Aug 16, 2018

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning ... Look, I don't want to admit that my spirit animal might not be an owl, after all, but rather this obscene parrot that cursed out the people just trying to help her escape from a predicament she got herself into. But, hey, if the shoe fits.

1 big thing: The opioid crisis is getting deadlier

Firefighters help an overdose victim in Rockford, Ill.. Photo: Scott Olson/Getty Images

Despite a political clamor to help arrest the opioid crisis, its death toll continues to rise. More than 72,000 people died from drug overdoses in 2017, the Centers for Disease Control and Prevention said yesterday. That’s a new record, and an increase of just under 10% from 2016.

The biggest problem is still synthetic opioids like fentanyl.

  • Roughly 30,000 people fatally overdosed on synthetic opioids last year — about the same number as heroin and prescription opioids combined. (Some people are counted multiple times because multiple drugs were in their systems when they died.)

Fentanyl’s risks are threefold: It’s easy to make and ship; it’s incredibly potent; and it shows up in different places, at different strengths.

  • That might help explain why overdose deaths are becoming more diverse.
  • “In some places, the type of synthetic drugs mixed into heroin changes often,” the New York Times notes. “The penetration of fentanyl into more heroin markets may explain recent increases in overdose deaths among older, urban black Americans; those who used heroin before the recent changes to the drug supply might be unprepared for the strength of the new mixtures.”

What to watch: Congress is still debating a package of opioids-related bills, which does include some new tools to help detect fentanyl shipments as they come in through the mail and some new efforts to boost treatment options.

  • But a lot of the legislation is also relatively minor, asking for reports and studies or focusing on minor changes to the sale of prescription opioids.
2. Hospitals had a great Q2

Axios’ Bob Herman reviewed the second-quarter financial statements of 16 not-for-profit hospital systems, and the big takeaway is that they’re doing just fine.

By the numbers:

  • Similar to the first quarter, most systems posted lower overall surpluses in the first six months of this year because their Wall Street investments have performed much worse in 2018 than they did during the booming market of 2017.
  • However, hospital operating margins — which reflect the money that hospitals keep after paying their employees and after paying for routine expenses like drugs and medical equipment — held steady at around 4%.
  • Operating margins were higher, year over year, for more than half of the systems.
  • Sentara Healthcare, which owns hospitals and a health plan in Virginia, had the highest operating margin at 9.1%.

Why it matters: The consolidating industry has given big systems even more power to charge commercial health insurers what they want, and American hospitals' fixed costs are unusually high.

Go deeper: The whole health care industry is having a profitable year so far.

3. CVS expects to stay in Ohio’s Medicaid program

CVS Health is “restructuring” its drug pricing contracts with the health insurers running Ohio’s Medicaid program and expects to stick around in Ohio, the company tells Axios.

The bottom line: A CVS spokesperson said the insurers “chose” the model under which pharmacy benefit managers collect the spread on different drug prices. The state subsequently decided it didn’t want to use that model any more, but its PBM contracts aren’t being rebid, CVS said.

  • CVS is now updating its contracts to reflect a new “pass-through” design, under which it is paid fixed fees.
  • CVS said it is “premature to say” what those fees would look like and if it’d be less profitable under the new model.

What we’re watching: Whether other Medicaid programs force their PBMs to rework contracts with simpler, more transparent terms.

4. When PBMs are also pharmacies

You've probably heard PBMs tout the savings they negotiate for prescription drugs — and they often do. But Reuters illuminates another side of the business at the country's biggest PBM, Express Scripts — it's also a specialty pharmacy that partners with drug companies to sell new and expensive products.

How it works: Express Scripts' PBM and its specialty pharmacy are walled off from each other, the company told Reuters.

  • While the PBM is negotiating discounts off the list prices of drugs (and keeping a slice of those savings for itself), the specialty pharmacy side is hoping to lock down an exclusive contract to distribute a new crop of hemophilia treatments that could cost as much as $1 million.
  • Express Scripts already has exclusive distribution rights on at least three other drugs with price tags between $475,000 and $850,000.

The intrigue, via Reuters: "By working as both the manufacturer’s partner who gets paid for each sale, and the pharmacy benefit manager responsible for negotiating the best price for its traditional corporate and government clients, Express Scripts is open to questions about being conflicted, industry sources and experts say."

Between the lines: As PBMs come under fire politically for their rebate structure, they've been sharply disputing charges from critics — including the Trump administration — that they benefit from drugs' high sticker prices.

  • Express Scripts doesn't break out its PBM and pharmacy profits, but one analyst told Reuters the pharmacy side is growing faster and accounts for about a third of the company's profits.

The other side: “Our PBM treats our specialty pharmacy as they treat any other pharmacy in our pharmacy network,” the company told Reuters.

Caitlin Owens

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