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.
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. 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.
By: Brady Bizarro, Esq.
In 2012, the annual cost of insulin needed to treat patients with type 1 diabetes was $2,864. Today, the cost has risen to over $6,000. For working-class families already struggling to keep up with everyday expenses, this increased economic burden has forced some to choose between food and life-saving medication. CBS News has reported that more than one-quarter of Americans living with diabetes have cut back on their insulin usage to ration their supply, and that can be dangerous. Skyrocketing insulin prices are just one example of high prescription drug costs, which the Trump administration has made it a priority to address.
We have written a lot before about the administration’s proposals to lower drug costs: from ending pharmacy gag rules to outlawing the use of co-pay coupons, ideas for controlling costs were in no short supply. Ideas and tweets, however, have a limited impact. Real legislation is needed to produce meaningful reform, and as we are now well into 2019, there are indications that bipartisan action may be on the horizon.
Soon after taking over powerful congressional committees, Democrats began scheduling hearings and reaching out to drug companies asking for detailed information regarding their pricing practices. On February 7th, Democrats, including 2020 hopeful Senator Sherrod Brown (D-OH), unveiled a bill that would allow Medicare, the largest purchaser of pharmaceuticals in the country, to negotiate drug prices directly with drug manufacturers. The Medicare Negotiation and Competitive Licensing Act would permit such negotiations and strip drug manufacturers of their patent protection for a drug if those negotiations failed. For self-funded plans, this is key. Not only would negotiated Medicare rates provide a benchmark for pricing (as is the case for most medical services), but failed negotiations would allow generic versions of expensive drugs to market much earlier than previously allowed by law.
For now, lawmakers are hoping to get President Trump to support this bill. The president’s support would put significant pressure on Republican congressmen to support the bill. As always, we will bring you the latest developments as they unfold.
By: Jen McCormick, Esq.
Coverage of contraceptives for women and the availability of a religious or moral exemption (or an accommodation) has been hotly debated recently – particularly due to a new Trump administration rule. Specifically, this rule would expand the pool of employers eligible to opt-out of providing birth control for women based on religious objections. The rule was set to take effect January 1, 2019, but judges in California and Pennsylvania recently blocked these rules from taking effect.
Last week a California judge granted a request for a preliminary injunction for California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, New York, North Carolina, Rhone Island, Vermont, Virginia, Washington and DC. This week (on Monday) a Pennsylvania judge took the next step and issued a nationwide hold on these rules.
Many entities and individuals have strong opinions on this topic, but for how (or whether) the rules may impact businesses we’ll have to wait and see. In the meantime, employers should pay attention and understand the current rules regarding religious exemptions and accommodations.
By: Ron E. Peck, Esq.
A friend and ally in the health benefits industry recently asked me if I had an up to date listing of the most costly health care expenses paid by health plans in 2018. I didn’t; so on a whim I brought up my handy dandy search engine and typed in: “the most costly health care expenses paid by health plans in 2018.” You know what the top results were? “Cost of Employer Health Coverage to Rise in 2019” … “Health Insurance: Premiums and Increases” … “How to Find Affordable Health Insurance in 2018” … and other, similar articles focused on what individuals will pay in premium (and in some instances, even dissecting co-pays, deductibles, and co-insurance). The common thread? They are all about participant out-of-pocket expenses. I didn’t ask how much it costs to obtain insurance. I asked how much it costs to obtain an appendectomy!
This is just a most recent example of an issue that sticks in my craw like no other, and reminds me of something I wrote years ago. Check this article out: https://moneyinc.com/affordable-health-insurance-is-not-affordable-health-care/.
“… too many people are confusing the term ‘health care’ with ‘health insurance.’ … Health care – meaning the actual act of caring for someone’s health – is necessary for survival. Health insurance – meaning a method by which we pay for health care – is just that; merely a means to pay for health care. Yet, a few years ago (2009 to be precise), a report posted by the American Journal of Public Health indicated that nearly 45,000 deaths are annually associated with a ‘lack of health insurance’ and that uninsured, working-age Americans have a forty percent higher risk of death than those with private insurance. The knee-jerk reaction to this news is likely (and likely was) to rush to provide health insurance to as many people as possible. Indeed, according to this report, health insurance saves lives. Furthermore, one could argue, if saving lives is health care, and health insurance saves lives, then health insurance is health care, and your author has proven himself wrong.… As stated before, however, health insurance is a method by which we pay for health care. It stands to reason, therefore, that it is not a lack of health insurance that kills people, but rather, it is a lack of means by which to pay for health care that kills people. This, then, leads us to a logical conclusion; the problem is not that we don’t have insurance … the problem is that we can’t pay for health care without insurance. This, then, leads to the next logical thought: why is health care so expensive?”
Go back and re-read the first paragraph of this blog post. Sadly, I fear my words published two years ago apply as much today as ever. Enjoy this blast from the past for Throwback Thursday, and let me know if you think we’ve advanced at all since then.
By: Erin M. Hussey, Esq.
On November 28th, CVS Health closed on its acquisition of Aetna in a $69 billion merger. CVS Health and Aetna announced this deal in December 2017 and received preliminary approval from the Department of Justice in October. This merger will combine CVS’ pharmacies and Aetna’s insurance business, but it remains to be seen whether this merger will only benefit the companies themselves or if it will truly create positive change for patients as consumers of healthcare.
CVS Health President and Chief Executive Officer Larry J. Merlo, detailed the following regarding the company’s objectives: “our combined company will have a community focus, engaging consumers with the care they need when and where they need it, will simplify a complicated system and will help people achieve better health at a lower cost.” In addition, CVS Health not only stressed the importance of patients as consumers, but the role of pharmacists and primary care physicians given the increased access to data. The combined companies will have the ability to deliver data at the pharmacy level and the pharmacists would know recent medical history of patients. Merlo also detailed the following: “By fully integrating Aetna's medical information and analytics with CVS Health’s pharmacy data, we can develop new ways to engage consumers in their total health and wellness through personal contacts and deeper collaboration with their primary care physicians.” CVS Health further commented that the use of technology will also help to achieve these objectives.
CVS will start to test stores in 2019 with added health services, focusing mainly on the management of chronic diseases. Some examples of services being added include the expansion of services at MinuteClinic, nutritional and behavioral counseling, and digital apps. CVS Health and Aetna will also focus on offering new preventive health screenings in communities that are identified as high-risk for certain health conditions. Additionally, CVS Health is developing medical cost reduction programs to “improve medication adherence and avoid hospital readmissions and unnecessary emergency room visits.”
Establishing localized and accessible healthcare, simplifying the process for consumers, and lowering costs are all positive and meaningful objectives that CVS Health and Aetna are seeking to accomplish. The changes within CVS stores will certainly be on the healthcare industry’s radar in 2019 to determine whether these objectives will be achieved and if this merger will prove positive for patients, pharmacists, and primary care physicians.
By: Ron E. Peck
If you are looking for a blog post listing specific healthcare related questions appearing on ballots, and a technical assessment of each, look elsewhere. If you were hoping for a dissection of candidates advertising heavily their support or opposition to the Affordable Care Act, and how that position will likely effect their likelihood of being elected (and what they says about the population’s attitude regarding healthcare and “Obamacare”), you can find a million articles on that topic somewhere else. My goal is to step back and assess the big picture.
I’ve read that “healthcare” is the biggest topic on most voters’ minds. That makes me laugh, because “healthcare” is such a broad topic, it captures everything. Further, it is something about which most people are painfully misled or ignorant.
In many other areas, some politicians basically say: “I want more of this. If I do what I want, these great things will happen…” and the opponent says, “Yes… but that thing will cost this much, and we will need to pay for it with higher taxes. It’s a nice idea, but not worth the money. We have more important things to do with that money.” Voters then decide whether that “thing” is worth the cost.
When I was in the 6th grade, we held a mock election. I was one of two presidential candidates, and was up against Zach. In the primaries, we all had discussed things that were important to us, and realistic goals we had for our classmates in the coming year, and apparently the majority of kids agreed with me and Zach. So we get to the election, and during our debate, Zach unleashes a barrage of questions about topics I’m sure he didn’t understand (that his parents fed him)… I mean… what 6th grader is asking another about their position on abortion; am I right? Regardless, when faced with this ridiculous assault, me and my team resorted to the age old strategy of smearing the other candidate. My team and I brought up every nasty thing Zach had ever done to someone else. I won, though I’m not proud of it. That year I learned that smear campaigns work.
The next year was my first year of junior high school. We promptly began elections for student council, and given the previous year’s success, I was sure I had it in the bag. That’s when another candidate did something I’d never seen, and will not soon forget. He made promises. He promised better food in the cafeteria; longer recreation periods between classes; and more. By the time he was done, I was ready to vote for him too! The issue? After he won, nothing happened. Why? Because no one could realistically pay the cost of delivering on those promises.
Fast forward only a few years (yeah right), and here I sit. I witness before me politicians promising to maintain (or – gasp – expand) health benefits and coverage, without addressing the cost of doing so. The opposition, meanwhile, can’t whip out the old reliable “anti-promises” stick (also known as the “we don’t want higher taxes” campaign), because – unlike almost all other issues politicians debate – we have privatized a huge portion of healthcare taxes. Make no mistake. When we force people to either pay a penalty or buy insurance, and the money that we all contribute is used to pay for “things” that benefit society… and when we increase the size and scope of those “things” and the resultant payments we all make to purchase insurance increases … that is the same as an increase in taxes. The problem is that by privatizing this tax as “insurance,” we dumbfound politicians and confuse the public.
No one will look at an image of a sick child, and argue they should not receive care. No one is “pro-illness” or “pro-death” and “anti-healthcare.” Yet, anytime anyone argues that buying more healthcare without assessing what we’re buying, or more importantly, the price of what we’re buying, they are labeled as those things… and worse.
Meanwhile, the voting public is blissfully unaware of how increasing coverage on the one hand, will cost them more on the other hand. Our healthcare payment system is so convoluted, people don’t see how an action today will cost them down the line. For most, mandating coverage for this condition or expanding coverage to that person is – in their mind – free. The only one who suffers is the “greedy insurance companies.” Bottom line? If you order a cheeseburger, and I ask if you want fries with it… and I tell you the fries are free… YOU AREN’T GOING TO SAY NO TO THE FREE FRIES!
Sadly, many insurance carriers and benefit plans do suffer from inefficiencies and other issues that result in them receiving too much, and handing out too little. It is true that for some payers, they could “tighten the belt” a little, to ensure more is covered without passing the cost onto everyone else. But, for the most part, what people don’t understand, is that along with the people working for the carrier, they too – the policy holders – are also part of the so-called “insurance company.” The money used to pay for healthcare comes from the pockets of the patients and policyholders. Whether it be through contributions to a self-funded plan or premiums paid to a carrier, we – as the people paying the bills – deserve to know that our plan or policy is being managed prudently and effectively. We have a right to demand that the carrier or plan is not wasteful or too focused on profits at our expense, and that they are coordinating with providers of healthcare to ensure we have access to care at an affordable price. As the ones “footing the bill” we should rest assured that everyone involved has the information they need to achieve an exchange of consideration that doesn’t overly favor one party or abuse another.
I have no issue with making efforts, legally or otherwise, to expand healthcare and improve the overall health and wellbeing of my fellow Americans. My concern is that until people truly understand the cost of healthcare, and who’s ultimately paying for the fries (in the form of an upcharge on the burger), people won’t make educated decisions or first assess our current spending to identify and eliminate inefficiencies BEFORE we throw more money at the problem.
But then again… what do I know? I couldn’t even win my student council election.
By: Patrick Ouellette, Esq.
In a move geared toward making drug prices more visible to consumers, the Department of Health and Human Services (HHS) recently released a proposed regulation that would force drug companies to include prices in their television advertisements of prescription drugs and biological products. HHS focused the proposal on drugs in which payment is available through or under Medicare or Medicaid to include the Wholesale Acquisition Cost (WAC, or “list price”) of that drug or biological product.
There are some drug price components of WAC to note, as WAC is generally the manufacturer’s price for drugs before the supplier of the product offers any rebates, discounts, allowances or other price concessions. True pricing involves a number of other variables to determine what the final drug costs are to patients beyond the WAC, such as what their insurance covers or whether their deductible has been met. These proposed regulations are also limited only to drugs covered under Medicare or Medicaid. However, it will be instructive in the long-term to see whether the inclusion of pricing in advertisements will actually lower final drug payments for patients. Similar to CMS requiring (starting in 2019) hospitals to make public a list of their standard charges via the Internet in a machine-readable format, there are no assurances that patients armed with new information will reduce final costs.
If these regulations prove to be successful, it will be interesting to see whether HHS would extend them to drugs payable by private insurers. In particular, HHS regulations could affect pharmacy benefit manager (PBM) rebates in the self-funded health plan space:
Because the list price of a drug does not reflect manufacturer rebates paid to a PBM, insurer, health plan, or government program, obscuring these discounts can shift costs to consumers in commercial health plans and Medicare beneficiaries. Many incentives in the current system reward higher list prices, all participants in the chain of distribution, e.g., manufacturers, wholesalers, pharmacy benefit managers, and even private insurers, gain as the list price of any given drug increases. These financial gains come at the expense of increased costs to patients and public payors, such as Medicare and Medicaid, which ultimately fall on the backs of American taxpayers.
Furthermore, consumers who have not met their deductible or are subject to coinsurance, pay based on the pharmacy list price, which is not reduced by the substantial drug manufacturer rebates paid to PBMs and health plans. As a result, the growth in list prices, and the widening gap between list and net prices, markedly increases consumer out-of-pocket spending, particularly for high-cost drugs not subject to negotiation.
Though the proposed regulations only affect companies in which their drugs covered by public payers, Medicare and Medicaid, all payers across healthcare should keep track of this initiative. The Pharmaceutical Research and Manufacturers of America (PhRMA) has already argued that such rules would violate the First Amendment and not affect patient costs.
By: Kelly Dempsey, Esq.
That’s a pretty big question as we learn more about the Trump Administration’s attempt to reduce drug costs.
We all know drug prices are off the charts and several attempts to control pricing have failed to get up and running. As you may recall, President Trump indicated during his campaigning that he would develop a plan to lower prescription medicine costs. The U.S. health secretary (Azar) is making some moves and has indicated that eliminating drug rebates may help reduce costs.
Cost containment is key to self-funding and high drug costs have caused employers and plans to explore options to keep plan costs down, including utilizing vendor programs that obtain drugs from outside the U.S. and/or build certain rebate programs into the customized plan design. While there’s still a lot that must be worked through before changes are implemented, these four key takeaways may give plans, employers, brokers, PBMs, and other vendors some heart burn:
Plans and vendors that utilize these types of programs should be on the look-out for rule changes to ensure continued health plan compliance.
By: Jon Jablon, Esq.
You asked whether your clients can decide to not utilize their wrap network for a given claim, right? Oh, you didn’t? Well, why didn’t you?
We get it. Wrap networks are very simple to use and they guarantee against balance-billing. Those are great things. But despite the ease of use, do wrap networks offer the best bang for your buck?
Research shows that the average wrap network discount ranges from 18% to 25%. There may be outliers, though; if you’ve got a 65% discount, it’s often worth it to take it with no questions asked. But if you’ve got a 20% discount on a very large claim, it will probably be beneficial to explore other options. In many cases, individualized negotiations can yield far better results than wrap discounts, since wrap discounts are pre-determined and predicated on arbitrary percentages off arbitrary billed charges. When negotiating a claim on an individual basis, though, there’s an opportunity to use benchmarks (such as Medicare), examine the specifics of the bill, and actually discuss the claim and its merits with a human being. More often than not, individualized negotiations yield better savings than pre-negotiated wrap discounts.
In a recent poll of many of The Phia Group’s clients, 75% of those who responded indicated that they weren’t aware that they were able to forego utilization of the wrap network on a case-by-case basis. It’ll depend on the contract, but in just about every case, a health plan does have that right.
Plus, if a negotiation outside the wrap isn’t successful, the health plan will still have the wrap discount to fall back on!
If you need a contract reviewed, The Phia Group can do just that – and if a benefit plan incurs a large claim that should have a better rate than what the wrap will offer, let us know as soon as possible, because we can help.