The heat on pharmacy benefit managers is building - Axios
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The heat on pharmacy benefit managers is building

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Pharmacy benefit managers — the middlemen in drug price negotiations — have been under siege since Donald Trump was elected last fall and vowed to go after rising drug costs. We reported on this in January, but the swell of criticism has accelerated further. One prominent financial analyst compared one of the largest such companies, Express Scripts, to gangster John Gotti — a comparison a top company official calls "crazy."

The pharmacy benefit management industry is prepared to fight back against the criticism and any possible regulations. But here's the political challenge: It's going to have a tough time explaining the value of its companies to the public, especially since their business model relies on secrecy and that consumers have little knowledge of what pharmacy benefit managers are.

What has happened: Most of the furor over drug prices has focused on the manufacturers that create the prices. But the increased scrutiny of the byzantine drug supply chain has landed heavily on pharmacy benefit managers that serve as intermediaries between drug makers and health insurers and employers.

  • Two new reports have looked at the murky nature of how fees and other revenue are collected from pharmacy benefit managers. One from the Centers for Medicare and Medicaid Services showed that a type of payment called "direct and indirect remuneration" — which consists heavily of rebates they earn from negotiating lower drug prices — has grown even faster than drug costs under Medicare Part D.
  • The other report, funded by the Community Oncology Alliance, said benefit managers are clawing back additional fees from pharmacies with no legal basis. "It's become a real Rube Goldberg payment system," said Ted Okon, executive director of the Community Oncology Alliance. The pharmacy benefit manager industry contended the report was the result of a "splinter group" that is trying to protect the profits of oncologists.
  • A class-action lawsuit accused three large drug companies of colluding to raise the prices of their insulin medications. But the lawsuit also highlighted pharmacy benefit managers, saying they are profiting from the "nefarious" business model that keeps the real prices of drugs hidden from public.
  • Short seller Andrew Left of Citron Research compared Express Scripts to John Gotti, calling the industry's reliance on rebates and preferred drug lists a "financial engineering kickback scheme." Dr. Glen Stettin, chief innovation officer at Express Scripts, told me that comparison was "crazy."
  • Financial analysts at Robert W. Baird & Co. downgraded the stock of CVS Health this month because they believe more Americans will be affected if regulators don't attack direct and indirect remuneration fees. "This isn't going to end well for some (companies)," they wrote. "Those who are creating and enforcing these fees might be in for some rocky times."
  • Republican Rep. Doug Collins made it clear that many in Congress, both Democrats and Republicans, are ready and willing to act, telling me that "the PBM industry is one of the most detrimental pieces of health care."

The industry isn't sitting still: The Pharmaceutical Care Management Association, the lobbying group for pharmacy benefit managers, is clearly concerned about what Congress and the Trump administration will do to temper drug prices and its industry.

A Feb. 6 memo from CEO Mark Merritt, obtained by Axios, Buzzfeed and other media, said the group was ready to aggressively defend its practices because the Trump administration has shown to be "more inclined toward quick, instinctive action than the traditional, deliberative decision-making process." The group is working to schedule meetings with White House staff and members of Congress who sit on health care committees.

Merritt said the memo relayed ideas that "every industry in America" is contemplating — how to best make their case in front of a new president. For his group, which also is pushing a website that gives its take on how pharmacy benefit managers reduce drug costs, the defense will involve keeping drug manufacturers as a bigger target.

"Everybody knows why drug prices are high. It's because drug companies set high prices," Merritt said.

Everything comes back to prices and rebates — and their effects on consumers: Evidence shows that the benefit managers have encouraged the use of cheaper generics and kept health insurance premiums somewhat in check despite the explosion of prescription drug spending. But that still doesn't address the sticker shock people face today when they pick up their medicines, which partially stem from the financial incentives of pharmacy benefit managers.

"They have created a gravy train in rebates and owning specialty pharmacies that makes lowering prices not necessarily in their interest," said Dr. Walid Gellad, an associate professor of medicine and health policy at the University of Pittsburgh. Pharmacy benefit managers now have to prove their value is "more than just the difference between list price and actual price," Gellad said.

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Sneak Peek: Pence to the pyramids

Pence listens as Trump announces his Jerusalem move. Photo: Alex Brandon / AP

With President Trump's announcement on Jerusalem lighting up the Middle East, Vice President Mike Pence embarks Saturday on his first trip to Israel since taking national office.

The vice president will be gone for a week, with stops in Egypt and Germany:

  • Pence takes off from Washington, lands in Tel Aviv and goes straight to Jerusalem for a bilateral meeting with Israeli President Benjamin Netanyahu.
  • Pence then will light a menorah at the Western Wall.
  • An aide said that Pence's message in Israel will be that Trump, as he said in his speech recognizing Jerusalem as the capital, is committed to working for peace between Israelis and Palestinians.
  • Pence will use his meetings with leaders in the region to reaffirm the administration's commitment to work with partners throughout the Middle East and to "defeat radicalism."
  • On Monday, Pence will give the signature speech at the Knesset, the Israeli Parliament. The speech will be aimed at the region overall. Pence will emphasize that he is there on behalf of the president, and detail why Israel is a most cherished ally of the United States.
  • Pence will then fly to Cairo for a bilat with President Abdel Fattah el-Sisi. The two will discuss security and joint efforts to fight ISIS.
  • Pence will visit the pyramids and will talk with media with the ancient wonders as a backdrop.
  • Pence will fly home through Ramstein Air Base in Germany, and will do a meet-and-greet with troops.

The takeaway: A key theme for Pence's remarks and interviews will be U.S. efforts to stop persecution of Christians and other religious minorities in the region.

Go deeper: Palestinians won't meet with Pence.

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Exclusive: Policy official leaving White House

The White House South Portico is adorned with Christmas lights. Photo: Manuel Balce Ceneta / AP

Paul Winfree is leaving the White House, according to a senior administration official with knowledge of the decision. Winfree, who declined to comment, has resigned from his position as Deputy Director of the White House Domestic Policy Council and Director of Budget Policy.

  • Why this matters: Winfree's departure is part of what we've been forecasting will be a wave of White House staff departures after year one of the Trump presidency. His last day in the White House will be Friday.

Winfree, a respected policy wonk with strong ties to the conservative movement, is the second senior official to announce a departure in three days. Deputy National Security Adviser Dina Powell told colleagues she's leaving to return to her family in New York.

What Winfree has been telling friends and colleagues:

  • He and his wife are expecting a second baby boy in a few weeks.
  • He'll return to the Heritage Foundation, where he will run economic policy.
  • He also plans to start his own policy consulting business. -
  • Starting in February, he will teach a seminar on policymaking at a top university, where he will draw on his experiences working in the White House, the U.S. Senate, and with think tanks.
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NYPD adjusts interview techniques for sexual assault victims

New York police officers march. Photo: Andres Kudacki / AP

Amid a flood of sexual misconduct allegations — some of which have turned into police investigations — the New York Police Department has taken a new approach to questioning victims, the Wall Street Journal reports.

The bottom line: "The focus that’s occurring on sexual criminal conduct coming out of the Hollywood celebrities and members of Congress may be a watershed moment,” NYPD Deputy Chief Michael Osgood told the Journal. He says more sensitive and open-ended questioning techniques may lead to breakthroughs in cold cases that have been abandoned for years.

The backdrop: Police tactics in dealing with victims of sexual assault have long been controversial, with critics saying harsh questioning puts undue scrutiny on victims and pushes them to silence. These critcisms were thrown into the spotlight when ProPublica, in conjunction with the Marshall Project, published "An Unbelievable Story of Rape" — an investigative project which showed how a police department in Washington state coerced a woman into retracting a rape allegation.

NYPD detectives in the Special Victims division received training in Forensic Experiential Trauma Interview (FETI) techniques this year. The methods include asking victims of sexual assault open-ended questions such as, "Tell me about your experience," instead of specifics about the perpetrators appearance and the time and place of the incident.

How it works: Such specific details are "stored in the prefrontal cortex of the brain, which shuts down during traumatic events. In FETI training, the detectives are instructed to ask broad questions that tap into a victim’s primitive brain, which maintains sensory information of those events. Channeling this part of the brain can result in a more substantial narrative," per Osgood.

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White House: "Unfortunate" that Palestinians won't meet with Pence

Vice President Pence's office has called the decision by Palestinian officials not to meet with Pence on his visit to the region "unfortunate. The Palestinians are refusing to meet with Pence over President Trump's decision to recognize Jerusalem as Israel's capital. The statement:

"The Vice President very much looks forward to traveling to the region to meet with Prime Minister Netanyahu and President el-Sisi. It’s unfortunate that the Palestinian Authority is walking away again from an opportunity to discuss the future of the region, but the Administration remains undeterred in its efforts to help achieve peace between Israelis and Palestinians and our peace team remains hard at work putting together a plan."
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The mental health crisis among young Americans, by the numbers

Illustration: Sam Jayne / Axios

One in five American young adults under the age of 25 lives with a mental illness or behavioral disorder, NBC reports, citing the Centers for Disease Control and Prevention.

The big picture: Per the CDC's research, the state of young adult mental health in the U.S. is only worsening, with the suicide rate among teenage girls reaching a 40-year high in 2015. Here's a look at the numbers that tell the story of this crisis.

The numbers:

  • 15 million, or 1 in 5, American children and young adults battle mental illnesses or learning disorders.
  • 10 million, or two-thirds of them, are undiagnosed or aren't receiving treatment.
  • Among children ages 3 to 17: 6.8% are diagnosed with ADHD, 3.0% suffer from anxiety, 2.1% suffer from depression
Featured

The case that bitcoin is a bubble

A man uses a Bitcoin ATM in Hong Kong. Photo: Kin Cheung / AP

The case against bitcoin, stated concisely by the Economist:

"It seems that every day, Bitcoin seems to hit a new high. But the reported price can move up and down by $1,000 or so within a few hours. This might have made it a great investment for those who got in at the right price and are nimble enough to get out in time. But it doesn't make it a useful means of exchange. When the price is rising fast, those who use bitcoin will be reluctant to part with it; when the price falls, those who sell goods will be reluctant to accept it."

Bitcoin as bubble: "This blogger remains convinced it is a bubble. Indeed its exponential rise only reinforces the argument. The beauty of bitcoin is that its intrinsic value is impossible to determine and that makes any value plausible to true believers. This is not the same as saying there is no merit in electronic currencies or blockchain technology; of course there is. But the range of prices which can be found on cryptocompare shows this is a narrow, illiquid market."

Go deeper: Read the whole article for an excellent Monty Python reference.

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The state of racial inequality in 12 major U.S. cities

The March Against Racism in Boston Common in 1974. Photo: Frank C. Curtin / AP

A deep-dive into racial inequities from the Boston Globe's Spotlight team reveals the cities where gaps between white and black residents are closing and the cities where little has changed since the 1970s.

The big picture: A survey commissioned by the Globe found that 54% of African-Americans feel Boston isn't welcoming to people of color, the highest of the cities surveyed. That percentage is 34% for Chicago and 28% for New York. Atlanta fares best, at 16%.

Boston

  • 7% of residents are black; 73% are white
  • 54% of African-Americans believe the city is unwelcoming to people of color
  • 4 neighborhoods have visible black middle class populations meaning, per the Globe's analysis, "At least 15 percent of the residents are black; and among the black residents, at least 30 percent had a four-year college degree and their household income was at or above the median for their metro area."

New York

  • 16% of residents are black; 48% are white
  • 28% of African-Americans believe the city is unwelcoming to people of color
  • 150 neighborhoods have visible black middle class populations

Washington, D.C.

  • 25% of residents are black; 47% are white
  • 119 neighborhoods have visible black middle class populations

Philadelphia

  • 20% of residents are black; 63% are white
  • 34% of African-Americans believe the city is unwelcoming to people of color
  • 36 neighborhoods have visible black middle class populations

Chicago

  • 17% of residents are black, 54% are white
  • 34% of African-Americans believe the city is unwelcoming to people of color
  • 33 neighborhoods have visible black middle class populations

Atlanta

  • 33% of residents are black; 49% are white
  • 16% of African-Americans believe the city is unwelcoming to people of color
  • 110 neighborhoods have visible black middle class populations

Dallas

  • 15% of residents are black; 49% are white
  • 50 neighborhoods have visible black middle class populations

Houston

  • 17% of residents are black; 38% are white
  • 57 neighborhoods have visible black middle class populations

Miami

  • 20% of residents are black, 33% are white
  • 24% of African-Americans believe the city is unwelcoming to people of color
  • 38 neighborhoods have visible black middle class populations

Los Angeles

  • 6% of residents are black; 31% are white
  • 24 neighborhoods have visible black middle class populations

Charlotte

  • 35% of residents are black, 45% are white
  • 38% of African-Americans believe the city is unwelcoming to people of color

San Francisco

  • 6% of residents are black, 54% are white
  • 34% of African-Americans believe the city is unwelcoming to people of color
  • 9 neighborhoods have visible black middle class populations

Go Deeper: The full piece from the Globe is well worth the click.

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Nikki Haley: Trump's accusers deserve to be heard

Diverging from the White House line, UN Ambassador Nikki Haley said on CBS' "Face the Nation" that the women accusing President Trump of sexual harassment and assault "should be heard."

"I know that he was elected, but, women should always feel comfortable coming forward and we should all be willing to listen to them," she said. Press Secretary Sarah Sanders has denied all of the dozen-plus claims and said Thursday that "the people of this country addressed" the allegations when they elected Trump.

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Sen. Shelby says Alabama "deserves better" than Roy Moore

Shelby. Photo: Alex Brandon / AP

Richard Shelby, Alabama's senior senator, told Jake Tapper on CNN's "State of the Union" Sunday that the Ethics Committee will have to investigate Roy Moore should he be elected on Tuesday, and the Senate will have to make a decision as to whether he's fit to serve.

Why it matters: As the NY Times' Jonathan Martin notes, "The most senior Ala R goes on nat’l TV to torpedo his would-be colleague!... Shelby has been in Cong for 40 years. He knew exactly what he was doing accepting this Sunday show invite."

  • "I'd rather see the Republican win, but I'd rather see a Republican write-in. I couldn't vote for Roy Moore. I didn't vote for Roy Moore."
  • "There's a tipping point.... When it got to the 14-year-old's story, that was enough for me."
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Trump: View each day as TV episode

A TV is on in the West Wing of the White House. Photo: Susan Walsh / AP

Read this sentence twice to understand this year and Trump: "Before taking office, Mr. Trump told top aides to think of each presidential day as an episode in a television show in which he vanquishes rivals."

  • That's from a juicy N.Y. Times tour de force on the president's style and habits, "The President vs. the Presidency ... Inside Trump's Hour-by-Hour Battle for Self-Preservation," by Maggie Haberman, Glenn Thrush and Peter Baker.

It's been one helluva season for this Trump show:

  • "Around 5:30 each morning, President Trump wakes and tunes into ... CNN for news, moves to 'Fox & Friends' for comfort and messaging ideas, and sometimes watches MSNBC's 'Morning Joe' because, friends suspect, it fires him up for the day."
  • "Trump spends at least four hours a day, and sometimes as much as twice that, in front of a television, sometimes with the volume muted."
  • "Watching cable, he shares thoughts with anyone in the room, even the household staff he summons via a button for lunch or for one of the dozen Diet Cokes he consumes each day."
  • "Trump is an avid newspaper reader who still marks up a half-dozen papers with comments in black Sharpie pen ... [Steve] Bannon has told allies that Mr. Trump only 'reads to reinforce.'"
  • "As he ends his first year in office, Mr. Trump is redefining what it means to be president. He sees the highest office in the land ... as a prize he must fight to protect every waking moment, and Twitter is his Excalibur. Despite all his bluster, he views himself less as a titan dominating the world stage than a maligned outsider engaged in a struggle to be taken seriously."
  • "Trump still takes shots at Mark Cuban, a fellow rich-guy reality star, and expresses disappointment that Tom Brady ... has distanced himself."
  • After dinner, he "sometimes 'hate-watches' CNN to get worked up, especially Don Lemon."
  • "In between, it is time for phone calls ... In recent weeks, Mr. Trump's friends have noticed a different pitch, acknowledging that many aides and even his own relatives could be hurt by Mr. Mueller's investigation. As for himself, he has adopted a surprisingly fatalistic attitude ... 'It's life,' he said of the investigation."
  • "From there it is off to bed for what usually amounts to five or six hours of sleep."
  • Get your Sharpie out.

P.S. The article has this footnote: "Glenn Thrush contributed to this article before he was suspended pending the result of an investigation into allegations of inappropriate behavior. Matt Apuzzo also contributed reporting."