Mar 29, 2019

Axios Vitals

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1 big thing: The drug pricing debate is stuck in the past

Illustration: Sarah Grillo/Axios

There's a scientific and economic revolution happening in medicine, and the political debate over drug prices isn’t keeping up, my colleague Caitlin Owens writes.

The big picture: "We haven't really contemplated how we're going to absorb some of these things," Food and Drug Administration commissioner Scott Gottlieb said. "These are good problems to have … but they are policy challenges."

Where it stands: Congress is mainly squabbling over proposals to reduce prices by boosting competition. And with the exception of some very preliminary talk about the length of patent exclusivity period for biologics, they're mostly focused on traditional small-molecule generics.

But those regulatory tools were designed for a world in which pharmaceutical companies develop relatively simple drugs and try to market them to a big group of people. And science is rapidly moving away from that world.

  • In the promising new field of cancer immunotherapy, for example, each dose is custom-made for each patient. Treatment can come with a price tag north of $1 million once all is said and done.

The old dichotomy of a brand-name pill followed by a generic version of that pill doesn't just hold up for custom-made drugs. And even when new drugs aren't entirely individualized, many will still be targeted at smaller numbers of patients.

  • "Generic entry might not prove to be as successful for addressing this problem as it has historically been, and I think it's because we fundamentally have shifted into these other types of products where competition is just more challenging," Vanderbilt professor Stacie Dusetzina said.

The bottom line: For now, Congress is focused mainly on areas where it can build consensus — and that means solving a lot of yesterday's problems, even as a new and wildly expensive future is already arriving.

2. Another legal loss for Trump

I wrote yesterday that President Trump's health care agenda was hitting brick walls in the courts — and the hits keep coming.

Driving the news: A federal judge in Washington yesterday struck down the administration's expansion of association health plans, which allow similarly situated individuals to band together and buy insurance as if they were a company.

  • "The Final Rule is clearly an end-run around the ACA," Judge John Bates wrote in his decision.
  • Moreover, Bates said, the rule exceeded the federal government's authority over employer-sponsored insurance, because it set "no meaningful limitation" on who can participate in an insurance-purchasing association.

Context: Trump expanded association health plans alongside the expansion of bare-bones "short-term" plans, and both moves were cast as alternatives to the ACA.

  • But association plans were seen as the less dramatic of those two policies — they still have to follow certain benefit rules.
  • And that has largely borne out: The plans on the market now are relatively comprehensive, covering pre-existing conditions and, in many cases, more benefits than they legally have to.
3. Here's the first drug ad to include prices

Screenshot of the price disclosure in a new Xarelto ad.

Xarelto will be the first drug to include pricing information in its TV ads, even before the Trump administration finalizes rules that will require those disclosures.

Why it matters: There's been plenty of uncertainty about how this would work and what it will look like. The administration wants drugmakers to include list prices, which most people don't pay, and critics say that could give patients an unrealistically inflated view of their costs.

How it works: The Xarelto ad, which begins running today, shows the drug's $448 per month list price, then adds that most patients pay between $0 and $47, depending on their insurance.

  • Johnson & Johnson, Xarelto's manufacturer, said 75% of patients who take the drug fall within that range.
4. An unexpected twist in the ACA case

A Florida man is capitalizing on the Trump administration's sudden legal reversal in an attempt to get off the hook for accusations of Medicare fraud.

Philip Esformes, who operated about 20 nursing homes in the Miami area, was arrested in 2016 and charged with committing $1 billion in Medicare fraud through a complex kickback scheme.

  • But Esformes's lawyers now argue the charges should be dismissed because of the Justice Department's new position on the Affordable Care Act. ThinkProgress' Ian Millhiser was the first to flag this creative argument.

How it works: Some of the specific charges against Esformes stem from parts of the Affordable Care Act. They are, his lawyers say, among the specific sections of law that Judge Reed O'Connor invalidated when he threw out the entire ACA.

  • Esformes's lawyers acknowledge that those statutes are still on the books.
  • But the Justice Department has said it agrees with all of the O'Connor's decision — which means it has said that "the very statutes it is seeking to enforce in this trial are unenforceable," his brief argues.
  • The government shouldn't be able to prosecute Esformes using legal authorities that it's simultaneously saying are invalid, the lawyers argue.

My thought bubble: This seems like the kind of thing a good prosecutor will probably find a way to wriggle out of. It also seems like the kind of thing career lawyers at DOJ would have caught, if they had been allowed to shape DOJ's position in the ACA case.

5. Quantifying surprise billing

New data from the Health Care Cost Institute tries to pin down just how often patients end up with the most common form of a surprise hospital bill — the kind that arises when patients go to a hospital that's in their insurance network, but are seen by a doctor who's out-of-network.

By the numbers: Nationwide, about 14% of in-network hospital admissions included a bill for out-of-network care, per HCCI.

  • There's wide variation in the prevalence of surprise billing from state to state. Florida patients have it worst — 26% of hospital admissions in the state ended with an out-of-network bill. Minnesota has the lowest rate of surprise billing, at less than 2%.
  • Anesthesiologists sent more of these bills than any other specialty, followed by primary care and emergency medicine.

Go deeper: How to crack down on surprise medical bills

6. Mylan is competing with itself — and winning
Expand chart
Adapted from Leerink Partners and IQVIA; Chart: Andrew Witherspoon/Axios

Brand-name EpiPen barely has any share of the epinephrine injection market these days — a swift change from 2015, when EpiPens controlled 89% of the market and Mylan earned congressional scrutiny for jacking up prices.

Yes, but: Mylan still owns the market through its "authorized" generic, Axios' Bob Herman notes.

  • That product is exactly the same as EpiPen, except for the label and its smaller price tag, and it has prevented other competing generics from gaining ground.

Where it stands: The price for a pack of Mylan's generic EpiPens is $300, or about half the price of regular EpiPen.

  • Mylan offers large rebates to insurance middlemen so they will cover brand-name EpiPen, but Mylan doesn't have to do that for its generic.
  • People who rely on epinephrine injectors save money on their out-of-pocket costs with the lower-priced generic, and Mylan has been able to keep a loyal following despite its pricing practices.
  • But the net amount everyone collectively spends on the drug hasn't really changed, and the generic EpiPen may be more profitable for Mylan.

What we're watching: Eli Lilly is mirroring Mylan's EpiPen strategy with its most popular insulin.

The bottom line: Drug companies can retain most or all of their turf by competing with themselves through their own generics.

Thanks for reading, and as always, please never hesitate to share your thoughts, questions, tips and ideas: baker@axios.com, or just reply to this email.