Jan 25, 2019

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning ... Sometimes you read a headline and all you can do is hope you never have to find out for yourself whether it's true. Case in point: "No One Is Prepared for Hagfish Slime."

1 big thing: WHO says R&D doesn't justify cancer drugs' prices

Pharmaceutical companies defend their high prices largely by arguing that they need to recoup the costs of researching and developing new drugs — including the failures. But the World Health Organization says that math doesn't add up, my colleagues Caitlin Owens and Bob Herman report this morning.

The big picture: A new WHO report says new cancer drugs have translated into better survival rates, but that high prices are the main factor limiting access to those life-saving drugs. And it says R&D costs don't justify those prices.

  • “Pharmaceutical companies set prices according to their commercial goals, with a focus on extracting the maximum amount that a buyer is willing to pay for a medicine,” the report says.

By the numbers: Even after accounting for failed clinical trials and other opportunity costs, drug companies saw a median return of $14.50 for every $1 they spent on research and development, the paper says, citing earlier research published in the Journal of the American Medical Association.

The other side: “The report is wrong on the facts and deeply flawed,” a spokeswoman for the Pharmaceutical Research and Manufacturers of America said. “The report’s narrow scope fails to properly account for the value that cancer medicines provide to patients, health care systems and societies.”

  • And the WHO report does say that price controls in other countries have, in some cases, "resulted in reduced, delayed and even cancelled treatment."

Read the paper.

2. The latest drug price hikes

A new round of price increases for brand-name prescription drugs was just enacted, Bob reports.

Details: Pharma giants Pfizer and Novartis have officially raised prices on dozens of drugs, according to data from 46brooklyn Research and Elsevier's Gold Standard Drug Database.

  • A 21-pill bottle of Ibrance, Pfizer’s big-selling breast cancer medication, now costs almost $12,000, up 5% from last year.
  • A 30-pill bottle of Pfizer’s Viagra retails for more than $2,100, also up 5% from a year ago. Generic versions of the impotence drug, which came out in late 2017, retail for about $15 for the same amount.
  • The price of Cosentyx, Novartis’ blockbuster psoriasis treatment, went up 9.9% to nearly $5,200 for a pack of two pens.

Some important context: These are list prices. Insurance plans will end up actually paying lower, negotiated rates.

  • Spokespeople for Novartis and Pfizer said the net effect of their price increases, after rebates and discounts, will be zero or a slight decrease.
  • The companies also said they did not raises prices for the vast majority of their medicines.
  • As we reported earlier this week, there are fewer list-price increases this year than in past years.

Yes, but: List prices still matter for patients with high deductibles, including Medicare coverage.

  • And though Pfizer, for example, increased the list prices for just 10% of its drugs, those drugs account for about half of Pfizer’s revenue.
3. Hospitals run "wealth checks" on patients

Non-profit hospitals are conducting "wealth checks" to identify wealthy patients, then hitting up them for donations. And though hospitals say wealthier patients don’t get better care, they do get more personal touches.

Hospitals search public data like property records and political contributions to identify wealthy patients.

  • Some of them also train doctors and nurses to "identify patients who have expressed gratitude for their care, and then put the patients in touch with staff fund-raisers," according to a Kaiser Health News report published in conjunction with The New York Times.
  • It’s not that weird for wealthy patients to make big donations. But the fact that hospitals are get more proactive about seeking them out, even while patients are still hospitalized, and drawing doctors into the process, makes some ethicists uneasy.
  • Patients flagged as potential donors may get "a visit from a hospital executive in their rooms, as well as extra amenities like a bathrobe or a nicer waiting area for their families," KHN reports.

By the numbers: Charitable donations to hospitals topped $10 billion in 2017, per KHN.

  • One California hospital system told KHN that patients accounted for two-thirds of its donations last year, and that doctors’ conversations with patients prompted about 20% of those gifts. It runs up to 400 "wealth checks" per night.

Why it matters: “I feel like the risk is we are setting up a two-tiered health care system — one for wealthy patients and one for everyone else,"3e Johns Hopkins internist Rosalyn Stewart told KHN.

4. PBMs' markups are getting bigger

Pharmacy benefit managers' role in the drug supply chain is incredibly opaque. But Bloomberg helps pull back the curtain a little bit more.

How it works: PBMs' profit from the "spread" between the prices they charge their clients (insurance companies and employers) and what they actually pay pharmacies for drugs. But it's usually impossible to know exactly what that spread is.

The latest details come from New York's Medicaid program. A new analysis commissioned by independent pharmacists in the state, and shared with Bloomberg, found that PBMs' markups doubled from 2016 to 2017.

  • The relatively limited study examined data from 11 independent pharmacies and compared that to federal Medicaid records. It does not include big chain pharmacies.
  • Within that sample, Medicaid insurers paid $14.34 for each generic prescription, while pharmacies were paid $10.85 — leaving a 32% spread for PBMs.

The other side: PBMs say New York overpays its pharmacies. A spokesman for PBMs' trade organization in Washington told Bloomberg that "New York’s special interest drugstore lobby wants to rearrange deck chairs on the Titanic without offering ways to keep Medicaid afloat.”

5. Civica RX plans to offer 20 drugs this year

The non-profit drug supplier Civica RX has upped its expectations and now says it will be able to provide about 20 drugs this year, Reuters reports.

Civica RX is consortium of hospitals and non-profits, led by Intermountain Healthcare, that aims to jump-start the supplies of older drugs that hospitals rely on, but which have become inaccessible due to shortages and price hikes.

  • Civica had previously said it would provide 14 drugs this year, but now "believes it will exceed that number after forging relationships with several companies with licenses to manufacture additional medicines," according to Reuters.
  • The company has been negotiating relatively affordable long-term prices in exchange for long-term agreements to keep purchasing certain drugs. It wants to build its own manufacturing facilities within the next 5 to 10 years.

Go deeper: Axios' Felix Salmon has a good Civica RX explainer.

6. When charity becomes insurance fraud

A school superintendent in Indiana was charged with insurance fraud after she used her son's insurance to get medicine for a sick student.

Details, via the Indianapolis Star:

  • The superintendent, Casey Smitherman, was concerned when a 15-year-old student didn't show up to class. She called his home, where he lives with elderly relatives who don't have a car, and figured out he had a sore throat.
  • So she used her son's insurance card to take the student to an urgent-care facility and then to fill a prescription for antibiotics.

My thought bubble: I suppose this is probably insurance fraud, but man, this must be one of the most pure-of-heart crimes ever committed. And I don't think this is necessarily a scathing indictment of the health care system; it's just ... really an all-around bummer, to be honest.

  • Prosecutors are working on a diversionary agreement that would allow Smitherman to avoid any jail time. Which seems good. But still.
Caitlin Owens

What's on your mind? I want to hear from you: Simply reply to this email or find me any time at baker@axios.com.