Health Care Reform Articles - September 11, 2015

Maine owes more than $1 million in Medicaid overpayments

By A.J. Higgins, MPBN

AUGUSTA, Maine — The state Department of Health and Human Services continues to struggle with its Medicaid accounting practices.

A report from the federal Office of Inspector General says the department has yet to devise auditing procedures that can promptly identify Medicaid overpayments to nursing homes.

As a result, the feds say DHHS owes Medicaid a little more than $1 million for nursing home overpayments that it received in 2011.

Last year, state auditors determined that the Maine Department of Health and Human Services had overpaid nursing homes and assisted-living facilities by nearly $30 million in the previous fiscal year. The department laid blame for the bulk of the problems to computer program errors that trace back to 2006.

However, a new Office of Inspector General report claims the department failed to develop protocols to prevent the recurrence of those overpayments, and demands a fix, as well as the return of $1 million.

“This money that’s due back to the federal government hasn’t been sent back in a timely manner,” state Sen. Anne Haskell said.

Haskell of Portland, who sits on the Legislature’s Health and Human Services Committee, is among State House Democrats who say they’re tired of dealing with nursing home overpayments. She said DHHS officials could solve the problem if they made it a priority.

“To think about all the resources that they’ve put into things that are not proven to be effective, all of the time they spent putting pictures on EBT cards and doing drug tests for such minor results,” Haskell said. “They’ve got resources to do that but they haven’t been able to put resources into this very straightforward and expensive — as far as the state’s concerned — responsibility on their part and that is to rebate that money back in a timely manner.”

“The department really needs to start being more forthcoming with the Legislature about all of these things,” said fellow Democrat Drew Gattine of Westbrook, who is the House chairman of the Legislature’s Health and Human Services Committee.

http://bangordailynews.com/2015/09/08/politics/maine-owes-more-than-1-million-in-medicaid-overpayments/

New Cholesterol Drugs Are Vastly Overpriced, Analysis Says

By ANDREW POLLACKSEPT. 8, 2015

Two powerful new drugs that can sharply lower cholesterolare vastly overpriced based on the value they provide, according to a new analysis by an independent organization that evaluates pharmaceutical costs.

The analysis, released on Tuesday, said that measured by the health benefits the drugs provide, the price should be only about one-third the level set by the manufacturers. The cost should be even lower — about 15 percent of list price — to avoid straining health care budgets, it said.

The new report is from the Institute for Clinical and Economic Review, a nonprofit organization that made a name for itself last year when it warned about the costs of new drugs to treat hepatitis C.

Health plans use the group’s reports, and this new one could increase pressure on the makers of the cholesteroldrugs to offer bigger discounts. Express Scripts, the country’s largest pharmaceutical benefit manager, has said it plans to use the report’s findings in its negotiations with the drug companies.

The two drugs, Repatha from Amgen and Praluent from Sanofi and Regeneron Pharmaceuticals, were approved by the Food and Drug Administration in the last two months. In clinical trials they lowered the level of LDL cholesterol, the so-called bad kind, by 40 percent or more, even when patients were already taking statins.

But the drugs’ prices — $14,100 a year for Repatha and $14,600 a year for Praluent — have raised concern about costs, especially since the drugs might be used year after year by millions of Americans.

“Even if these drugs were used in just over 25 percent of eligible patients, then employers, insurers and patients would need to spend on average more than $20 billion a year,” Dr. Steven D. Pearson, the founder and president of ICER, said in a statement.

The analysis said the drugs should cost $3,615 to $4,811 a year, based on the value they are expected to provide in terms of preventing heart attacks and deaths.

The drugs should cost even less — $2,177 — the analysis said, to be at a level where health plans would not have to limit their use to prevent straining health care budgets.

http://www.nytimes.com/2015/09/09/business/new-cholesterol-drugs-are-vastly-overpriced-analysis-says.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0

The Solution to Drug Prices

by Ezekiel Emanuel

WE’RE paying too much for prescription drugs. The price for cancer drugs like Yervoy, Opdivo and Keytruda routinely exceeds $120,000 a year.

Some other specialty drugs have even higher prices. Cerezyme for Gaucher disease costs about $300,000 per year for life. Kalydeco for cystic fibrosis also costs about $300,000 per year.

Despite representing about 1 percent of prescriptions in 2014, these types of high-cost drugs accounted for some 32 percent of all spending on pharmaceuticals.

Polls show that Americans are fed up with high drug costs. A commonly proposed solution has been to let the federal government, through Medicare, negotiate with drug companies. Currently, while Medicare tells hospitals and doctors what it will pay for services, by law it cannot negotiate with companies for lower drug prices. Some independent estimates suggest that negotiated drug prices could save the federal government $15 billion or more per year.

But this approach will not solve the problem of stratospheric drug prices, for several reasons. For many diseases, there exist only a couple of effective drugs, with little price competition. Also, Medicare would have little negotiating leverage since, unlike private insurers, it cannot maintain an approved drug list and exclude overly expensive drugs from coverage.

The bigger problem, though, is that Medicare negotiations would do nothing to contain drug prices for the 170 million Americans who have private health insurance, through their employer, the exchanges, or by self-purchase. Having the federal government negotiate lower prices for Medicare would most likely drive up prices on the private side as drug companies tried to recoup their “lost” profits.

http://www.nytimes.com/2015/09/09/opinion/the-solution-to-drug-prices.html

Probing Our Moral Values in Health Care: The Pricing of Specialty Drugs

Uwe Reinhardt, PhD

Imagine visualizing a health system through the eyes of an economist in the form of a supply curve, which shows the relationship between price of a product or service and the quantity of product that a seller can offer. In this example, the seller is the health system, a large agglomeration of highly skilled professionals supported by sophisticated technical equipment and institutions. The “product” being offered to society is the benefit of interventions in terms of the quantity and quality of life it generates, measured in quality-adjusted life-years (QALYs) (http://bit.ly/1L3Tv6h).

Through some interventions, such as immunizations or maternal health care, physicians can wrestle some additional QALYs from nature at very low cost (see point A in the Figure). Other QALYs can be obtained only at enormous incremental costs per QALY (points above B in the Figure), such as additional months of life achieved with high-priced specialty drugs during terminal illness. Cost-effectiveness analysis can determine that one treatment is not cost-effective, because the same additional QALY can be achieved with a lower-cost treatment (points X vs Z in the Figure).

The health system’s QALY supply curve confronts society with 2 vexing moral questions that physicians are not in a position to determine on their own. First, how much is society willing to pay for an additional QALY derived from a particular intervention? And second, should the maximum price to be paid per additional QALY be the same for everyone, or can it vary with the individual patient’s ability to pay for it? 

The answer to the first question requires putting a dollar value on a QALY, to determine whether the cost of the treatment used to “purchase” an added QALY from the health care system is justified. The answer to the second question reveals the distributional ethic to be imposed on the health care system: either rationing access to high-priced specialty drugs by income class of patients, or following a more egalitarian approach expressed through collective decision making.

Currently, the median household income of Americans is roughly $52 000 (http://1.usa.gov/1Tr8E3z). Therefore, in the absence of health insurance, only a few members of society could afford the high prices now routinely charged for new specialty drugs. The maximum price of a QALY would be severely constrained if these products had to be purchased strictly out of household income. To be affordable to those without health insurance, the high cost of these products could not prevail. Absent health insurance, the now-high rates of return to investment in developing these products would be much reduced, and many of these drugs might not even be developed.

However, because the majority of US households do have health insurance coverage, the problem of putting monetary values on QALYs is deflected away from individual households and onto the administrators of public or private health insurance funds. Those administrators face the morally difficult question of what value their funds should be willing to put on an extra QALY purchased for its insured members with new specialty drugs.

Knowing the reluctance of US consumers even to discuss such morally vexing questions (http://bit.ly/1DLba2C), the producers of specialty drugs are now crawling up higher and higher along the steeper segment of the QALY supply curve, exploring whether there is a maximum price per QALY that US consumers will tolerate and what that price may be. 

One should not question this pricing policy on moral grounds. After all, for-profit producers of new medical technology generally have been set up as practitioners of Anglo-Saxon capitalism (http://bit.ly/1DHvZfG), and the sole mandate for the company’s board of directors and the managers they hire is to maximize the wealth of the firm’s owners without breaking any of the laws. 

These enterprises will thus naturally seek by any legal means the maximum revenue for a new product. This usually includes the practice of profit-maximizing price discrimination, which means charging different prices to different customers for identical items with identical production costs. The investor-owned producers of new specialty drugs properly call this approach “value pricing,” because it is based on their subjective estimate of the maximum value society imputes to the added QALYs these products can produce.

But In pursuing their pricing strategy, specialty drug producers should not imagine themselves as free-enterprisers operating within the competitive markets of textbook fame. On the contrary, we can think of them as fragile little birds that the protective hand of government carefully shields from the harsh vagaries of truly free, competitive markets. That protective hand consists of patents granted these producers by the US Patent and Trademark Office and market exclusivity that can be granted by the US Food and Drug Administration on request. It also consists of prohibiting resale of these products among customers, such as reimporting drugs from countries that have been granted lower prices.

http://jama.jamanetwork.com/article.aspx?articleid=2434671

The House Stretches Legal Logic on Health Reform

By THE EDITORIAL BOARDSEPT. 11, 2015

Once again congressional Republicans are trying to manipulate the courts into overturning health care reforms that they have been unable to block in the normal political process.

Conservative lawyers backed by Republicans got a well-deserved rebuke in June when the Supreme Court ruled that people in every state are eligible for tax-credit subsidies to help them buy insurance on new exchanges, regardless of whether the exchanges are set up by the state or the federal government.

This week, however, House Republicans got a court to allow them to move forward on a baseless lawsuit they filed to block subsidies that keep deductibles and co-payments low for more than five million low-income people. The Affordable Care Act requires insurance companies to reduce cost-sharing for people buying health care on exchanges based on their incomes, with the federal government reimbursing the insurers for the cost.

The suit was filed last November by the Republican-dominated House, which argued that the Obama administration had violated the Constitution by providing cost-sharing subsidies that Congress had never specifically approved. It seeks to stop the administration from distributing some $136 billion to the insurers over a decade.

http://www.nytimes.com/2015/09/11/opinion/the-house-stretches-legal-logic-on-health-reform.html?smprod=nytcore-iphone&smid=nytcore-iphone-share