Tagged Drug Costs

Podcast: ‘What The Health?’ Meanwhile, In Other Health News…

Most followers of health policy have been consumed lately by the potential repeal or alteration of the Affordable Care Act, as well as the ongoing open enrollment for individual insurance for 2018.

But that’s far from the only health news out there. In this episode of “What the Health?” Julie Rovner of Kaiser Health News, Joanne Kenen of Politico, Alice Ollstein of Talking Points Memo, and Sarah Jane Tribble of Kaiser Health News discuss some of the important but under-covered stories you might have missed this fall, including prescription drug price fights and women’s reproductive health.

Among the takeaways from this week’s podcast:

  • Lobbyists are coming out of the woodwork – spending more than $42 million over the last quarter — on a battle over whether Medicare should reduce what it pays for drugs at hospitals that primarily serve low-income patients.
  • Massachusetts has passed its own guarantee of no-cost contraceptives for women, after the Trump administration rolled back the federal health law provision.
  • The health law’s individual mandate is front and center in the tax debate, but it’s not clear how the Senate will come down on it. Some GOP moderates are suggesting that they might support the repeal if another bill to help stabilize the individual insurance market is approved. Yet at the same time, the White House is signaling that it might be fine dropping the mandate.
  • Of course, if Congress opts not to tackle the mandate, the White House could take some actions later to neutralize the provision. That could add another log on the fire as critics seek help through the courts to stop administration actions.

Plus, for “extra credit,” the panelists recommend their favorite health stories of the week they think you should read, too.

Julie Rovner: The Washington Post and Kaiser Health News’ “Ambulance trips can leave you with surprising – and very expensive – bills,” by Melissa Bailey.

Joanne Kenen: The New York Times’ “Skin Cancers Rise, Along With Questionable Treatments,” by  Katie Hafner and Griffin Palmer.

Alice Ollstein: The Washington Post’s “What the parasites in a defector’s stomach tell us about North Korea,” by Cleve R. Wootson Jr.

Sarah Jane Tribble: The Washington Post’s “How we got the story about monkeypox,” by Lena H. Sun.

To hear all our podcasts, click here.

And subscribe to What the Health? on iTunesStitcher or Google Play.

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Massachusetts Grabs Spotlight By Proposing New Twist On Medicaid Drug Coverage

In the absence of new federal policies to tame break-the-bank drug prices, Massachusetts’ state Medicaid program hopes to road-test an idea both radical and market-driven. It wants the power to negotiate discounts for the drugs it purchases and to exclude drugs with limited treatment value.

“This is a serious demonstration proposal,” said Sara Rosenbaum, a health policy expert and professor at George Washington University. “They’re not simply using [this idea] as an excuse to cut Medicaid. They’re trying to take a step toward efficiency.”

If the Department of Health and Human Services approves the Bay State’s plan, others will likely take similar action. According to the most recent federal data, Medicaid spending on prescription drugs increased about 25 percent in 2014 and nearly 14 percent in 2015.

Currently, state Medicaid programs are required to cover almost all drugs that have received Food and Drug Administration approval, including multiple drugs from different manufacturers used for the same purpose and in the same category. In exchange, manufacturers must discount those drugs — typically based on a set percentage of the list price, specified by federal law. The idea is Medicaid’s vulnerable beneficiaries get medications they need and the state doesn’t go broke paying for them.

As drug prices soar, states say, those fractional rebates no longer suffice to defray the burden of rising costs.

Take, for instance, the hepatitis C cures released in recent years. The price tags come in tens or even hundreds of thousands of dollars and — even after rebates — have cost Medicaid billions. In turn, some states tried to restrict access, so only the sickest patients could get the drugs. Advocates filed suit in response and won based on the argument that such limits violated Medicaid’s statutory drug benefit.

State officials contend that the current Medicaid rebate system may encourage drug price inflation, since a set percentage of a higher price yields a greater profit. Also, the legal requirement to cover most prescriptions leaves little wiggle room to negotiate a better price.

So, Massachusetts wants to go a different route, requesting a federal exemption known as a Section 1115 waiver, which is meant to let states test ways of improving Medicaid. It wants to pick which drugs it covers based on most beneficiaries’ medical needs and which medicines demonstrate the highest rates of cost effectiveness.

It says it will be able to negotiate better prices as a result, saving public dollars while maintaining patients’ access to needed therapies.

The federal Centers for Medicare & Medicaid Services, which will ultimately approve or reject Massachusetts’ proposal, has no deadline for its decision. A Massachusetts spokeswoman said officials are pushing for an answer by year’s end.

Already, though, the pitch is turning heads.

“This is absolutely something a lot of other states are looking very closely at,” said Matt Salo, executive director of the National Association of Medicaid Directors.

If the request is approved, agreed Jane Horvath, a senior policy fellow at the National Academy for State Health Policy, other states would follow suit “in about five minutes.”

Critics worry this change could make it harder for low-income people to get needed medications, without necessarily providing them an alternative. In the past decade, though, it has become commonplace for people with commercial insurance to have limited drug choices — meaning only those medicines listed on a plan’s formulary are covered.

The Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry’s trade group, has already lodged its displeasure, saying this would limit consumer access and is unnecessary on top of the rebates Medicaid programs receive.

“The pharmaceutical industry has a reputation for being litigious. This would be a big deal for them,” said Andy Schneider, a Medicaid expert at Georgetown University, who worked at CMS under the Obama administration. If CMS approves the waiver, analysts said, the industry would likely sue, though PhRMA wouldn’t comment on potential legal action.

But federal approval is no sure thing.

On one hand, the Trump administration has encouraged states to test changes that would run Medicaid more like a private insurance plan. Through that frame, Massachusetts’ approach seems a logical fit. Though a formal strategy has not been released, President Donald Trump has said his administration intends to bring drug prices “way down.”

On the other hand, analysts said, CMS’ decision-making regarding waivers has proven unpredictable. The agency declined to comment beyond confirming it was reviewing Massachusetts’ request.

It’s clear why states are interested. On average, between 25 and 30 percent of state budgets go to Medicaid, and program directors across the country identify rising drug costs as a major contributor to spending increases, according to a recent survey by the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

In Massachusetts, Medicaid accounts for about 40 percent of the state’s budget. Prescription-drug spending has in the past seven years more than doubled — from about $917 million in 2010 to about $1.94 billion last year, according to figures provided by the state health department.

If the waiver is approved, the state’s Medicaid program would cover at least one medication per therapeutic class — that is, per specific medical need.

It also would have an appeals process for people to get their off-formulary drugs covered, if they’re medically necessary.

Number crunchers say it’s hard to estimate what this would save. It depends on how the state negotiates, how industry responds and what the program covers. The potential result is significant, though.

“You’d have to be foolish not to consider this,” said Ameet Sarpatwari, an epidemiologist and lawyer at Harvard Medical School, who studies drug pricing and related legislation.

But consumer groups worry about Medicaid’s low-income beneficiaries, even as they acknowledge that rising drug costs are unsupportable for state budgets.

“The Medicaid population is different from the commercially insured — they’re more vulnerable and have a lot more going on in their lives, and are generally poorer. So they have fewer resources to try to get the services and prescription drugs they need,” said Suzanne Curry, associate director of policy and government relations at Health Care For All, a Massachusetts-based advocacy group.

Although Massachusetts, a state with a long history of innovation, has committed to making sure patients get needed medicine, “you have to ask what will real-world implementation looks like,” said Benjamin Sommers, an associate professor of health policy and economics at Harvard’s public health school. Appeals processes, he noted, can be onerous or restrictive.

And even if Massachusetts receives federal approval, it still couldn’t challenge the cost of certain expensive drugs that are the only offering in their therapeutic class. For instance, Spinraza, which treats the rare but debilitating disease of spinal muscular atrophy, has a price tag of $750,000 for an initial year of treatment. With no therapeutic equivalent, it would still have to be covered.

But states are desperate to push back in new ways and however they can. “We have seen in the past year … drugs that have almost bankrupted state budgets,” Sarpatwari said. “There will be many other states that will be interested in following this lead.”

KHN’s coverage of prescription drug development, costs and pricing is supported by the Laura and John Arnold Foundation.

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Medicare Seeks Comment On Ways To Cut Costs Of Part D Drugs

Noting that the true price of a drug is often hidden from consumers, Medicare officials requested comments late Thursday on how to use discounts and rebates to help decrease what enrollees pay for prescriptions.

The proposal request, buried in hundreds of pages released late Thursday afternoon, asked for public comment on how to share the rebates and discounts that are negotiated by manufacturers, pharmacists and insurers. Insurers and pharmacy benefit managers, or PBMs, administer Medicare’s Part D drug program and negotiate behind-the-scenes fees and discounts that are often hidden from public view.

Officials at Medicare “are asking: ‘Tell us what you want,’” said Jack Hoadley, a commissioner with the Medicare Payment Advisory Commission and a health policy analyst at Georgetown University. “They are open to ideas both around manufacturer rebates and the pharmacy price concessions.”

Requests for comments are open until Jan. 16 and, Hoadley said, it may be a challenge to institute any changes before 2020. But other parts of the proposed rule are more likely to take effect sooner. Those include:

  • Allowing enrollees to buy drugs at the pharmacy they prefer, by revising participation rules to motivate more local pharmacies to participate in the program.
  • Lowering drug costs by allowing for midyear changes to prescription drug formularies when a generic becomes available.
  • Treating lower-cost drugs called biosimilars, such as cancer drug Zarxio, the same as generics when determining how much they cost out-of-pocket.

While the request for information on the fees and discounts is not yet a proposal, pressure has been building for the administration to take action.

Earlier this year, the Centers for Medicare & Medicaid Services (CMS) released a fact sheet that set the stage for change, describing how the fees kept Medicare Part D and monthly premiums lower but translated to higher out-of-pocket spending by enrollees and increased costs to the program overall.

Supporters of a rule change say they want the fees disclosed and for them to be applied to what enrollees pay for their drugs. However, there are questions about how the rule would work and whether it would drive up premium prices for Medicare Part D plans.

“There’s a potential to bring about the price reductions at the point of sale,” Hoadley said. “That might come at the expense of higher premiums. Money is going to move from one pot to another.”

In the proposal out Thursday, CMS writes that when manufacturer rebates and pharmacy price concessions are not reflected at the point of sale, Medicare enrollees might get a break with lower premiums but “end up paying a larger share of the actual cost of a drug.”

Congress has also raised concerns, sending letters to CMS officials asking about transparency, sharing the discounts with enrollees and introducing related legislation.

When Sen. Chuck Grassley (R-Iowa) and 10 other senators sent a letter in July to the agency asking for more transparency in the fees, CMS Administrator Seema Verma responded last month that they were analyzing the issue.

KHN’s coverage of prescription drug development, costs and pricing is supported by the Laura and John Arnold Foundation.

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Pressure Builds To Cut Medicare Patients In On Prescription Deals

Medicare enrollees, who have watched their out-of-pocket spending on prescription drugs climb in recent years, might be in for a break.

Federal officials are exploring how beneficiaries could get a share of certain behind-the-scenes fees and discounts negotiated by insurers and pharmacy benefit managers, or PBMs, who together administer Medicare’s Part D drug program. Supporters say this could help enrollees by reducing the price tag of their prescription drugs and slow their approach to the coverage gap in the Part D program.

The Centers for Medicare & Medicaid Services (CMS) could disclose the fees to the public and apply them to what enrollees pay for their drugs. However, there’s no guarantee that such an approach would be included in a proposed rule change that could land any day, according to several experts familiar with the discussions.

“It’s obvious something has to be done about this. This is causing higher drug prices for patients and taxpayers,” Rep. Earl “Buddy” Carter (R-Ga.), a pharmacist, said this week.

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While Medicare itself cannot negotiate drug prices, the health insurers and PBMs have long been able to negotiate with manufacturers who are willing to pay rebates and other discounts so their products win a good spot on a health plan’s list of approved drugs.

Federal officials described these fees in a January fact sheet as direct and indirect remuneration, or DIR fees.

In recent years, pharmacies and specialty pharmacies have also begun paying fees to PBMs. These fees, which are different than the rebates and discounts offered by manufacturers, can be controversial, in part, because they are retroactive or “clawed back” from the pharmacies.

The controversy is also part of the reason advocates, such as pharmacy organizations, have lobbied for this kind of policy change.

PBMs have long contended that they help contain costs and are improving drug availability rather than driving up prices.

Pressure has been building for the administration to take action. Earlier this year, the federal agency’s fact sheet set the stage for change, describing how the fees kept Medicare Part D monthly premiums lower but translated to higher out-of-pocket spending by enrollees and increased costs to the program overall.

In early October, Carter led a group of more than 50 House members in a letter urging Medicare to dedicate a share of the fees to reducing the price paid by Part D beneficiaries when they buy a drug. Also in the House, Rep. Morgan Griffith (R-Va.) introduced a related bill.

On the Senate side, Chuck Grassley (R-Iowa) and 10 other senators sent a letter in July to CMS Administrator Seema Verma as well as officials at the Department of Health and Human Services asking for more transparency in the fees — which could lead to a drop in soaring drug prices if patients get a share of the action.

A response from Verma last month notes that the agency is analyzing how altering DIR requirements would affect Part D beneficiary premiums — a key point that muted previous political conversations.

But advocates say the tone of discussions with the agency and on Capitol Hill have changed this year. That’s partly because Medicare beneficiaries have become more vocal about their rising out-of-pocket costs, increasing scrutiny of these fees.

Ellen Miller, a 70-year-old Medicare enrollee in New York City’s borough of Queens, sent a letter to the Trump administration demanding lower drug prices. Miller’s prescription prices went up this year, sending her into the Medicare “doughnut hole” by April, compared with October in 2016. With coverage, Miller pays about $200 a month for several prescriptions that help her cope with COPD, or chronic obstructive pulmonary disease, as well as another chronic illness.

In the doughnut hole, where coverage drops until catastrophic coverage kicks in, her out-of-pocket costs climb to $600 a month.

It’s “ridiculous, and that doesn’t count my medical bills,” Miller said.

The number of Medicare Part D enrollees with high out-of-pocket costs, like Miller, is on the rise. And in 2015, 3.6 million Medicare Part D enrollees had drug spending above the program’s catastrophic threshold of $7,062, according to a report released this week by the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

Supporters of the rule change say making the fees more transparent and applying them to what enrollees pay would provide relief for beneficiaries like Miller.

The Pharmaceutical Care Management Association (PCMA), which represents the PBMs who negotiate the rebates and discounts, says changing the fees would endanger the Part D program.

“In Medicare Part D, you have one of the most successful programs in health care,” said Mark Merritt, president and chief executive of PCMA. “Why anybody would choose to destabilize the program is beyond me.”

CMS declined to comment on a vague reference to a pending rule change, which was posted in September.

For now, though, according to the CMS fact sheet, the fees pose two compounding problems for seniors and the agency:

  • Enrollees pay more out-of-pocket for each drug, causing them to reach the program’s coverage gap quicker. In 2018, the so-called doughnut hole begins once an enrollee spends $3,750 out-of-pocket and ends at $5,000, and then catastrophic coverage begins.
  • Medicare, thus taxpayers, pays more for each beneficiary. Once enrollees reach the threshold for catastrophic coverage, Medicare pays the bulk cost of the drugs.

CVS Health, one of the nation’s top three PBMs, released a statement in February calling the fees part of a pay-for-performance program that helps improve patient care. The fees, CVS noted, are fully disclosed and help drive down how much Medicare pays plans that help run the program.

“CVS Health is not profiting from this program,” the company noted.

Express Scripts, also among the nation’s top three PBMs, agreed that the fees lower costs and give incentives for the pharmacies to deliver quality care. As for criticism from the pharmacies, Jennifer Luddy, director of corporate communications for the company, said, “We’re not administering fees in a way that penalizes a pharmacy over something they cannot control.”

Regardless, even if a rule is changed or a law is passed, there is some question as to how easily the fees can translate into lower costs for seniors, in part because the negotiations are so complicated.

When the Medicare Payment Advisory Commission, which provides guidance to Congress, discussed the negotiations in September, Commissioner Jack Hoadley thanked the presenters and said, “In my eyes, what you’ve revealed is a real maze of financial … entanglements.”

Tara O’Neill Hayes, deputy director of health care policy at the conservative American Action Forum, said passing on the discounts and fees to beneficiaries when they buy the drug could be difficult because costs crystallize only after a sale has occurred.

“They can’t be known,” said Hayes, who created an illustration of the negotiations.

“There’s money flowing many different ways between many different stakeholders,” Hayes said.

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Categories: Cost and Quality, Medicare, Pharmaceuticals

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Laws To Equalize Cancer Patients’ Out-Of-Pocket Costs Provide Uneven Protection

Laws passed by many states that require health plans to charge the same cost-sharing amounts for cancer patients receiving chemotherapy — regardless of whether they get the medication intravenously or take a pill or liquid by mouth — are providing uneven pocketbook protection, according to a new study.

These “parity” laws became popular as the number of pricey anti-cancer oral medications grew, but consumers were seeing a disparity in how insurance handled the patients’ share of the treatment.

In many plans, oral anti-cancer drugs were placed in high cost-sharing tiers in patients’ prescription coverage while the drug infusions — which took place at a doctor’s office — were handled as an office visit and generally required less out-of-pocket costs for patients, sometimes just a minimal copayment.

The study, published online in JAMA Oncology this week, analyzed the health plan claims of 63,780 adult cancer patients younger than age 65. All lived in states that passed parity laws from 2008 to 2012.

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State parity laws don’t apply to “self-funded” employer health plans that pay their workers’ claims directly rather than buying state-regulated insurance policies. Just under half of the patients studied were covered by self-funded plans. Researchers compared the use of oral anti-cancer medicines and out-of-pocket spending between patients in the self-funded plans and those in state-regulated plans to determine the impact of parity laws.

The study found that the laws benefited those with lower monthly out-of-pocket spending more than those whose monthly spending for oral chemotherapy drugs was higher. According to the research, the proportion of prescriptions for oral drugs that did not require a patient’s copayment grew from 15 to 53 percent over the study period in health plans that were subject to state parity laws. That was more than double the increase in plans that were not subject to parity laws, which increased from 12.3 to 18 percent.

The finding surprised researchers, said Stacie Dusetzina, an assistant professor of pharmacy and public health at the University of North Carolina-Chapel Hill, who was the study’s lead author.

At the other end of the spectrum, the number of prescriptions requiring high out-of-pocket spending grew, despite parity laws. The proportion of prescriptions filled in plans subject to parity that cost more than $100 out-of-pocket per month increased from 8.4 to 11.1 percent, the study found. That figure declined slightly for prescriptions in plans that weren’t subject to parity, from 12 to 11.7 percent.

“We are a bit concerned about that finding, because when you think about who would have been the target of the law, parity is intended to help people afford the cost of their treatment,” Dusetzina said. “The most expensive fills got more expensive after parity. That’s concerning.”

The researchers suggested that continuing growth in high-deductible plans and high coinsurance charges may have contributed to the rise in the number of patients with high out-of-pocket costs for cancer treatment, even in states that have parity laws.

The study also found that out-of-pocket spending on infused drugs, which are typically older and less expensive than oral anti-cancer therapies, remained stable during the study period and was unaffected by parity laws.

A federal law that would extend parity to the seven states that don’t have it has been proposed in the past, most recently in March. Such a law could also benefit people in self-funded plans that aren’t subject to state laws, as well as Medicare beneficiaries.

“A federal law would potentially provide a lot of benefit, because we do feel parity has a net benefit for patients,” Dusetzina said.

Please visit khn.org/columnists to send comments or ideas for future topics for the Insuring Your Health column.

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