Aug 8, 2018

Axios Vitals

Good morning ... We'll get to health care in a second, but first, some news I am incredibly excited to be able to share with you...

Coming this fall: Axios on HBO
Illustration: Caresse Haaser/Axios

Axios has signed a deal with HBO to produce a limited docu-news series airing this fall. The series will feature breaking news, interviews with the world’s most influential leaders, and short documentaries on the topics that matter most. Axios will work with HBO and a cast of Emmy®-winning producers to help viewers better understand the collision of politics, technology, business and the world.  

1 big thing: Medicare inches forward on drug prices

President Trump and HHS Secretary Alex Azar. Photo: Nicholas Kamim/AFP/Getty Image

The Trump administration is making another incremental move toward lower drug prices, opening up a new part of Medicare to well-established competitive pressures.

"Step therapy" allows insurance companies and pharmacy benefit managers (PBMs) to set up a system under which patients have to start with a cheaper drug first, switching to a higher-cost alternative only if they need to.

  • Step therapy is common in private insurance and in Medicare’s coverage for the kinds of drugs you pick up at a pharmacy.
  • Now, the administration is allowing the use of step therapy for some drugs that are administered at a doctor’s office — which are some of the most expensive drugs on the market.

How it works: The idea behind step therapy is partially just to switch patients to cheaper drugs. But there’s also a hope that it will prod more expensive products to offer bigger discounts, so that insurers won’t subject them to step therapy.

The impact is hard to predict. The new rules only apply to Medicare Advantage, not to traditional Medicare. MA accounts for about a third of all Medicare beneficiaries.

  • Some plans won’t adopt step therapy. Some MA enrollees will prefer the plans that don’t. And some of the relevant drugs don’t have cheaper alternatives.

Why it matters: The Trump administration’s top health officials have said they’re going to bring down drug prices through greater competition, and they’ve acknowledged a lot of that will have to happen without Congress.

  • However well or poorly that process ultimately works, this is what it looks like — a series of small, incremental changes.
  • Patients for Affordable Drugs, an advocacy group that often pushes the administration to be more aggressive on drug prices, supported the move.

What’s next: PBMs cheered yesterday’s announcement, but they’re next on the chopping block. The administration is working on regulations to roll federal protections for PBMs’ highly lucrative rebates.

2. Immigration plan targets health coverage

NBC News reported yesterday that the Trump administration is preparing a new, harder line on legal immigration — one that would also steer immigrants away from public health care programs.

The proposal would make it harder for legal immigrants to gain citizenship if they have used certain public programs, including the Children’s Health Insurance Program or coverage through the Affordable Care Act.

  • Today, undocumented immigrants are not eligible for Medicare, Medicaid, ACA subsidies or CHIP, but people who are in the country legally are able to enroll in those programs after verifying their immigration status.
3. Primaries cement the status quo

Last night's primaries didn't shake anything up on health care. What was true yesterday remains true today:

1. The left is insurgent, but it has not fully taken over the Democratic party.

  • Abdul El-Sayed, who campaigned on a platform of state-level "Medicare for All," did not win Michigan's Democratic gubernatorial primary.

2. Democrats want to talk about health care. Look no further than Missouri, and the race between Democratic Claire McCaskill and Republican Josh Hawley.

  • He's part of a lawsuit aiming to get the ACA thrown out.
  • She's trying to save a vulnerable seat by campaigning against that lawsuit and also against pharma.

The bottom line: Any number of polls show that Democrats have an edge on health care and, most importantly for these midterms, that it will motivate Democratic turnout.

4. Fewer ACA shoppers are focused on premiums

Finding the lowest premium is becoming less important to people shopping for coverage in the ACA’s insurance exchanges — maybe because fewer people are aware that their premiums are going up.

By the numbers: Just 23% of people who bought a plan last year said finding the lowest premium was their top priority, according to McKinsey’s annual survey of the exchange market. That’s down from roughly 60% when the exchanges first opened in 2014.

  • While 23% said they’re shopping for the lowest premium, 19% said they’re looking for the best value, 12% said they were looking for coverage for a specific doctor, and another 12% wanted the lowest out-of-pocket costs.
  • At the same time, among people who already had coverage through the exchanges, 63% said their premiums went down, held steady or only rose modestly from 2016 to 2017.
  • Most of those people are mistaken. Premiums were up sharply last year — the average increase was 25%. But the ACA’s premium subsidies largely shielded consumers from those increases, especially those who were willing to switch plans.

My thought bubble: All of this is consistent with what we know about the changing ACA marketplace. Unsubsidized consumers — the ones you’d expect to be most attuned to their premiums— are leaving the exchanges.

  • And if that leaves behind a sicker risk pool, you’d expect to see more emphasis on out-of-pocket spending and access to certain doctors.
5. Express Scripts cuts 48 drugs

Express Scripts, the country's biggest PBM, will stop covering 48 brand-name drugs next year, directing patients instead to lower-cost alternatives.

  • The company said the changes would only affect 0.2% of the people it covers, but will save more than $3 billion next year.

Why it matters: Express Scripts covers more than 3,800 medications on its largest formulary, which is the basis for about 25 million Americans' prescription drug coverage. So it's an important list.

The details: Express Scripts said it cut 22 drugs because they have a cheaper generic competitor, and 12 due to brand-0n-brand competition.

Losers: AbbVie, whose hepatitis C drug Mavyret got the boot in favor of products from Merck and Gilead. But Gilead lost coverage for one of its HIV drugs to a competitor from Mylan.

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