Axios Vitals

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October 25, 2019

Good morning. Happy Friday! Congrats on making it through another week.

📺 Next on "Axios on HBO": An exclusive interview with Iraq's President Barham Salih (sneak preview), the head of the IMF Kristalina Georgieva talks socialism and taxes, and Sen. Kamala Harris gives her take on 2020. Plus, explore the only offshore wind farm in the U.S., and two of our reporters debate the severity of the next recession. Tune in Sunday at 6pm on HBO. 

Today's word count is 943, or <4 minutes.

1 big thing: The downside of cheap generics

Illustration of a tree shedding pills instead of leaves.
Illustration: Aïda Amer/Axios

Generic drugs are becoming both more available and cheaper, but that can have steep consequences, including shortages and safety issues.

The big picture: The number of generics being approved keeps hitting new records, they now make up 90% of all prescriptions dispensed, and these generics keep getting cheaper.

At the same time, the number of quality inspections done by the FDA is decreasing, as Bloomberg's Anna Edney has reported in an investigation of the generics industry.

  • The industry has adamantly pushed back on the idea that generics are any less safe than brand-name drugs.

Shortages are also a problem — while the number of new and ongoing drug shortages was lower in 2018 than in the recent past, it's trending up again, per an FDA report.

  • "Generics by and large are very safe and very effective and increasingly at price points so low that it is impacting the sustainability of the industry moving forward," said Chip Davis, president and CEO of the Association for Accessible Medicines, which represents the industry.

Driving the news: A generic pediatric cancer drug has become "increasingly scarce" to the point that doctors are warning they may have to ration doses, the New York Times reported earlier this month. There's no appropriate substitute for it.

What's next: "There are solutions to the safety and shortage problems that don't necessarily involve paying much more for these products," said Rachel Sachs, a law professor at Washington University.

  • Civica Rx, for example, is a nonprofit manufacturer that was formed partially to address shortages.
  • On the more extreme side of the spectrum, Sen. Elizabeth Warren has proposed having the government manufacture some generics.
  • More resources could be devoted to FDA inspections, addressing the safety issues raised by Bloomberg's reporting.

Go deeper: Why the spotlight on generic drug prices is getting brighter

2. A very expensive surprise billing solution

New York's surprise billing law — which providers hope will become the model for a national solution — has resulted in providers receiving some very high payments, according to a new analysis by the USC-Brookings Schaeffer Initiative for Health Policy.

Why it matters: Surprise medical bills impact two groups of people: The patients directly responsible for paying them, and the rest of us, who pay higher premiums as a result of their existence.

  • A solution resulting in higher provider reimbursements would still protect patients from enormous surprise bills, but it could raise health care costs and thus premiums.

Details: New York's law resolves payment disputes between insurers and providers — the heart of the surprise billing debate — by using an arbitration process.

  • State guidance says that arbiters should consider the 80th percentile of billed charges, or list prices. The problem is that these charges tend to be much higher than the negotiated rates that insurers pay for in-network care.
  • A New York Department of Financial Services report found that the average payment amount decided through arbitration is 8% higher than the 80th percentile of charges — a victory for providers.
  • This, in turn, is likely to raise physicians' leverage with insurers when negotiating payment rates.

Yes, but: The state's report says the law has saved consumers an estimated $400 million, "but there is no supporting evidence provided and the actual data released in the report strongly suggests that the opposite is true," the USC-Brookings analysis argues.

3. AI's impact on breast cancer treatment

An algorithm is helping researchers map the medical history of breast cancer patients so they can better predict, treat and maybe even prevent it, the New York Times reports.

The big picture: This database covers more than 100,000 patients over 30 years, from Massachusetts General hospital, Axios' Marisa Fernandez writes. That's a lot more data than oncologists can get from clinical trials, the Times notes.

Why it matters: AI could help us understand how tumors responded to different treatments. Machines could also make it easier for clinicians to identify patients with specific disease characteristics and to enroll them in clinical trials.

The other side: Science Magazine published an article Thursday explaining how black patients were susceptible to racial bias in treatment when a popular algorithm predicted who would benefit from extra medical care.

  • Risk scores underestimated the needs of black patients compared to white patients.

4. The VA's silencing of whistleblowers

The seal of the United States Department of Veterans Affairs.
Photo: Robert Alexander/Getty Images

An office established by the Trump administration in the Department of Veterans Affairs to protect internal whistleblowers ended up alienating "the very individuals it was meant to protect," according to a VA Office of Inspector General report released Thursday.

Why it matters: Creating a permanent Office of Accountability and Whistleblower Protection was a key campaign promise of President Trump's, who said he wanted more accountability on veteran's care, Marisa writes.

Instead, the office "engaged in actions that could be considered retaliatory [against whistleblowers]" and "likely diminished the desired confidence of whistleblowers and other potential complainants in the operations of the office," the report said.

What they're saying, per a VA spokesperson: "VA appreciates the inspector general's oversight and has been encouraging the IG to complete this work for some time, but it's important to note that this report largely focuses on OAWP's operations under previous leaders who no longer work at VA."

Go deeper: Veterans face surprise medical bills from non-VA hospitals

5. 1 semantics thing

We're obviously all anxiously awaiting Sen. Elizabeth Warren's plan to pay for Medicare for All. But, as the Washington Post's Jeff Stein reports, some economists haven't been shy about sharing their suggestions.

The big issue is that it's difficult to pay for a $30 trillion health care plan without raising taxes, including on the middle class. And Warren has already accounted for how she'd spend the $3 trillion she'd raise from her proposed wealth tax.

Several ideas were floated to Stein, but this is my personal favorite:

  • Robert Hockett, a Cornell University professor, said that he's urged Warren's team to create a "public premium," which would essentially be a premium charge going to the government instead of a private insurance company.
  • "I told them what they should do is say, we will have a low premium that will replace a high premium. Or, if you prefer, a low public tax to replace a high private tax," Hockett told WashPost.
  • "That would neutralize the word 'tax' because it would remind people that a tax is a synonym for a premium, and then at that point you are quibbling over words," he added.

My thought bubble: "Quibbling" may be an understatement.