Several states have made ambitious attempts to address health care costs, only to be thwarted by the hospital industry.

Why it matters: States' failures provide a warning to Washington: Even policies with bipartisan support — like ending surprise medical bills — could die at the hand of the all-powerful hospital lobby.

The big picture: Hospitals are the biggest contributor to rising health care spending, and states are on the leading edge of trying to curtail those costs.

Driving the news: Hospitals' most recent political victory came in North Carolina, where large systems were able to remain in state employees' health plan without agreeing to the state's proposed payment rates, according to the Charlotte Observer.

• Last month, hospitals killed a California proposal to curb surprise medical bills. It would have limited how much hospitals could charge insurers for out-of-network emergency care, according to California Healthline, and hospitals said it would have given insurers too much incentive to exclude hospitals from their networks.
• And in June, Washington state passed a law to create a public insurance option — but only after hospitals secured higher payment rates than the proposal had initially called for. The public plan's low costs wouldn't be worth much if too few providers agreed to accept it.

What we're watching: Congress and the Trump administration are trying to pull off several reforms that hospitals oppose — including price transparency measures and a federal prohibition on surprise billing that would be similar to California's.

• And new public insurance plans are central to Democratic presidential candidates' health care plans.

The bottom line: If the state battles are any indication, all of those political battles will be difficult, if not impossible, to win.

Pharmacy benefit managers negotiated $18 billion worth of rebates from drug manufacturers within Medicare’s prescription drug program in 2016, and they retained less than 1% of those rebates for themselves, according to a new Government Accountability Office report.

The big picture: This isn’t surprising, as Medicare is structured so that PBMs pass pretty much all rebates back to the federal government. While the GAO report offers a good base of how middlemen affect drug prices in Medicare, it does not fully address larger issues, my colleague Bob Herman reports.

These include: 

• PBMs do keep rebates in commercial plans. Those commercial rebates are most important and highly variable, and they're are hidden within a black box, which Bloomberg started to expose in 2016.
• PBMs extract payments from drug companies that are not technically rebates — things like inflation payments, prompt payment discounts and many more — but they act a lot like rebates. The GAO only made a passing reference to “bona fide service fees.” 
• The GAO acknowledges the contracts it reviewed “are not generalizable to all service agreements that are in effect,” and many agreements omitted important information because PBMs or health insurers viewed it as proprietary.

Go deeper: How Express Scripts claws back money from almost all pharmacies in Medicare

The Food and Drug Administration yesterday approved Pretomanid Tablets, when used alongside 2 other antibiotics, to treat an extremely drug-resistant strain of tuberculosis, my colleague Orion Rummler writes.

By the numbers: "Tuberculosis has now surpassed AIDS as the world’s leading infectious cause of death," the New York Times reports.

• The new drug cured 89% of 107 patients with extensively drug-resistant TB after 6 months, when used in combination with antibiotics bedaquiline and linezolid, the FDA said.

What's new: Before the FDA approved this combination therapy, the most common treatment for this type of tuberculosis required patients to take around 30 pills a day plus sometimes daily injections for at least 18 months.

• This new treatment lowers that dose to 5 pills/day over 6 months for most patients.

The bottom line: Although the new drug is now approved only in the U.S., FDA approval is a signal to the rest of the world that this treatment has validity.

Go deeper: Experts say eliminating TB is possible this generation, but funding is paramount

A new Health Affairs study throws cold water on the idea that the U.S. spends so much more on health care than other countries because we spend less on other social services.

• Some policymakers and researchers say that the underinvestment in social services has led to a less healthy population, and point to the low U.S. ratio of social-to-health spending.

Between the lines: Instead, our spending on social services as a percentage of GDP is actually greater than the average of OECD countries, and there's a positive correlation between a country's spending on social services and its spending on health care.

• Forgive me if you've heard this before, but the answer is that we just spend way more on health care than other countries do, which drives down our social-to-health spending ratio and makes us an outlier.
• And, the authors note, "the US has average rates of utilization, which suggests that this is not likely a key driver of higher health care spending at the national level."

The bottom line: It's the prices, stupid.

Novartis let go of the top 2 scientists in its gene therapy department AveXis shortly after learning about data falsification related to Zolgensma, the world's most expensive drug, STAT reports.

The timeline: A source told STAT that the scientists “have not been not been involved in any operations at AveXis since early May 2019,” and a source confirmed to STAT that their departure was connected to the data manipulation.

• Zolgensma was approved by the FDA on May 24, but Novartis didn't tell the FDA about the data manipulation until the end of June.

Why it matters: "The news will likely only amplify questions as to why Novartis delayed notifying the FDA of concerns," STAT's Damian Garde and Matthew Herper write.

• While Novartis has said that it was because it was waiting for the results of an internal investigation, it "apparently knew enough about the issue to fire the [scientists] more than a month before informing regulators," they write.

Go deeper: FDA: World's most expensive drug was approved using faulty data