May 1, 2019

Axios Vitals

Situational awareness: Yesterday I started listening to the podcast "Dr. Death" and man, is it good.

  • Also, yet another set of prescription drug pricing bills unanimously passed a House panel yesterday, further defining the base for future congressional action.
1 big thing: Medicare's skyrocketing specialty drug spending
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Data: Medicare Payment Advisory Commission; Chart: Andrew Witherspoon/Axios

There's been an explosion in spending on specialty drugs within Medicare's prescription drug benefit over the past decade, and it may be warping insurers' incentives to keep overall costs down.

The bottom line: A single expensive prescription now sends hundreds of thousands of beneficiaries straight into the benefit's "catastrophic phase," where the government picks up most of the tab and insurers have little incentive to manage costs.

By the numbers: In 2007, only 6% of Part D spending was on specialty drugs. By 2017, they accounted for 25% of spending, according to the Medicare Payment Advisory Commission's 2019 report.

  • While only 33,000 beneficiaries filled a prescription that was expensive enough to place them in the program's catastrophic phase after a single claim in 2010, by 2016, that number had risen to 360,000.

Once a beneficiary reaches the catastrophic phase, the government covers 80% of their prescription drug costs. The insurer pays 15% and the enrollee pays 5%.

  • Experts say this removes the incentive for plans to manage beneficiaries' spending, driving up costs.
  • Along with other changes to Part D, "the expanding role of high-cost medicines may be eroding plans' incentives for and ability to achieve cost control," MedPAC's James Mathews wrote in congressional testimony delivered yesterday.

The big picture: Prescription drug spending is increasingly driven by specialty drugs, a trend that isn't going to change anytime soon.

  • Drug development is heading more in this direction, as new therapies are increasingly individualized and complicated. This means they often come to market with a high price tag.
  • In 2018, 39 of the 59 new drugs that came to market were specialty drugs, according to a recent IQVIA report.

Go deeper:

2. Tobacco's awkward day

Photo: Michael Nagle/Getty Images

The Food and Drug Administration yesterday cleared Philip Morris' iQOS, a new tobacco device designed as an alternative to traditional cigarettes — an announcement that falls smack-dab in the middle of a swelling push to control the fallout from another cigarette alternative.

  • The effort to curb the teenage vaping epidemic has momentum largely thanks to former FDA commissioner Scott Gottlieb.
  • The iQOS — which heats up sticks of tobacco instead of burning them — is in existence largely for the same reason as e-cigarettes: The FDA said it was cleared because "the products produce fewer or lower levels of some toxins than combustible cigarettes" and "IQOS users may be able to completely transition away from combustible cigarettes."

Yes, but: The FDA said that it has put strict marketing rules in place to prevent youth use of the device.

  • It also made clear that the product is not "approved," as "all tobacco products are potentially harmful and addictive."

Related: Also yesterday, a bipartisan group of both House and Senate members introduced a bill to raise the federal smoking age to 21.

  • One of the bill's sponsors, Rep. Diana DeGette, took a shot at previously introduced legislation. "Unlike other bills drafted by the industry, our bill has no special-interest carve-outs or limitations on state and local governments," she said in a statement.
  • One such proposal, announced by Majority Leader Mitch McConnell, has come under fire for being tobacco-friendly, Politico reported.
3. Sexual assault in the medical profession

The same obstacles that medical students face on their path to becoming doctors — the years of education, the long, brutal hours, the six-figure debt — also make medical school a place rife with sexual misconduct, Bloomberg reports.

  • One recent report by the National Academies of Sciences, Engineering, and Medicine found that almost half of doctors-in-training said they'd experienced harassment from faculty or staff. This is almost double the rate in other science and engineering specialties.
  • The University of Texas found in an investigation that 47% of female medical school students had been harassed, compared to 22% of women students across the entire university.

The bottom line: "If you're working at a company and you're harassed by the boss, you can just quit and get another job," Philadelphia attorney Patrick Griffin told Bloomberg.

  • "That's not an option for medical residents, whether they're accusing supervisors or colleagues. There's a very real fear of their careers being derailed."
4. The next scar for HMA

Gary Newsome, the former CEO of Health Management Associates, who left the hospital company to lead a Mormon mission in South America, is set to pay the federal government almost $3.5 million out of his own pocket.

  • This is to settle claims he directed HMA to sign off on illegal kickbacks to doctors and falsely bill Medicare and Medicaid by hospitalizing patients that didn’t need to be admitted, Axios' Bob Herman reports.

Why it matters: This is another scar in a disastrous sequence of events for what used to be one of the largest for-profit hospital chains in the country.

  • Newsome, who said HMA was "on a clear path to great success" on his way out, sold the company to Community Health Systems in 2014 after an investor revolt. He made $23.3 million from that deal just on the HMA shares he owned.
  • CHS CEO Wayne Smith said during the buyout that he had "a good understanding" of the allegations that said HMA was pressuring doctors to admit patients. Since then, Smith admitted he regrets buying HMA.
  • Last year, CHS agreed to pay the feds $260 million to resolve the claims against HMA. That came after two physician groups paid $33 million combined to clear allegations that they accepted referral bribes from HMA.

Now, CHS has sold off a lot of the HMA hospitals, continues to hemorrhage money, and has also closed some facilities.

5. Facebook launches new health groups

Facebook announced yesterday that it's creating health support groups where users will be able to ask administrators to post questions on their behalf, Stat News reports.

  • "There are a lot of people with sensitive questions [who] are not comfortable asking a question in a group where they have to tie their identity to that question," said Hema Budaraju, the product management director for health at Facebook.
  • There's plenty of skepticism as to whether this actually alleviates privacy concerns surrounding sharing sensitive health information online.
  • While members of the new group won't be able to see who posted a question, the administrator will be able to see who made the request.

Our thought bubble, via Axios tech editor Scott Rosenberg: Facebook's "pivot to privacy" has a long way to go to persuade users that the social network is a safe place to share their information.

  • The company will need to recapture people's trust in many smaller ways before they are likely to feel more comfortable about sharing health info, even with a promise of anonymity.

— Correction: An earlier version of this newsletter said McConnell has introduced a bill to raise the federal age limit for buying tobacco. He has announced that proposal but has not yet introduced it as a bill.

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