Feb 26, 2019

Axios Vitals

By Caitlin Owens
Caitlin Owens

🚨 Breaking news: Axios and HBO have inked a deal for a second season! Broken into 8 half-hour episodes — 4 this spring and 4 this fall — AXIOS will cover the big trends, people and ideas shaping the next decade.

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1 big thing: Pharma in the hot seat
Giphy

Seven pharmaceutical CEOs will face off against the Senate Finance Committee today in what could be the beginning of a bipartisan push to reduce drug prices.

What we're watching: Pharma would rather not be here, but if there's a silver lining for the industry, it's that this hearing — with 7 drug companies and no one else — is a pretty big platform to try to shift the blame to pharmacy benefit managers.

  • Expect to hear these executives return repeatedly to PBMs, arguing that even as drug prices rise, drug companies aren't keeping the extra money.
  • Finance Chairman Chuck Grassley (R-Iowa) seems to be prepared for this already.
Screenshot from Sen. Chuck Grassley's Twitter feed.

The big picture: Pharma is weaker on Capitol Hill right now than it has been in a very long time, and President Trump's willingness to take on the industry has frayed drugmakers' usual alliances with the GOP.

  • If lawmakers want to home in on specific issues within the drug-pricing system, this is a great opportunity.
  • You could do a lot worse, for example, than pressing AbbVie CEO Richard Gonzalez about the thicket of patents that continue to stave off competition for Humira, the world's best-selling drug.

Yes, but: Let's not get ahead of ourselves.

  • The House held a big angry hearing with Martin Shkreli in 2015, and Mylan CEO Heather Bresch in 2016. No laws changed either time. Both Daraprim and Mylan’s Epi-Pen cost just as much today as they did during those hearings.
  • As Kaiser Health News recently noted, lawmakers were incensed about the price of drugs at similar hearings 60 years ago. And yet, here we are.

Watch the hearing here.

2. Bad times for PBMs

PBMs will likely be taking it on the chin during today's hearing — and, as my colleague Bob Herman reports this morning, they're already not having a great 2019.

CVS Health rolled out profit estimates for 2019 that were well below what Wall Street had expected, due in part to its PBM proactively passing more rebate dollars to employers and insurers.

  • Executives also said CVS won't keep as much money on some generic drugs through a practice known as "spread pricing."

Cigna CEO David Cordani recently said the Trump administration's proposed rebate rule would "not have a meaningful impact on our growth or earnings trajectory," even now that the company has acquired Express Scripts.

  • But analysts are not convinced.

Diplomat Pharmacy lost a lot of employer customers within its recently acquired PBM business, and it anticipates writing down a "significant portion" of the PBM's $630 million value.

Magellan Health owns a PBM with $2.5 billion of annual revenue, but activist investor Starboard Value is breathing down the neck and is encouraging a sale due to the company's "poor performance."

That's not all: States continue to be the most aggressive force challenging PBMs.

  • Ohio's attorney general wants to claw back "overcharges" from OptumRx, and Kentucky criticized its drug benefit companies for retaining almost $124 million last year through spread pricing.

The bottom line: The rebate rule and general scrutiny on PBMs "poses meaningful risk to [their] profit models," analysts at Robert W. Baird & Co. wrote in an investor note last week.

3. Google AI is now in clinical use

Google — along with its health care-focused sister company, Verily — has taken an artificial intelligence tool out of the lab and into real doctors' offices.

Why it matters: So far, AI tools in the health care world have mostly been useful for things like quickly reading and synthesizing a lot of medical literature — a few steps removed from clinical practice. Using a system like this for actual treatment is a big jump.

How it works: Google and Verily are using this tool in India to help diagnose 2 diabetes-related eye conditions that can cause blindness if left untreated.

  • Technicians take photos of patients' eyes, and the AI tool scans them for evidence of either condition so that the technician knows whether patients need to see a doctor, according to Verily.
  • The company said India has a shortage of roughly 100,000 eye doctors and that only a fraction of diabetics are screened for preventable blindness.
  • Thailand may be the companies' next stop.
4. FDA will reevaluate long-term opioid use

FDA commissioner Scott Gottlieb. Photo: Drew Angerer/Getty Images

The Food and Drug Administration plans to require more research about whether opioid painkillers are safe for long-term use.

  • "We are going to impose a mandate on existing products ... to answer the question that people have been posing for years: whether you have declining efficacy, and whether that declining efficacy can lead to addiction," FDA Commissioner Scott Gottlieb told The Washington Post.

Between the lines: Former FDA commissioner David Kessler said on "60 Minutes" this past weekend that the agency made a mistake when it approved opioids like OxyContin for long-term use, because it didn't have enough scientific data to support that decision.

5. Anthem: Cigna "cut us off at the knees"

Anthem’s general counsel told a judge yesterday that Cigna "cut us off at the knees," sabotaging the proposed merger between the two insurers, Bloomberg reports.

What they’re saying: The nearly $50 billion merger would have involved Anthem buying Cigna.

  • But Cigna CEO David Cordani was insistent on running the new, combined company, and Cigna grew uncooperative after he was rebuffed, Anthem general counsel Thomas Zielinski said in court, per Bloomberg.
  • Zielinski accused Cigna of undermining plans for combining the two companies' operations and responding to the government's antitrust concerns, including being unwilling to sell any of its assets to help get the merger approved.

The other side: Cigna has accused Anthem of using the merger to steal sensitive information and customers.

Where it stands: Anthem says it's entitled to $20 million from Cigna because of the deal's collapse, while Cigna says it's entitled to $16 million from Anthem. The trial to sort all this out is just getting started.

6. Dems want to roll back Medicaid limits

Newly empowered Democrats are looking to roll back some of the restrictive Medicaid policies Republican governors have implemented or set in motion. Here's a roundup, from the Center on Budget and Policy Priorities:

  • Maine Gov. Janet Mills, in addition to implementing the Medicaid expansion that former Gov. Paul LePage fought so hard against, also withdrew the LePage administration’s proposal for Medicaid work requirements.
  • New Mexico Gov. Michelle Lujan Grisham won't implement premiums for the state’s Medicaid program, or proposed cost-sharing for certain services. (The state is also considering a Medicaid buy-in.)
  • Democrats in the New Hampshire legislature are trying to water down the state's work requirements, or repeal the requirement entirely.

Why it matters: Medicaid work requirements are the most substantive change the Trump administration has made so far to health care coverage. But pushback from Democrats — and potentially the courts — could limit the reach of that change.

Caitlin Owens

News you can use: "Dark energy might be getting stronger and denser, leading to a future in which atoms are ripped apart and time ends." Have a nice day, I guess, and send me your tips/theories about the end of time: baker@axios.com.