The cost rebates drugmakers give health plans are among the U.S. health-care system’s many strange features that inflate costs for consumers. Now the country’s largest private insurer is making a move to start fixing them.
Signaling that it hears the growing public frustration over drug prices, UnitedHealthcare announced yesterday it will pass on rebates on prescription drugs directly to the 7 million people enrolled in its fully insured employer plans.
These rebates — which have grown dramatically in recent years — are typically (and controversially) pocketed by employers or insurers instead of used to lower out-of-pocket costs for enrollees. Because the size of the rebates aren’t made public, customers often don’t know they’re paying far more for drugs than the price negotiated by their plan.
The move won swift applause from the Trump administration, which in its recent budget proposed making it mandatory for health plans to directly pass rebates to consumers. Health and Human Services Secretary Alex Azar called United’s move a “prime example of the type of movement toward transparency and lower drug prices” the administration is “championing.”
“Empowering patients and providers with the information and control to put them in the driver’s seat is a key part of our strategy at [HHS] to bring down the price of drugs and make healthcare more affordable,” Azar said in a statement.
Although UnitedHealthcare’s action will affect only a minority of its commercially insured population, what’s more significant is what the strategy symbolizes. It draws attention to a market distortion that has increasingly sparked the ire of the pharmaceutical industry and consumer advocates as the gap between the public list price of drugs and the private, negotiated price is growing ever wider.
“I think it’s more significant for what it signals about where we’re going,” Adam Fein, CEO of Drug Channels Institute, a website that provides analysis of the pharmaceutical industry, told me. “I think it’s creating a conversation on creating more transparency in the system.”
Rebates and discounts from drugmakers to insurance plans nearly doubled from 2013 to 2015, according to research commissioned by the Pharmaceutical Research and Manufacturers of America.
But those savings aren’t -- for the most part -- being passed on to consumers. So patients who rely on high-cost drugs such as insulin, for example, are shelling out for co-payments and deductibles based on the much higher list price. And more people than ever have moved into high-deductible health plans, requiring them to cough up more in co-pays and deductibles before their benefits kick in.
Remember the controversy a few years ago around Mylan’s EpiPen? Insured customers, despite their coverage, weren’t shielded from the company’s decision to dramatically hike prices. Patients’ out-of-pocket spending for EpiPens climbed 535 percent from 2007 to 2014, according to a University of Chicago study last year.
“You’ve got pretty sick people being exposed to pretty high bills,” Craig Garthwaite, an economist at Northwestern University who specializes in drug pricing, told me.
So it’s not surprising that there has been heightened scrutiny lately of the complicated mechanics of drug pricing. Drugmakers typically grant rebates to pharmacy benefit managers (PBMs), which secretly negotiate on behalf of insurers and employers. But are the savings then passed on to consumers? The PBMs say savings are produced while drug companies argue that rebates aren't trickling down to patients, my colleague Carolyn Y. Johnson explains.
Experts agree that UnitedHealthcare’s move is a good one, especially from a public relations perspective.
“I think they perceive it’s a good PR move, it will generate some good press,” Fein said. “It’s a way to signal that we’re going to try to bring down drug prices people pay.”
University of Chicago health economist Rena Conti told Carolyn it’s a “step in the right direction.” “I think patients — particularly those struggling with very high deductibles and costs associated with prescription drugs or high co-insurance rates associated with very high price drugs — stand to benefit significantly from this announcement."
|You are reading The Health 202, our must-read newsletter on health policy.|
|Not a regular subscriber?|
AHH: Yesterday the FDA approved the first direct-to-consumer test allowing people to assess whether they have three gene mutations linked with breast cancer. The company 23andMe is the first able to test for cancer risk without a doctor, our colleague Carolyn Y. Johnson reports. The test, which examines DNA via saliva samples, will be able to detect three of the BRCA mutations most common in the Ashkenazi Jewish population. But those mutations are not the most common BRCA mutations in the broader population.
FDA official Donald St. Pierre told Carolyn the agency's move is a step forward but noted “a lot of caveats.” “Most BRCA mutations that increase an individual’s risk are not detected by this test,” he said. “The test should not be used as a substitute for seeing your doctor for cancer screenings or counseling on genetic and lifestyle factors that can increase or decrease cancer risk.”
"Direct-to-consumer genetic tests have typically raised concern because of fears people may not understand the information and panic or might be falsely reassured," Carolyn writes. "Any person who comes back with a negative for these three gene mutations, for example, could still carry other mutations in the BRCA genes that elevate their cancer risk. They could also face elevated breast cancer risk because of other gene variations or other factors."
OOF: New CDC data indicates the opioid epidemic is only getting worse, with overdoses recently spiking more than 30 percent. The data shows more than 142,000 people were taken to the hospital for opioid overdoses in a 15 month period in 45 states, our colleague Lenny Bernstein reports. In 16 states with marked overdose rates, there was an even higher 34.5 percent spike. In Wisconsin and Delaware, overdose visits to the emergency room more than doubled.
"The data represent yet another dismal sign that efforts to curb the worst drug epidemic in U.S. history have not taken hold in most of the country," Lenny writes. "Unlike the annual tally of overdose deaths, which lag behind by a year, they provide recent evidence that the crisis continues to head in the wrong direction. Nearly 64,000 people died of drug overdoses, two-thirds of them from opioids, in 2016."
“The bottom line,” said CDC acting director Anne Schuchat, “is that no area of the United States is exempt from this epidemic.”
OUCH: The Justice Department has requested a sentence of at least 15 years for former Turing Pharmaceuticals executive Martin Shkreli. Prosecutors cited a lack of remorse and respect for the law after Shkreli's conviction last August of lying to investors about the performance of his hedge funds and conspiring to manipulate the stock price of the drug company Retrophin, Reuters reports.
U.S. District Judge Kiyo Matsumoto is scheduled to hand down Shkreli's sentence later this week in Brooklyn federal court. Popularly referred to as “Pharma Bro,” in part for his ability to attract attention, Shkreli is perhaps best known for raising the price of the antiparasitic drug Daraprim by more than 5,000 percent in 2015.
"Shkreli has been in jail since September, when Matsumoto revoked his bail after he offered social media followers $5,000 for a hair from former U.S. presidential candidate Hillary Clinton," Brendan Pierson and Jonathan Stempel report. Shkreli has requested a 12 to 15 month prison term.
—The Congressional Budget Office concluded funding Obamacare's cost-sharing subsidies would be cheaper for the federal government than not funding them. Now the White House's own budget office agrees. An analysis circulating on Capitol Hill from the Office of Management and Budget shows the subsidies would not only lower premiums by 15 to 20 percent — they'd also be more cost-effective than a new reinsurance program some Republicans are pushing for, Axios's Jonathan Swan and Caitlin Owens report.
Why does this matter? The OMB's findings pile on more evidence that the Trump administration is actually choosing the worse financial deal by refusing to pay the cost-sharing subsidies, which reimburse insurers for discounting things such as co-payments for the lowest-income marketplace enrollees. The report adds that for every $1 billion spent on a reinsurance program (compensating insurers for their priciest claims), individual market premiums would decrease by only 1 percent.
—A group of health-care providers and insurers sent a letter to Senate and House leaders yesterday urging them to include additional funding for the CSRs plus reinsurance in the omnibus package Congress must pass by March 23.
The letter from a coalition, which includes America’s Health Insurance Plans, the American Academy of Family Physicians, the American Hospital Association, and the American Medical Association, referenced analysis from Avalere Health and Oliver Wyman that found such provisions would lower premiums, boost health care enrollment and provide coverage for 1.7 million more Americans.
“Congress has an important opportunity to act and reduce premiums for consumers for 2019, but time is running short,” the groups wrote. “We urge you to take immediate action to advance bipartisan legislation that includes both premium reduction/reinsurance and funding for CSR benefits as part of the March 23rd omnibus appropriations.”
—Jon Cordova, who was recently placed on a two week leave from HHS for using social media to promote conspiracy theories, will return to his position as principal deputy assistant secretary for administration, Politico's Dan Diamond reports. Cordova had suggested Sen. Ted Cruz (R-Tex.) had frequent encounters with prostitutes and spread other false stories about former president Barack Obama and Hillary Clinton.
“Mr. Cordova has expressed sincere and deep apology for those statements and for any harm or injury he may have caused to readers of any of his social media posts,” an HHS spokesperson told Politico. “While he continues to work at HHS, Mr. Cordova – along with all department employees – will be expected to demonstrate a full commitment to inclusiveness and respect for all Americans that we serve.”
--A few more good reads from The Post and beyond:
- AHIP National Health Policy Conference begins.
- The Center for American Progress holds an event on “How Cities and States Are Leading the Way on Mental Health.”
- HHS Secretary Alex Azar speaks at the AHIP National Health Policy Conference on Thursday.
- The Senate Health, Education, Labor and Pensions committee holds a hearing on the opioid crisis on Thursday.
- George Washington University hosts an event on the seate of the health care system in the EU on Thursday.
- The National Coalition on Health Care holds an event on alternative payment models on March 16.
Porn actress Stormy Daniels has sued President Trump:
White House counselor Kellyanne Conway violated the Hatch Act. What is it?
Jimmy Kimmel responds to President Trump's tweets about the Oscars: