Mar 12, 2018

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning ... Hope you had a good weekend and didn’t lose your mind too much when everyone just agreed that 6:00 is going to be 7:00 now, as if that’s not a potent reminder that time is a construct and we’re all simply floating in space.

PBMs: The easy target on drug pricing

Illustration: Caresse Haaser, Rebecca Zisser/Axios

The debate over high drug prices has been a maze of deflection and circular finger-pointing. But now, a lot of those fingers are starting to point in the same direction — at pharmacy benefit managers. They’re the middlemen between drug companies and insurance coverage.

  • Pharmaceutical companies have been beating up on PBMs for a long time.
  • Insurance companies are increasingly looking to run their own PBMs, rather than contracting with independent companies — a sign that they also think there are savings to be found in this part of the system.
  • HHS secretary Alex Azar and FDA commissioner Scott Gottlieb joined the fray last week, saying they want PBMs and health plans to pass more of their savings on to consumers at the pharmacy counter.

Between the lines: PBMs have helped bring down net spending on some drugs, according to data from industry reports. But as my colleague Bob Herman notes, they also have profited from secretive rebates and raised concerns about whether they have exploited their market power.

Yes, but: Squeezing the middleman can only take you so far.

  • PBMs negotiate rebates off of drugs’ sticker prices, which are set by their manufacturers. As long as the process starts off with expensive drugs, we’re probably going to have expensive drugs.
  • “Everybody in the system is picking more money out of that higher retail price,” consumer advocate David Mitchell said last week at an insurance industry conference.

Go deeper: Bob has more details about how PBMs ended up in the hot seat and what it means for the larger health care debate.

Some good news for 2018 Dems on health care
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Data: SurveyMonkey polls conducted Feb. 12–March 5, 2018Poll Methodology; Note: "No answer" responses excluded; Chart: Andrew Witherspoon/Axios

Here’s one bright spot for the 10 Senate Democrats up for re-election this year in states that President Trump won: Their constituents aren’t too fired up against the Affordable Care Act.

  • Our Axios/Survey Monkey poll shows that most voters in all 10 states want Congress to either modify the law or leave it alone, rather than try to repeal it.

Why it matters: Repeal is still a strong motivator for the GOP base, but that’s about the extent of its political potency. And most of these 10 Democrats have already tried to stake out a middle ground on health care, opposing the ACA repeal while also not joining their party’s shift toward embracing a single-payer system.

Conservative moves could help entrench ACA

Sure, the ACA and Medicaid are being pulled to the right in states like Kentucky, Indiana, Arkansas, Idaho and Iowa. But as the Kaiser Family Foundation’s Drew Altman argues in today’s column, the waivers and other changes could actually put both programs on more solid political ground.

What to watch: Republican governors and lawmakers will own the changes they’ve made, Altman writes — so they’re more likely to defend not just the changes, but the programs in their rewritten form. That means the state leaders might be less supportive of ACA repeal and Medicaid cuts, and they might be able to convince donors and other powerful Republicans to back off, too.

Go deeper: Read the column on

How insurers game Medicare rankings

Insurance companies game the Medicare Advantage ratings system by merging low-quality plans into high-quality plans, according to the Wall Street Journal.

How it works:

  • Medicare pays a bonus to MA plans with a high rating on a scale of one to five stars. When a large MA plan isn’t set to receive a bonus one year, the insurer will simply roll those patients into a higher-rated plan, and collect a bonus for its suddenly larger customer base.
  • UnitedHealth, one of the biggest MA insurers, has done this with hundreds of thousands of people each year and the practice helped pad its bottom line by almost $64 million in 2015, per the WSJ.

Yes, but: A provision of the new tax law is expected to cut down on this practice.

While you were weekending ...
  • During a meeting last week, Trump surprised VA secretary David Shulkin by calling up Fox & Friends host Pete Hegseth on speakerphone to get his opinion of VA legislation, my colleague Jonathan Swan reports.
  • Doctors who prescribe a lot of opioids often rake in speaking and consulting fees from the pharmaceutical industry, CNN reports.
  • Electronic health records are a seriously underrated shortcoming of the health care system, CNBC's Christina Farr writes.
  • Scientists at Harvard are working on a contact lens that will deliver drugs directly into your eyes, per MIT News.
Caitlin Owens

What we're watching this week: Azar testifies Thursday at a House Appropriations subcommittee hearing on HHS' budget request. Shulkin will also appear before House appropriators on Thursday.

Senate HELP Committee hearing Thursday on the 340B drug discount program.

What's on your radar? I always welcome your tips: