|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
A major change to drug pricing practices
This week the Trump administration announced its most aggressive proposal yet to address the high cost of prescription drugs. Under a new regulation that would go into effect next year, rebates paid by pharmaceutical companies to pharmacy benefit managers (PBMs) would no longer be given “safe harbor” from anti-kickback laws. These rebates, intended to encourage PBMs to include certain drugs in their plans, often represent as much as 30 percent of the list price of the drug, and can generate significant gains for insurers, who rarely pass those savings along to consumers at the point of sale. Meanwhile, discounts provided directly to consumers would receive new safe-harbor protections. The new proposal, which would cover Medicare and Medicaid drug plans, represents “the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever,” according to Secretary of Health and Human Services (HHS) Alex Azar. By eliminating rebates for Medicare Part D and Medicaid drug plans—a move sure to be adopted in the commercial market as well—the plan would lower the price of drugs Medicare patients purchase and their out-of-pocket payments on those medications, but will likely result in higher premiums for drug plans, as insurers look to compensate for the loss in rebate revenue. In 2016, rebates paid by drug companies to PBMs amounted to about $89B, according to a recent study.
The PBM lobby swiftly condemned the proposal, which now enters a 60-day public review period, citing the expected increase in drug plan premiums that it will cause. PhRMA, the main pharmaceutical lobbying organization, expressed its support for the proposal; drug companies have long complained about the practice of paying rebates to PBMs, citing it as a key driver of inflated list prices for drugs. Policy analysts were mixed on the new approach, with some worrying that the increase in Medicare drug plan premiums could outweigh the benefit to many consumers at the retail counter. Seniors with many prescriptions, or who take very high-cost drugs, are likely to benefit the most from the change. The announcement is part of a string of recent initiatives by the Trump administration to address the high cost of drugs and comes as Congressional Democrats are also setting their sights on drug pricing practices. Meanwhile, newly-elected Senator Mitt Romney (R-UT) met behind closed doors this week with pharma company executives to warn that “change is coming”, signaling that the drug industry can expect continued bipartisan scrutiny from the new Congress, even as the Administration continues its campaign to address widespread public concern about the cost of medications.
The first thing we do, let’s kill all the…insurers?
In a CNN town hall meeting this week, California Senator and Presidential hopeful Kamala Harris planted a firm stake in the ground in the growing public dialogue over Democrats’ proposal for universal coverage known as “Medicare for All” (M4A). When pressed on the details of the plan, for which she and other 2020 Democratic contenders have expressed strong support, Harris said she’d be in favor of eliminating private health insurance companies entirely. While a Harris spokesperson walked back the statement the next day, saying that the candidate would support more moderate approaches to M4A as well, the remark drew immediate attention from across the political spectrum. Conservatives blasted the candidate as “jaw-droppingly radical”, while moderates, including some Democrats, were more reserved. Top-ranking Senator Dick Durbin (D-IL), told CNN, “I don’t want to guess what (Harris) is thinking but that is a massive part of the American economy…It would take a mighty transition to move from where we are to that.” Meanwhile, former Starbucks CEO Howard Schultz, who made the media rounds this week as he eyes a potential Presidential run as an independent, slammed Harris’s proposal as un-American.
Whether or not Harris stands by her initial statement, she does appear to have set the guardrail for the coming debate on M4A, which is sure to be a centerpiece of the 2020 Presidential campaign. With the field of candidates growing larger by the day, and a wide array of proposals for expanding public coverage already being proposed by Democrats, healthcare is poised to become a “litmus test” issue for those vying for the party’s nomination. As we saw from polling last week, Americans are broadly supportive of M4A at a high level, but are much more skeptical of the idea when they learn specific details. While Harris took a political risk by expressing her support for eliminating private insurance altogether, her stance does play a useful role in kicking off a discussion of the real trade-offs to be made in moving toward an M4A system. Legendary journalist Michael Kinsley once said that “a gaffe is when a politician tells the truth—some obvious truth he isn’t supposed to say.” In the coming weeks, we’re hoping for even more “gaffes” on health policy from politicians on both sides of the issue.
A step backwards on transparency
Bad news for healthcare data transparency this week, as UnitedHealth Group announced that it plans to discontinue its data-sharing partnership with a leading repository of claims data. Since 2011 the non-profit Health Care Cost Institute (HCCI) has provided an invaluable resource for healthcare researchers, consumers and policymakers. The organization, funded in part by insurance companies (including United), aggregates claims data from employer, Medicare Advantage, and individual market health plans, along with the full set of Medicare fee-for-service claims data, and has assembled a suite of analytical and transparency tools that have yielded important insights about healthcare costs and utilization patterns. Its annual reports have become a mainstay of policy research, and its consumer-facing transparency site Guroo.com was an early and important resource for patients seeking pricing information. In addition to United, HCCI also draws on data from Humana, Kaiser Permanente, and Aetna, although Humana has also signaled its intention to withdraw from the data-sharing venture. A spokesman for United declined to comment on the company’s rationale for disengaging, but did point to the insurer’s Optum division, which houses its own, proprietary data analytics capabilities.
HCCI CEO Niall Brennan, formerly the chief data officer of the Centers for Medicare & Medicaid Services, said that it was “definitely a surprise” that United will sever ties with the organization, and warned that the lack of a complete data set could result in problems for its 2018 reporting. Academics and policy analysts decried the announcement, with Carnegie Mellon health economist Martin Gaynor calling it “really bad” and “a step in the wrong direction”. Whatever the rationale for UnitedHealth Group’s decision to withdraw, the move highlights the need for more, not less data-sharing in healthcare. In our view, health plans, hospitals, PBMs, group purchasing organizations, physician groups and others should be mandated to reveal data on cost, utilization and pricing as a prerequisite to receiving public funding. A good first step might be to require all insurers and providers who participate in Medicare, Medicaid or the Obamacare exchanges to submit data to all-payer claims databases. Without full transparency, policymakers, purchasers, and individual consumers will continue to find themselves flying blind when it comes to making rational healthcare decisions.