Jul 19, 2018

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning ... Sign of the times: There's now an official "Medicare for All" Caucus in the House.

It's been a long week, so the Bourbon Caucus (yes, there's really a Bourbon Caucus) is somewhat more front-of-mind for me right now, but still. Even just a few years ago, it would have been hard to imagine that anything even resembling a single-payer caucus could exist, much less launch in an election year.

1 big thing: The White House's next move on drug prices
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The Trump administration's next steps on drug pricing could come quickly: The White House budget office is reviewing a new proposal to change the way pharmacy benefit managers, which are the middlemen between drugmakers and the pharmacy counter, get paid.

What I'm hearing: Even by the standards of the drug supply chain, this is likely to be an extremely complex and in-the-weeds rule, in part because it's not entirely clear how much of PBMs' rebate structure the administration can change on its own, without any help from Congress.

  • “While we cannot comment on pending regulations, the President’s ‘American Patients First’ blueprint to lower drug prices and reduce out-of pocket costs clearly states that we are looking at removing safe harbor protections for drug company rebates. It should not come as a surprise that this would require rulemaking," HHS spokesperson Caitlin Oakley said.

Driving the news: The administration took another significant step on drug pricing yesterday — arguably its most impactful step to date — when Food and Drug Administration Commissioner Scott Gottlieb rolled out a new plan to spark the development of more biosimilar drugs.

  • Biosimilars are, in effect, generic versions of highly complex (and very expensive) biologic drugs. Biologics look like the future of drug development, but the biosimilars market has been slow to heat up.
  • Yesterday's announcement may not pay immediate dividends, but building a competitive market now could definitely yield noticeable savings in the future — even though these products likely won't offer the same steep discounts we're used to with traditional generics.
2. HHS hypes progress that hasn't happened yet

"This week, we will see more action to reform drug pricing in America than we have seen in a number of years," Health and Human Services adviser Dan Best says in a blog post.

  • For the most part, Best's post rounds up what the administration has done so far and criticizes "some in the media" for "still claiming that the Trump Administration’s plan for reforming drug pricing isn’t delivering."

Reality check: A strong market for biosimilars would make a big difference for future patients. Changes in the PBM industry could, too — PBMs are powerful players who operate in near-total secrecy. President Trump's plan has the potential to affect change.

But some of what HHS is hyping is just not that big a deal.

  • For example, Best touts the recent announcements that Pfizer and Novartis would delay their most recent round of price increases.
  • Here's some context from my colleague Bob Herman: The list price of Novartis' cancer drug Gleevec has gone from $26,000 in 2001 to $146,000 in 2017. And it's not going down — it's just staying put, temporarily, at $146,000.

Taking a five-month breather on price increases is more of a public relations play than a business strategy, and it's far from structural change that would affect future price hikes. To wit: Pfizer's now-delayed increases are set to kick back in at the end of the year.

3. Hill GOP wants ACA transfers to resume

House Republicans are looking for ways to restore the Affordable Care Act payments the Trump administration froze just last week.

"We want this fixed, whether we have to legislate or do it by rule. It needs to happen," Rep. Greg Walden, the chairman of the Energy and Commerce Committee, told my colleague Caitlin Owens.

  • The administration froze payments for the ACA's risk adjustment program last week, citing conflicting court rulings about the program.
  • Walden said one of the big outstanding questions is whether HHS can issue a retroactive rule applying to previous previous plan years, for which payments are owed. And "if they can’t do a retroactive rule, we might have to legislate," he said. 
  • Timing remains up in the air, but "we’re working to be ready to do whatever needs to happen," Walden said.

Threat level: House Republicans are aware that this is yet another administrative action that could raise premiums for 2019. And those rates will be finalized just before the midterms.

  • Restoring the payments wouldn't cost the federal government anything. It simply facilitates payments among insurance companies.
4. Optum: We didn’t discourage cheaper drugs

OptumRx, the PBM owned by UnitedHealth Group, says it never encouraged pharmaceutical companies to keep their prices high.

The background: Trump said in May that drug companies were about to announce voluntary price cuts.

  • Asked what happened to those reductions, HHS Secretary Alex Azar said at a Senate hearing that some drugmakers wanted to cut their prices, but faced resistance from PBMs.
  • Sens. Tina Smith and Elizabeth Warren asked PBMs whether that’s true.

Between the lines: PBMs — not pharmaceutical companies — are the main target of HHS' plan for lower drug prices.

  • But Democrats aren't rushing to defend PBMs, even as they also take a harder tack with drug companies than most Republicans.
  • PBMs are working hard to get themselves out of the political spotlight.

The response: “This is simply not the case with OptumRx. Drug manufacturers independently set the prices for the drugs they manufacturer. We have not discouraged them from lowering their prices, nor have we excluded drugs with lower list prices from the formulary,” Optum said in a letter to Smith and Warren, a copy of which was shared with me.

  • CVS Health has also said it never "instructed" drug companies not to lower their prices.
5. CMS will try again on Ky. Medicaid waiver

President Trump and CMS Administrator Seema Verma. Photo: Alex Wong/Getty Images

The Centers for Medicare & Medicaid Services is planning to reopen public comments on Kentucky’s version of Medicaid work requirements, Politico reported yesterday. It’s an effort to address a federal judge’s ruling last month that blocked the new rules from taking effect.

What to watch: Another round of comments doesn’t seem like enough, on its own, to satisfy Judge James Boasberg’s complaints. How CMS responds to those comments will be a big deal.

  • HHS and CMS already collected one round of comments. Boasberg was mainly critical of how they responded to those comments, not the process of collecting them.
  • He faulted HHS for failing to account for how many people would lose Medicaid coverage under work requirements, and said the agencies hadn’t sufficiently explained how work requirements fit in with Medicaid’s goals as a source of health insurance.

The big question: What if this next round of comments is mostly negative? That could ultimately work against CMS’ goals.

6. How a hospital merger could raise prices

Independent health policy experts in Massachusetts issued a stark warning yesterday about a pending hospital merger, Bob reports.

  • They said commercial health care costs could go up by a “conservative” $251 million per year if a merger between Lahey Health and Beth Israel Deaconess Medical Center, two large hospital systems in the Boston area, clears antitrust review.

How it works: The systems charge lower prices than the dominant player in the state, Partners HealthCare. If they join forces, they could use their newly enhanced negotiating power to charge a lot more, while still remaining cheaper than Partners, state officials said in a report analyzing the deal.

Why it matters: For people in the Boston area who get health insurance through their jobs, this merger could directly affect premiums and, as a result, wages.

  • And for everyone else, the report builds on research that shows hospital mergers significantly consolidate market power and do not lower costs, as the industry contends.
Caitlin Owens

What we're watching today: Energy and Commerce health subcommittee hearing on mental health and the 21st Century Cures Act (9am; details).

Send me your tips: baker@axios.com.