Dec 10, 2019

Axios Vitals

Good morning. My deepest apologies to my good friend Peter Sullivan — an excellent reporter for The Hill — who we mistakenly called "Peter Alexander" yesterday.

Today's word count is 733, or a 3-minute read.

1 big thing: Trump's fine with ditching USMCA drug provision

House Minority Leader Kevin McCarthy and President Trump. Photo: Alex Wong/Getty Images

As they took in Game 5 of the World Series together, President Trump told House Minority Leader Kevin McCarthy he doesn't want to fight for a biologics provision in a trade pact with Mexico and Canada, Axios' Jonathan Swan and I report.

Why it matters: The provision has been one of the final sticking points keeping the USMCA from finalization, with Democrats fighting for it to be removed or watered down. But McCarthy has known for more than a month that Trump probably won't go to bat to keep it.

  • The announcement of a deal acceptable to House Democrats appears imminent, Politico reports.

Details: Trump and McCarthy (R-Calif.) discussed the USMCA at the World Series game that they attended on Oct. 27, according to three sources familiar with the conversation, including a source in the room.

  • McCarthy told Trump they didn't need to alter the biologics provision of the trade deal for Democrats to eventually agree to finalize it because House Speaker Nancy Pelosi needed to pass the trade deal to show Democrats could get things done amid impeachment.

But Trump told McCarthy he had no interest in keeping the provision.

  • Trump instead talked about how he wants lower drug prices.
  • "His number one goal is he wants drug prices lower, he wants no hurdles out there ... from his point of view, just don't have it in there, period," said a source who was at the baseball game with the president. "Why even argue over it? It's better ... just not having it in there."

Between the lines: Republicans and their supporters in the pharmaceutical industry have long pushed for prescription drug protections to be included in trade deals.

Go deeper.

2. The ACA heads back to the Supreme Court

Illustration: Sarah Grillo/Axios

A group of insurers will make their case to the Supreme Court today for billions of dollars in Affordable Care Act payments, Axios’ Sam Baker reports.

Driving the news: The court will hear oral arguments in a long-running dispute over the ACA’s risk corridors program. Insurers say they’re owed billions of dollars from that program; the government says it doesn’t have to pay.

Risk corridors were designed to even out the ACA’s early days. Insurers with a better-than-expected experience in the exchanges paid in, and that money was then paid out to insurers that had a worse-than-expected launch.

  • The amount the program was supposed to pay out exceeded the amount insurers had paid in. The assumption, at the time, was that HHS would make up the difference itself.
  • But then Congress passed an appropriations rider saying HHS couldn’t use its own money to cover risk-corridors payments, leaving billions of dollars unpaid.

Insurers sued, claiming HHS had essentially reneged on a promise, only after insurers put themselves on the line in a new marketplace under the expectation that this safety net would be there.

The other side: The government argues that “Congress did not expose the federal fisc to that massive liability” — that it never intended to create an open-ended expense “based on criteria that depended largely on the insurers’ own business judgments.”

Why it matters: The implications for the ACA are modest, but it's a lot of money for these insurers — about $12 billion, all told.

3. Industry united against health costs bill

The health care industry is not very happy with Congress' latest proposal on surprise medical bills, which also includes other provisions designed to lower health costs.

Driving the news: The bill, championed by Sen. Lamar Alexander and Reps. Frank Pallone and Greg Walden, cracks down on industry behavior that is often profitable at patients' expense.

What they're saying: Providers are complaining that arbitration can only be used to settle payment disputes over out-of-network bills over $750.

The other side: The Coalition Against Surprise Medical Billing, which includes employer groups and insurers, is complaining that arbitration is included at all.

  • The generic drug industry also released a statement criticizing the bill's drug component.
  • The White House released a statement of support, writing that "this compromise reflects the input of doctors and hospitals and is the result of months of delicate work to reach a deal among congressional members and the White House that protects patients."
4. The Azar-Verma war continues

An internal Centers for Medicare and Medicaid Services review found that stories critical of CMS administrator Seema Verma may have come from the Department of Health and Human Services, its parent organization.

Why it matters: The feud between Verma and HHS Secretary Alex Azar continues to escalate.

5. Major specialty pharmacy consolidation

UnitedHealth Group's OptumRx division is buying Diplomat Pharmacy for $300 million, roughly a month after Diplomat said it was running out of money and was exploring a sale, Axios' Bob Herman reports.

  • We chronicled Diplomat's multi-year fall here.

Why it matters: Health insurance companies have tightened their oligopoly hold on specialty pharmacies.

  • UnitedHealth and the other big insurers, which own these pharmacies that sell high-cost drugs for complex diseases, helped create Diplomat's financial problems by routing prescriptions to themselves over Diplomat. 
  • Now, Diplomat is selling itself to the giant that squeezed it, at a discount, and specialty pharmacy competition goes down. Diplomat's pharmacy benefit manager also gets absorbed by UnitedHealth.

Go deeper: Why specialty pharmacies matter