May 6, 2019

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning. A fun fact about me is that both my parents are horse veterinarians. I won't tell you their take on the Kentucky Derby results, but I will say that they never expected the derby to become a political controversy.

Situational awareness: Axios, HBO and DCTV were commended for the news documentary series "Axios on HBO" at the 10th Annual Tribeca Disruptive Innovation Awards last Friday night.

1 big thing: Health care's big spending mismatch
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Adapted from Ezra Golberstein using NHEA data; Chart: Axios Visuals

The health care services that rack up the highest out-of-pocket costs for patients aren't the same ones that cost the most to the health care system overall.

Why it matters: Americans likely have a distorted view of what is costing them the most, which affects where consumers direct their ire after receiving expensive medical bills.

What they're saying: "What you pay for health care is often more influenced by your health insurance than the actual cost of the service," Avalere's Chris Sloan said.

  • "It's hard to have consumer-driven market forces that impact costs if the consumer doesn’t understand how much any service costs and subsequently can’t 'shop around' or negotiate it down," Sloan added.
  • It also means that certain issues, like prescription drug spending, become politically elevated over other areas with lower cost-sharing.

Yes, but: Insurance was designed in part to shield patients from high health care bills, which typically are largest when a patient goes to the hospital. But most people don't go to the hospital in any given year.

  • And cost-sharing was designed to encourage enrollees from inappropriately using health care, even though it's become a way of off-loading costs onto patients.
  • "Most people are not itching to get admitted to the hospital, so it doesn’t make sense for insurance plans to discourage it through cost-sharing," said the Kaiser Family Foundation's Larry Levitt.

The bottom line: The health care costs that are hitting patients' pocketbooks hardest aren't the same ones that are driving health care spending through the roof, meaning that political action to address costs may be somewhat divorced from our long-term problems.

2. Block grants move forward in Tennessee

Tennessee is plowing ahead with its plan to become the first state to adopt Medicaid block grants. But, Axios' Sam Baker notes, there's no guarantee that the Trump administration will end up playing along.

Driving the news: The state legislature on Friday passed a bill authorizing the new financing structure, and Gov. Bill Lee is expected to sign it.

Details, via Nashville Public Radio: Tennessee's block-grant proposal would lock in the current rate of federal Medicaid funding — which could be a problem if either enrollment or costs ever increase.

  • The Lee administration would have to negotiate the details with federal officials, but the state legislature would have to approve whatever they work out.

Yes, but: The Trump administration has urged states on in a handful of efforts to roll back Medicaid, and block grants would be the most aggressive of those efforts by far. But it hasn’t yet provided a clear framework about what it believes it can approve, within its legal authority — meaning all of this could still fizzle out.

Go deeper: Red states' Medicaid gamble: Paying more to cover fewer people

3. The rise and fall of hepatitis C drug sales
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Source: Company filings; Chart: Axios Visuals 

Three years ago, Gilead Sciences was generating record sales and profits on the back of its hepatitis C pills.

  • Now, Gilead's medicines are playing second fiddle to a competitor, and the drug that started it all, Sovaldi, has been relegated to a footnote, Axios' Bob Herman reports.

The big picture: Gilead's drugs were a major reason why pharmaceutical spending shot up in 2014 and 2015, as patients flocked to the high-priced pills that cure the disease for a vast majority of people.

  • Sales have gone down considerably, due to competing drugs and restrictive insurance coverage, even though a large number of hepatitis C patients remain untreated.

Between the lines: AbbVie has been the leading hepatitis C drugmaker for 2 consecutive quarters, as its Mavyret medicine has outsold Gilead's options, led by Epclusa and Harvoni.

  • Gilead is still projected to collect roughly $3 billion in sales this year from its hepatitis C drugs, but that's a far cry from when it was getting almost $5 billion per quarter from hepatitis C drugs in 2015.
  • Merck remains far behind AbbVie and Gilead in the market, even though it cut the price of Zepatier by 60% last year.

What we're watching: Whether more state Medicaid programs follow Louisiana and adopt a subscription approach to purchasing hepatitis C medications.

Go deeper: Inmates with hepatitis C aren't getting the medicine.

4. Pharma has an antibiotics problem

As the threat of drug-resistant infections rises globally, small and large drug companies are giving up on antibiotics because they don't turn enough profit, Bloomberg reports.

  • One particularly striking example is an antibiotic developed by Achaogen targeting a superbug that appears in intensive care units, carbapenem-resistant Enterobacteriaceae.
  • While the antibiotic was approved by the Food and Drug Administration in June, Achaogen filed for bankruptcy in April. The drug had made less than $1 million in sales in its first 6 months on the market.
  • Experts fear this story will repeat itself with other biotechs if something isn't done.

By the numbers: Only 5 of 16 antibiotics introduced between 2000 and 2015 made $100 million or more annually in U.S. sales.

  • Antibiotics bring in much less money than drugs for other types of diseases, like cancer.
  • And doctors explicitly try not to prescribe antibiotics unless they're needed.

The bottom line: While public health experts have ideas about how to fix the incentives around developing antibiotics, for now things aren't looking good.

Go deeper: Drug resistance could kill 10M people per year by 2050, experts say

5. While you were weekending
  • The Washington Post reports on the rise of palliative care for cancer patients, which aims to make the treatment experience better.
  • Juul is working on an app designed to turn cigarette smokers into Juul users, Business Insider reports.
  • HuffPost dives into a health care proposal that creates a public insurance plan and a pathway to universal coverage, but serves as a contrast to single-payer Medicare for All.
Caitlin Owens

Have a great day!