Mar 15, 2019

Axios Vitals

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1 big thing: PBMs are changing; drug prices aren't
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Adapted from a Pew report; Chart: Axios Visuals

As part of its plan to lower prescription drug prices, the Trump administration wants to restructure pharmacy benefit managers' business models. It wants them to profit from flat fees, rather than the complex rebates they rely on now.

  • The administration and the pharmaceutical industry argue that because rebates are tied to drugs' list prices, making those rebates less lucrative for PBMs will help bring down prices overall.

Yes, but: This transition to a new business model is already happening on its own, my colleagues Caitlin Owens and Bob Herman note. And drugs' list prices are not coming down.

  • PBMs are keeping a smaller share of rebates and passing more along to their clients.
  • Instead, PBMs are collecting more revenue through various fees — the same shift the Trump administration envisions — and through a practice called "spread pricing," according to a Pew analysis.
  • Express Scripts, one of the largest PBMs, explicitly told investors last year it would find "an alternate funding / pricing structure" to offset lost rebate dollars.

The bottom line: "One can call something a rebate, a flat fee or an elephant. It still represents a lucrative flow of money, and the influence that goes along with it,” said Robin Feldman, a UC Hastings law school professor who recently wrote a book exploring these deals.

2. Judge still wary of work requirements

The Trump administration hasn't changed any other part of the health care system as much as it has changed Medicaid. And yesterday, it was fighting in court to preserve that legacy while also foreshadowing where it wants to go next.

Driving the news: Judge James Boasberg, who put Kentucky's Medicaid work requirements on ice last year, still seemed skeptical about the policy during oral arguments yesterday, the Lexington Herald-Leader reports.

  • Boasberg said last year that HHS hadn't done a good enough job justifying its approval of Medicaid work rules, especially in light of Medicaid's statutory goals as a source of health care coverage. But he gave the department a chance to try again.
  • Boasberg pressed Justice Department attorney James Burnham on the same point yesterday, asking him how Kentucky and Arkansas' work requirements advanced Medicaid's health coverage.
  • Per Kaiser Health News: "When Burnham argued that work requirements would give people incentives to find work and improve their lives, Boasberg interjected: 'That is not the purpose of Medicaid.'”

What's next: Boasberg said he would rule before April 1, when Kentucky's rules are slated to take effect.

What's after that: HHS Secretary Alex Azar confirmed to a Senate committee yesterday that the department has talked with state officials about even steeper Medicaid cuts, including block grants and per-person spending caps.

  • “There may be states that have asked about block granting, per capita [caps], restructurings around especially expansion populations ... It's at their instigation," Azar said, according to The Hill.
3. Direct contracting, so hot right now


Employers cover more Americans than the government does, but with a lot less cost control. For years, their primary tool for keeping their health care spending in check has been to simply shift more of the bill onto workers.

  • But big companies are now beginning to focus more on the underlying cost of care, not just the mechanism to pay for it.

Some of the largest companies in the U.S. are starting to ditch their insurers and contract directly with providers, believing they can get a better deal going it alone.

  • As the Harvard Business Review notes in a lengthy case study of Walmart's direct-purchasing system, those setups often involve bundled payments or arrangements similar to Medicare's Accountable Care Organizations.
  • Similar to a traditional insurance plan, Walmart imposes steep out-of-pocket costs for care outside its provider network. But it also covers the travel costs associated with sending employees to high-quality systems for certain procedures.

Yes, but: Direct contracting is only a tool for big employers — small companies simply don't have the leverage to drive the kind of bargains Walmart can.

  • And even Walmart, the biggest private-sector employer in the country, can find itself at the mercy of big, consolidated hospital systems.
  • Walmart's arrangement puts a premium on quality measurements, but hospitals' all-or-nothing contracts foiled the company's effort to cut out the lowest-quality providers in its network.

Go deeper: I wrote last year about employers turning inward as they look for health care savings.

4. Beto isn't talking up "Medicare for All"

Beto O'Rourke in Iowa. Photo: Chip Somodevilla/Getty Images

This tells you a lot about what matters to Democratic primary voters: "1st question for Beto O'Rourke as a 2020 candidate is on health care," NBC's Alex Seitz-Wald reported yesterday from Iowa.

What he's saying: O'Rourke didn't sign on to single-payer legislation when he was in the House, but he made some Medicare-for-All-adjacent comments early in early his Senate run, but he's not talking about Medicare for All now.

  • "I think we have to begin with a goal that has to be separate from any labels," O'Rourke said yesterday, per a transcription by the Washington Post's Jeff Stein.
  • The way to achieve that goal, he said, is for more states to adopt the Affordable Care Act's Medicaid expansion and to "allow people to buy into Medicare who aren't already covered by employer insurance."

Flashback: The Wall Street Journal dug back into O'Rourke's first campaign for the House, in 2012, and you can expect to hear this a couple million times over the next year.

From WSJ:

  • "Asked if he supported the Affordable Care Act that Democrats passed and Mr. Obama had signed into law two years earlier, Mr. O’Rourke said he did not."
  • "'In its current form, no,' he told El Paso Inc., a local business publication. 'It doesn’t do anything for El Paso in terms of the Medicaid reimbursement rate.' Mr. O’Rourke added that he was 'supportive of all the aims' of the law."

He voted consistently against the myriad repeal bills once he was in the House.

5. Making mental health a part of crisis response

In the aftermath of a sudden tragedy — like a natural disaster or political violence — the world generally has a system in place to quickly mobilize an army of doctors and nurses. But there's usually no such structure in place to help people cope with the mental health effects of those calamitous events.

Good news, courtesy of The Economist: It's easier than a lot of people thought.

  • Especially in the wake of a disaster, a lot of people don't need the full-fledged services of a psychologist. Laypeople with some basic training can go a long way, and that training can often be done in just a few hours.
  • "Teachers, pastors, barbers and taxi-drivers are taught to notice people in distress, to provide the right kind of emotional support, and to avoid common mistakes such as pressing sufferers to recount stressful events," The Economist reports.

After the razing of slums in Zimbabwe's capital left some 700,000 people homeless, one local psychiatrist "decided to train elderly women already known for some kind of community work in aspects of cognitive-behavioural therapy," dispatching them to sit on designated benches where locals could turn for some help.

  • It worked, and there are lessons for the West in that experience, too.
  • New York City has started giving similar training to its police and firefighters, and Britain's National Health Service is increasingly referring patients to social-services organizations.

This won't work for everyone, of course — police can't replace mental health professionals. But it's a promising tool for emergencies.