Brady Bizarro, Esq.
Last May, we extensively covered the Trump administration’s American Patients First blueprint. That document outlined four strategies for tackling the problems Americans face with respect to high prescription drug prices: boosting competition, enhancing negotiation, creating incentives for lower list prices, and bringing down out-of-pocket costs. The strategies called for some specific, ambitious proposals, including considering fiduciary status for PBMs. One of those proposals was to require drug companies to disclose list prices in television ads. Nearly a year later, the Centers for Medicare and Medicaid Services (“CMS”) has published the first final rule on prescription drug price transparency.
Currently, drug manufacturers are only required to disclose potential, major side effects of their drugs in commercials, and as anyone who watches commercials knows, the list of potential side effects can be startling and absurdly long. Now, these companies will have to disclose to patients the list price for their drugs, and that is likely to cause even more consternation. An important question to ask, however, is whether or not this will achieve the desired result (bringing down drug prices in general). The reason for skepticism on the part of some industry analysts is because of what the list price actually represents.
List prices are not reflective of what a patient actually pays at the register for a prescription drug. For example, the blood thinner Xarelto, made by Johnson & Johnson, will show a list price of $448 a month. Most patients, however, will pay $0 for this drug because of manufacturers assistance. The pharmaceutical industry and its supporters claim that this confusion may cause patients to avoid seeking necessary care. Closer scrutiny of that position reveals that it is likely overblown and misguided. Drug makers are free to add information to their adds to show what a typical consumer of the drug pays, and we in the self-funded industry know, perhaps more than others, that while the patient may be paying $0 for a prescription drug, the patient’s health plan is most certainly not.
The Secretary of Health and Human Services has noted that drug companies are really pushing back on this rule because they are ashamed of their prices. One healthcare consultant noted, with an air of bemoaning, that this is health policy made through public humiliation. Given that effective legislation and regulation in this area has been scant, public humiliation may be our best bet. The final rule is scheduled to go into effect on July 9th (sixty days after it was published in the Federal Register). In the meantime, some manufacturers are fighting its implementation based on First Amendment concerns. We will be watching to see how those battles play out.
By: Jon Jablon, Esq.
Here’s a case study that crossed my desk recently: A self-funded health plan incurred a claim for a member who went scuba diving, against his doctor’s explicit orders. The activity itself is far from hazardous; for many individuals, scuba diving can be a fun and rewarding activity. In this particular instance, however, the member’s physician told the member – and I quote from the medical records – “I highly recommend against it.”
Well, as expected, the member went scuba diving, and incurred the exact injuries his doctor warned him about. The plan incurred the claim, did some investigation, got ahold of that medical record (the “I highly recommend against it” one), and denied the claim on the basis that the member intentionally disobeyed his doctor’s explicit orders.
Why are we here, then? Why is this a case study and not just a lesson in listening to your doctor?
Well, because the plan document contained an exclusion for any services provided “against the advice of a medical processional.” The Plan Administrator relied on that exclusion to exclude the claim. The member’s attorney argued that the plan’s exclusion applied only to medical services rendered against a doctor’s advice – and these services were both advised and medically necessary (which the Plan Administrator did not dispute).
The activity was against a doctor’s orders – but the Plan Document didn’t mention contain an exclusion for that particular situation.
When considering the member’s attorney’s appeal, the Plan Administrator asked The Phia Group for advice, and after reviewing the facts and the Plan Document, we opined that it does not appear that the Plan Administrator may validly deny this claim upon the basis it had chosen.
Accordingly, the Plan Administrator paid the claim. The kicker, however, is that the appeals process took so long that the stop-loss filing deadline had come and gone, and now the health plan was left with no reimbursement for this spec claim.
What are the morals of this story, then?
Interesting Side Note #1: The Plan Administrator could conceivably have determined that going scuba diving after your doctor specifically tells you not to constitutes a “hazardous activity” pursuant to the Plan Document – but no such argument was made.
Interesting Side Note #2: The member’s attorney raised the argument that HIPAA’s “source of injury” rule prohibited the denial, since the injury was caused by a medical condition the member had. That argument is certainly creative – but when opining, we noted that the member’s medical condition may have been the root cause of the injuries in question, but the member’s choice to go scuba diving against his doctor’s advice broke that “chain of causation” wide open.
A claim arrives. Is it payable? Such a simple question triggers so many complex scenarios. In this era of steadily increasing appeals, to pay or exclude is only the first step. Even if it’s covered, how much is payable? Are there network entanglements or stop-loss issues? Employer bias or HR concerns? Never mind gaps! Even IF the claims are properly handled, has the written notification of adverse benefit determination been issued properly? Who can file an appeal? How? What timelines apply? What steps do you take, to set yourself up to triumph, if and when it ends up in front of a court of law? As so many administrators have discovered the hard way, it is all too easy to make mistakes that can come back to bite you later. DON’T PANIC! Join The Phia Group’s legal team as they discuss the good, bad, and ugly truths about the claims process, and how to safely navigate the various TPA and health plan duties associated with it.
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By: Nick Bonds, Esq.
Pharmaceutical companies and rapidly rising drug prices have been eating up a lot of the oxygen in the conversation around healthcare costs. From pharmaceutical executives and PBMs testifying before Congress to President Trump’s May 9 remarks from the Roosevelt Room calling for Democrats and Republicans to unite in a legislative effort to end surprise medical bills.
But Congress and the White House are not alone in their endeavors to tamp down prescription drug costs, HHS Secretary Alex Azar and the CMS recently promulgated a new rule requiring pharmaceutical manufacturers to include the list prices of their drugs in their television ads. This push for transparency is the latest tactic in a multi-pronged strategy deployed by the Trump Administration to lower drug prices in the United States, including moves to change the system of rebates paid to PBMs and to restructure Medicare Part B. Outraged drug manufacturers cried foul, arguing that patients almost never pay their list prices and disclosing them in their commercials would lead to customer confusion.
Perhaps one of the most interesting components of this CMS rule is its enforcement mechanism. Instead of the CMS itself going after drug manufacturers who fail to comply, the rule allows other manufacturers to pursue damages and injunctions against them for claims of false or misleading advertising under Section 43(a) of the Lanham Act. Also known as the Trademark Act of 1946, this federal law relies on a “likelihood of confusion” standard for adjudicating trademark disputes. The Lanham Act and its remedies have been refined over the last 70 years to combat the very customer confusion pharmaceutical companies insist this new CMS rule will cause.
Whether you agree with drug manufacturers or the CMS, it’s worth noting that this is not the only situation where the government has turned to intellectual property law as a versatile tool to lower drug costs. A bi-partisan group of Senators, including Republicans Chuck Grassley and John Cornyn along with Democratic Presidential Candidate Amy Klobuchar, are working together on a package of legislation targeting drug pricing issues which they hope to have ready by summer. Cornyn’s bill takes a machete to the “patent thickets” crafted by drug manufacturers to artificially extend the monopolies on high-value “blockbuster” drugs granted them by their patents. These patent thickets make it all but impossible for cheaper generic drugs to reach the market, keeping the price of name brand drugs higher for longer. Legislators are coming to see these patent thickets as an abuse of our patent system, a system intended to spur and reward innovation.
It may be too early to say how effective intellectual property law will be in lawmakers’ fight against high drug prices, but it certainly looks like a trend to keep our eyes on. At the very least, it shows that Democrats and Republicans are willing to get creative, using every weapon in their arsenal in their fights with Big Pharma. And they’re willing to reach across the aisle to do it. If you think your own healthcare may be overcharging you for prescriptions, contact us for a claim negotiation, today!
By: Philip Qualo, J.D.
The Centers for Medicaid and Medicare Services (CMS) has finalized yet another rule demonstrating the agency’s commitment for greater transparency in the healthcare industry. On May 8, 2019, CMS finalized the “Regulation to Require Drug Pricing Transparency”, which will require prescription drug manufacturers to provide the Wholesale Acquisition Cost for their products in direct-to-consumer television advertisements. Under the final rule, drug makers will have to post the list price of a typical course of treatment for acute medications like antibiotics or for a 30-day supply of medications for chronic conditions. These consumer ads will be required to have a readable, text statement at the end to comply with the mandate.
The rule also requires the Health and Human Services (HHS) secretary to maintain a public list of drugs that violate the rule. Drugs with list prices under $35 per month will be exempt from the requirement.
CMS estimates that approximately 25 pharmaceutical companies will be affected by this rule, as they run an estimated 300 distinct pharmaceutical ads on television each quarter. Complying with the rule is expected to cost drug makers $5.2 million in its first year and $2.4 million in subsequent years.
The regulation, which was initially proposed in October 2018, has faced major opposition from drug manufacturers. On December 17, 2018, the Pharmaceutical Research and Manufacturers of America (PhRMA) submitted comments in response to the then-proposed CMS rule arguing that disclosure of drug prices in television advertisements. PhRMA argued that the list price alone does not convey to patients meaningful information about how much they will actually pay for a medicine. Without providing additional context, such as a patient’s average, estimated, or typical out-of-pocket costs, disclosure of the list price in a direct-to-consumer advertisement could give patients the false impression that they are required to pay the full list price, rather than the copay or coinsurance that the patient is actually responsible for. They also argued that the new rule is unconstitutional on First Amendment grounds. Specifically, they believe that a government mandate on drug makers to disclose only the full list prices directly in their television ads would violate the First Amendment as "compelled speech."
One of the primary goals of this new regulation is to boost competition among drug manufacturers and provide them with incentives to lower their list prices. This transparency will also help gain more specific information for claim negotiations. Greater drug price transparency will also provide new cost containment opportunities for employers who sponsor self-funded health plans and their respective Pharmacy Benefit Managers. The final rule will go into effect 60 days after it is published in the Federal Register.
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By: Brady Bizarro, Esq.
On February 26th, and again in early April, top executives from major pharmaceutical companies and PBMs testified before the Senate Finance Committee. The companies represented included Pfizer, Merck, John and Johnson, CVS, Express Scrips, OptumRx, and others. Led by Chairman Grassley (R-IA) and Ranking Member Wyden (D-OR), the Committee sought to address the problems of continued price increases, free loading, and price transparency. They also portrayed PBMs portrayed as the shadowy middlemen who may be making these problems worse through their increased use of rebates.
The hearings proceeded mostly as Q&A sessions. When asked whether the CEOs consider negative public opinion when setting list prices, all said yes, meaning price isn’t just a function of administrative or research and development costs. Their answer Implies that if no one got upset, prices would go up more. One senator pointed out that if Humira (a drug used to treat arthritis and Crohn’s disease) were its own company, the drug would be among the Fortune 500 companies all by itself, larger than General Mills, Halliburton or Xerox.
The drug manufacturers claimed to support the Trump administration’s proposed rebate reform rule. That rule as proposed applies to Medicare Part D rebates only (which are still very large). Senators are also developing bills aimed at reforming the rebate system. Two CEOs told the Committee that they would lower their list prices if the rebate ban was extended to the private market.
Between these two hearings (for the manufacturers and then for the PBMs), the drugmakers and PBMs essentially blamed each other for high prescription drug prices. Popular ideas discussed were potentially tying U.S. drug prices to international prices. There was also serious support for value-based purchasing arrangements (sometimes called risk-sharing agreements) that tie drug payments to patient outcomes. That would mean that if a particular drug fails to produced a particular clinical or financial outcome, a price reduction would be triggered or a refund. Senators noted that these arrangements are complicated because of anti-kickback laws and proposed rebate reform rules, though. Price transparency will help gain more evidence in knowing if you're paying a fair price during claim negotiations. In the end, all parties agreed that the status quo isn’t working for patients, payers, or society.