in the data — for instance, which patients benefited, by how much, their absolute risk reduction and which precise conditions saw improvement — that illustrate whether a product is cost-effective, said medical and drug experts.

That’s especially true in the case of Vascepa, whose manufacturer is working hard to convince people the product is clinically superior to ordinary fish oil supplements. Fish oil, which can retail for a few dollars a bottle, has long been promoted as a preventive for heart disease. But the substance has never held up in clinical trials as a way to systematically lower disease risk, said experts.

That’s where Amarin’s product is superior, Thero said.

The manufacturer has tried to limit competition by seeking to block other fish oil products —arguing to the U.S. International Trade Commission that omega-3 supplements aren’t equivalents, and calling on the FDA to block a chemical component of fish oil, known as EPA and marketed by a number of supplement companies, from being sold as a dietary supplement. Amarin hasn’t yet prevailed.

Preston Mason, a biologist who consults for Amarin and has advocated on its behalf, argued that ordinary fish oil supplements carry risks because they are not regulated or approved by the FDA, which does oversee prescription drugs like Vascepa.

How Vascepa performs against regular fish oil remains unknown. Amarin’s trial compared the drug against a placebo, not over-the-counter supplements.

Vascepa itself isn’t new. It was approved in 2012 as a remedy for extremely high triglyceride levels, which can put patients at risk for pancreatic problems. But reducing that fat hadn’t been conclusively tied to, say, lowering the risk of heart attacks, or other major cardiac problems.

That link, ostensibly, is what Amarin is trying now to assert. And there’s plenty of money to be made if it succeeds.

As of last December, Vascepa retailed for about $280 for a month-long supply, a list price increase of 43 percent over five years, though the company says its net sale price has stayed the same. (That difference would come if Amarin increased the size of rebates, or discounts it provides, commensurate with price hikes.)

Now, citing the drug’s potentially increased value, Amarin has declined to say whether it will change the price again — though Thero said he sees greater profit potential if the company increases sales volume rather than price.

This gets at the crux of this debate. If a company makes available the technical details of a product, but only after hyping the findings, and if the details undercut some of that buzz — is it too late?

Dr. Khurram Nasir, a Yale cardiologist, acknowledged that it’s unclear how effective Vascepa really is, but maintained those ambiguities will be cleared up soon enough.

“As the findings reveal themselves, there will be a lot of discussion around cost effectiveness, and whether this is worth the spend,” Nasir said.

Mason, the Amarin scientist, said FDA scrutiny can also alleviate concerns about overhype.

But others worry the perception of Vascepa’s effectiveness is now set.

“People are weighing in with really strong language, without enough information,” said Dr. Lisa Schwartz, who co-directs the Dartmouth Institute’s Center for Medicine and Media and studies effective scientific communication.

That has both clinical and financial consequences, she added. Doctors are more likely to prescribe a product that’s been heavily promoted, even if subsequent discussion indicates the drug isn’t as powerful as initially implied. And manufacturers can cash in, whether through increased company stock market value or by charging higher list prices.

For Vascepa, the central question is which specific heart conditions saw risk reduction, she and others said. In its news release, Amarin noted a “composite outcome” — that is, the 25 percent relative improvement encompassed all conditions for which the researchers tested.

“People are saying, Wow, it reduced heart attack, stroke and blah, blah, blah — when it may just reduce the least important one,” said Dr. Steven Woloshin, Schwartz’s research partner.

Another issue: The Vascepa trial focused on a specific population — patients with high triglyceride levels plus elevated risk of cardiovascular disease or diabetes who were already taking a daily statin. That means any proof of benefit is limited to that group.

Woloshin and Schwartz both suggested that nuance could get lost in translation. “It is this much narrower, high-risk population,” Schwartz said.

Woloshin added, “The fear is [the message] would generalize to anyone with high triglycerides.”

This concern is amplified by a 2016 court settlement in which the FDA permitted Amarin to market Vascepa to audiences for whom it hasn’t been specifically approved — so long as the company doesn’t say anything untrue about the drug.

Thero said Amarin’s marketing of Vascepa has stayed, and will remain, consistent with what is factual and relevant.

“We are proceeding consistently with what the FDA has guided,” he said.

But, some experts said, the 2016 settlement could unlock the door to wider marketing of Vascepa’s off-label use, implying the pill benefits more people than it actually does.

“They’ll take pains to show how different this is from everything out there … and its results in these populations,” said Dr. Ameet Sarpatwari, an epidemiologist and lawyer at Harvard Medical School, who studies the pharmaceutical industry. “What they can’t do is say it will be beneficial to these other populations. But they can hint at that.”