Axios Vitals

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August 28, 2018

Happy Tuesday. Hope you're not missing Sam too much — yet.

1 big thing: Pharma could get another big win

Photo: Mike Kemp/In Pictures via Getty Images

The Trump administration's announcement of a new trade "understanding" with Mexico yesterday included a bullet point on drug patents that could have big implications for the pharmaceutical sector, but is severely lacking in detail.

Why it matters: The issue of drug companies' patent exclusivity period was a huge deal as the Trans Pacific Partnership was being debated, and there are warning signs that the same lawmakers who took issue with the handling of biologics in that deal also are worried about this one.

  • “I’m not real happy with it," Senate Finance Chairman Orrin Hatch told me yesterday. "It’s not a long enough exclusivity. But it’s a step in the right direction. No question.”

What we know: The understanding "includes 10 years of data protection for biologic drugs and expanded scope of products eligible for protection," according to a press release from the United States Trade Representative.

  • Current U.S. law protects drug patents for 12 years, but there are currently no data exclusivity protections for biologics in NAFTA.
  • TPP included 5 years of market exclusivity, which was a huge problem for the industry because it wanted more.

Pharma's reaction: “We look forward to analyzing the final text of the agreement once completed to ensure it includes policies that protect against global free-riding, promote research and development and reward ... innovation," said a spokesperson for the Pharmaceutical Research and Manufacturers of America.

What they're saying: “We feel this is bad news for patients who are seeking more affordable biologics. It would delay biosimilar competition," said Jeff Francer, general counsel for the Association for Accessible Medicines.

  • The other side: "That’s significant movement from where [former President] Obama was," said a former GOP Hill aide who was close to the TPP debate. "It’s a big deal because it resets the norm and trade template under [President] Trump."

The bottom line: If pharma gets an expanded class of products eligible for patent exclusivity, it could be a very good deal for them — even if it is shorter than U.S. law.

2. Red-state Dems getting dragged for abortion vote

Republicans have wasted no time in trying to make vulnerable Senate Democrats pay a price for voting last week against an amendment defunding Planned Parenthood.

  • No Democrats voted for it, including those in red states defending their seats.

Why it matters: These Democrats need to win over independent or Republican voters to keep their seats, and thus need to be more conservative than the rest of their party. Tying them to liberal groups and the left wing of their party is one way the GOP is trying to deny them these votes.

The state of play: The National Republican Senate Committee almost immediately released a TV ad slamming Sen. Heidi Heitkamp for her vote against the amendment, saying she "doesn't vote like North Dakota."

  • NRSC also released a statement criticizing Indiana Sen. Joe Donnelly for the vote, signaling that it sees tying Donnelly to the liberal wing of the party through Planned Parenthood as a potent line of attack.
  • The anti-abortion group Susan B. Anthony List has a TV ad against West Virginia Sen. Joe Manchin that was running before last week's vote but is likely to be more relevant now. The NRSC has already accused Manchin of flip-flopping on abortion, and says this vote only furthers its argument.

3. The $109,000 surprise heart surgery bill

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Kaiser Health News and NPR rolled out the latest installment of their “Bill of the Month” series, and it’s a doozy.

Driving the news: A 44-year-old teacher with health insurance through his school district had a heart attack last year. After surgery and recovery, he was on the hook for nearly $109,000 in surprise charges because the hospital he went to (owned by HCA Healthcare) was not in-network.

The bottom line: Even patients with decent private health insurance are facing mountainous medical bill debt, my colleague Bob Herman reports.

  • Most people with health coverage through their jobs get those benefits through a self-insured employer. It’s a mundane but critically important detail that dictates whether someone is not subject to state laws that protect people from surprise charges. 
  • Reporters sometimes can be a line of defense for patients — and it worked in this case.

4. Trimming the fat from long-term care

Long-term care hospitals, which primarily treat very sick people for several weeks and are paid by Medicare in a separate system, are “primarily cost-increasing institutions” that contribute to the waste in the country’s health care system, according to a new working paper from academic researchers.

Key quote: “Our results imply that Medicare could save about $4.6 billion per year — with no harm to patients — by not allowing for discharge to LTCHs.”

The other side: The industry pushed back and said the research did not show all benefits of long-term care. But other independent groups, like the Medicare Payment Advisory Commission, have similarly found skewed incentives in the system, Bob reports.

Go deeper: The Wall Street Journal investigated long-term care hospitals in 2015, finding that many companies discharge Medicare patients after they’ve reached “maximum profitability.” 

5. Wall Street’s dim view of drug distributors

Three pharmaceutical wholesalers — AmerisourceBergen, Cardinal Health and McKesson — control a vast majority of U.S. drug distribution, and Wall Street is not optimistic things will get better for them in the short term, Bob reports.

How it works: Distributors are paid a percentage of a drug’s list price for their services. And if drug companies are pausing price hikes for political reasons, that hurts distributors, which operate on narrow profit margins. It’s shown in the numbers so far this year.

What they’re saying: Drug distributors aren’t facing extinction by any means, but some investment shops aren’t eager to throw investor dollars toward those companies.

“We are doubtful that manufacturers will place a high priority on making distributors whole in the near term. After all, manufacturers have framed the drug pricing debate to place blame squarely on warped incentives in the supply chain.”
— Robert W. Baird & Co. analysts

What we're watching today: California's Assembly is expected to vote on SB 1156, the bill that would cap payments to dialysis providers for patients who have private insurance funded by charities.

What we're watching this week: FDA Commissioner Scott Gottlieb testifies before the Senate health committee tomorrow.

Thanks for reading! Make sure to let Sam know how much you miss him. And, if you have an outrageous medical bill, like the $109K bill in the story above, send us a line about it: [email protected] and [email protected].