Nov 13, 2019

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning. Axios' Mike Allen and I will be interviewing Health and Human Services Secretary Alex Azar this morning at The Showroom in D.C., beginning at 8am ET. We'd love to see you there!

  • Other big names having conversations that you won't want to miss: Sen. Ron Wyden, Sen. Mike Braun and Rep. Jan Schakowsky.
  • More details and RSVP.

Today's word count is 940, or ~3.5 minutes.

1 big thing: We all pay for bloated U.S. health care system
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Data: OECD; Chart: Andrew Witherspoon/Axios

Americans pay higher out-of-pocket costs than most other wealthy countries, a byproduct of having the most expensive health care system in the world, according to the Organization for Economic Co-operation and Development (OECD).

Why it matters: Health care costs are at the heart of today's most explosive health care debates, including "Medicare for All," prescription drug prices and surprise medical bills.

"Medicare for All" has been offered by some Democrats as the solution to these issues of expense, but the version proposed by Sens. Bernie Sanders and Elizabeth Warren "would leapfrog all these other countries in terms of generosity," said the Kaiser Family Foundation's Larry Levitt.

  • "Other high income countries in the world provide universal coverage and protect patients from crippling out of pocket costs, but none of them have zero cost sharing like the Medicare for [A]ll plans being debated now," he added.

The bottom line: Other countries — even those with private insurance — pay lower prices than the U.S. to doctors, hospitals and drug companies.

  • "The main regulatory difference is that other similarly large and wealthy countries’ governments play a role in either directly or indirectly controlling prices," said KFF's Cynthia Cox.
  • Some supporters of Medicare for All want to change that. Warren has proposed aggressive cost control measures as part of her plan.
2. Pelosi's drug pricing bill threatens biotechs

Small biotechs are worried that House Speaker Nancy Pelosi's drug pricing bill would dry up the venture capital funding that they need to survive, STAT reports in a story worthy of your time.

Why it matters: These companies turn basic research into new drugs, and conduct 70% of clinical trials, according to data from BIO.

Between the lines: Small biotechs often don't even have drugs on the market — they're still experimenting to find new treatments and cures, dependent on venture capital to fund their endeavors.

  • If investors no longer have the promise of high profit margins, they may abandon the biotech industry, venture capitalists told STAT.
  • "We could end up shooting ourselves in the foot," Andrew Lo, an economist at the Massachusetts Institute of Technology, told STAT. "These efforts, while they stem from very reasonable and laudable motivations, they will have an unintended consequence of creating a chill on funding."

The other side: While progressive experts admit that the bill would reduce biotech investment, they disagree on the extent and whether the changes would be all negative.

What we're watching: It's looking increasingly unlikely that Pelosi's bill will become law before the 2020 election, but most of the leading Democratic presidential candidates are running on similar ideas.

Go deeper: How Democrats want to limit drug prices

3. The fall of a major specialty pharmacy
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Data:; Chart: Axios Visuals

Diplomat Pharmacy, which sells medications to people with complex conditions and acts as a drug benefit middleman, is a shell of itself. The company was worth more than $3 billion in its heyday in 2015, but is now worth a little more than $200 million after a disastrous third quarter.

The bottom line: Larger specialty drug players — owned by Cigna, CVS Health and UnitedHealth Group — have crushed Diplomat with their size, Axios' Bob Herman reports.

  • Now, Diplomat is running out of cash and is being forced to sell assets, or the entire company, because it has "substantial doubt surrounding our ability to continue,” the company said in its earnings report.

By the numbers: Diplomat's main business, which distributes high-cost infusion drugs and other medicines that you don't find at your typical pharmacy, is still lucrative.

The pharmacy benefit manager business, which Diplomat just got into a couple years ago, has been a mess.

  • Health insurers continue to drop Diplomat's PBM, including one of Diplomat's largest clients.

What to watch: Diplomat executives will have to spell out their plans for a full or partial sale before the end of the year.

  • Diplomat "would be perfect" for a company like Amazon, according to a high-ranking person who worked at Diplomat.
  • Amazon now owns PillPack, but lacks a PBM and is not involved with these kinds of specialty medications.
4. CMS paid Trump-affiliated consultants millions

The Centers for Medicare and Medicaid Services hired about 40 former Trump White House and campaign employees for a $2.25 million annual contract to do work traditionally handled by CMS' own communications department.

Why it matters: "The arrangement allowed the Trump allies to cycle through the federal government's opaque contracting system, charging hefty fees with little public oversight or accountability," Politico reports.

Details: Multiple sources confirmed the authenticity of 200 pages of billing documents that Politico obtained from Health and Human Services in a congressional oversight request, Axios' Marisa Fernandez writes.

  • At least eight former officials from the White House, presidential transition and campaign for President Trump were hired.
  • CMS agreed to allow at least four consultants to bill up to $204,000 over the length of the contract, a much larger amount than senior career officials in the CMS communications department earned and a little more than HHS Secretary Alex Azar’s annual salary.

What they're saying: Politico reported that CMS insisted in a statement "that it followed standard government contracting procedures and that CMS routinely relies on thousands of contractors for 'critical day-to-day operations.'"

5. Regulators look into Google-Ascension project

The HHS Office for Civil Rights has opened an inquiry into “Project Nightingale," Google's effort with Ascension to collect millions of patients' health information, WSJ reports.

What they're saying: The office "will seek to learn more information about this mass collection of individuals’ medical records to ensure that HIPAA protections were fully implemented," office director Roger Severino said in a statement to WSJ.

News of the project quickly raised questions about patient privacy. Neither doctors nor patients were informed of the arrangement.

Caitlin Owens