Axios Vitals

A briefcase with a red cross on the front.
January 24, 2019

Good morning ... This guy just bought an apartment in New York for $238 million. $238 million! That's so much money! What could it possibly have to justify that price?

I'm serious: Reply to this email and tell me what you think an apartment would have to have, to be worth $238 million. My opening bid is that it's impossible.

1 big thing: Climate change may be big business for pharma

Animated illustration of a thermometer rising in temperature and powering up a light bulb in the shape of a dollar sign.
Illustration: Aïda Amer/Axios

Climate change is going to make us sick. We’ll need prescription drugs to get better. And that’s a business opportunity the pharmaceutical industry is starting to prepare for.

Driving the news: A non-profit organization called CDP asks companies to identify “risks and opportunities” they’ll face because of climate change, and grades them on their preparations.

  • Big pharmaceutical companies foresee similar risks — including physical damage to their facilities, supply-chain disruptions from increasingly powerful storms, and higher costs stemming from new energy regulations.
  • They also identified a consistent opportunity: More demand for drugs, thanks to the health effects of climate change.

What they’re saying:

  • AbbVie: “Climate change may create a greater need for existing or even new products … higher temperatures and drought conditions are becoming extreme … Our immunology product line could see an increase in sales as a result.”
  • Eli Lilly: “These risks may drive an increased demand for ... our diabetes products.”
  • Merck: “As the climate changes, there will be expanded markets for products for tropical and weather related diseases including water borne illness.”
  • Pfizer: “There could be an increased demand for products related to diseases impacted by climate change.”

Between the lines: Those companies either declined to estimate the financial impact this increased demand would have, or said it would be minor. Several highlighted partnerships to make certain life-saving drugs available at reduced prices, especially in developing countries.

The big picture: They’re right. The various effects of climate change — hotter temperatures, severe weather and dirtier air, among them — are expected to exacerbate a host of health problems. including infectious diseases, asthma and other respiratory diseases. And those are ailments we treat with drugs.

2. Trump talks surprise billing

President Trump speaks during a White House roundtable on health care costs.
Trump speaks at yesterday's roundtable. Photo: Chip Somodevilla/Getty Images

Surprise medical bills are on President Trump's radar, as yesterday's White House roundtable on health care costs made clear.

  • “Patients should know ... the real price and what’s going on with the real prices of procedures. Because they don’t know," Trump said. "They go in, they have a procedure, and then all of a sudden, they can’t afford it. They had no idea it was so bad.”

Where it stands: It would mostly be up to Congress to address the issue of surprise billing, Axios’ Caitlin Owens notes. But there are a few things the administration — specifically, the Department of Labor — could do. A recent Brookings brief outlined the department’s options:

  • Clarify states’ authority to establish provider rates, including in surprise billing situations.
  • Determine that bills from out-of-network providers count toward patients' out-of-pocket maximums.
  • Require employer plans to comply with billing dispute resolution processes that states have created.
  • Require employer plans to notify patients that their providers might be out of network.

Go deeper: Surprise medical bills could be a powerful campaign issue

3. Optum fears Amazon venture will steal its ideas

In the year since the health care world flipped out over the Amazon-Berkshire-JPMorgan Chase health care venture, we’ve learned very little about what it will do.

But now, thanks to a new lawsuit, we know at least one more thing: UnitedHealth Group’s Optum division thinks the triumvirate is a competitor and is worried it will use Optum's trade secrets, Axios’ Bob Herman reports.

Driving the news: Optum is suing a former employee who left Optum to work as an executive doing market research at the still-unnamed “ABC” firm. Optum is alleging that the employee printed documents and went to meetings that detailed Optum’s proprietary information, which he could share with ABC.

  • The employee’s main task, according to the lawsuit, was to do “in-depth research focused on the delivery and costs of health care for the over 1 million individuals covered by the health plans of Amazon, Berkshire Hathaway and JPMorgan Chase.”

Between the lines: That is a large part of what Optum does — selling data services, care and pharmacy benefits to employers. But it’s not necessarily revolutionary, and “ABC” is quickly finding out that anyone trying to claim turf in health care will be met with resistance.

Worthy of your time: Read the lawsuit.

4. Massachusetts may start setting drug prices

Massachusetts Gov. Charlie Baker wants to move closer to direct price-setting for certain high-cost drugs, CommonWealth magazine reports, citing Baker's latest budget proposal.

Details: Baker proposed a three-step plan, per CommonWealth.

  • First, the state would try to negotiate a lower price directly with drugmakers.
  • If that fails, it would "establish a 'target value' for a specific drug using a public rate-setting process."
  • If that fails, a state commission could use the bully pulpit to try to get the drugmaker to budge, or could refer the company to the state attorney general.

The big question: How would that middle step — the "public rate-setting process" — work? And what kind of teeth would it really have?

Why it matters: Hey, does anybody remember what became of the last big health care reform from a moderate Republican governor of Massachusetts? Did that end up catching on anywhere else?

5. More hip and knee surgeries drive up costs

Caitlin flags a new report by the Blue Cross Blue Shield Association that says spending on planned knee and hip replacements is increasing, driven mainly by an increase in the number of procedures among people under 65.

By the numbers: The number of knee replacements increased by 17% between 2010 and 2017, and hip replacements rose by 33%.

  • The average price of the procedures rose by 6% for knee replacements and 5% for hip replacements over the same time period.
  • Both procedures are significantly cheaper if they're performed in an outpatient setting than in an inpatient setting, although in 2017 only 11% of knee procedures and 8% of hip procedures were performed on an outpatient basis.

Between the lines: Overall health care spending increases in the U.S. are driven mainly by prices, not utilization, making these procedures a deviation from the trend.

Yes, but: The price of knee and hip replacements vary drastically based on location, as the BSBCA found in a previous report.

Go deeper:

Get in touch: I always welcome your tips and feedback. Just reply to this email, or reach me any time at [email protected].