The next drug pricing target: pharmacy benefit managers - Axios
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The next drug pricing target: pharmacy benefit managers

Richard Saxon / Flickr Creative Commons

Pharmaceutical companies have a big target on their back. But there's also a push to shine more light on the intermediaries known as pharmacy benefit managers and how they fit into the national furor over drug prices.

Why it matters: These intermediaries are getting some of the money from drug sales, so they may be part of the chain that's leading to higher drug costs. Read on to find out what might happen.

David Balto, a former antitrust attorney with the Justice Department and Federal Trade Commission and a critic of pharmacy benefit managers, has been in touch with Democratic leaders about regulating the companies. Balto wouldn't say who those legislators were, but it's likely the 19 senators who wrote to President-elect Trump in December about drug prices, including Bernie Sanders and Elizabeth Warren, will be interested.

A possible bipartisan issue: A spokesperson for Republican Sen. Chuck Grassley, who hasn't been shy about taking a critical eye toward the health care industry, said the senator is "looking at all factors that might contribute to higher drug prices, including the role of PBMs."

Why now: Employers, unions and health plans hire pharmacy benefit managers to create pharmacy networks and negotiate down prices from drug makers. They've hit criticism in the past. Balto, who represents consumer groups and independent pharmacies, argues that pharmacy benefit managers "don't do anything other than build the network and move information and money."

Last year, pharmacy benefit managers were partially blamed for the rising price of EpiPens. Mylan, which makes the EpiPen, circulated a chart that said pharmacy benefit managers and other actors in the supply chain were eating big slices of the cost pie. Pharmacy benefit managers, in particular, pocket sizable sums of the drug rebates they negotiate. Hence, the higher price.

PBMs aren't having it: Mark Merritt, chief executive officer of the Pharmaceutical Care Management Association, the PBM lobbying group, told me that nobody was buying Mylan's chart or the testimony of Heather Bresch, Mylan's CEO. "It was a load of bull. She was trying to distract that she had made a simple pricing decision."

Merritt added: "Drug pricing is not well understood by just about anybody. You and your compadres in the press get it wrong all the time."

But drug pricing economics is extremely complex: Even experts at the Medicare Payment Advisory Commission, which advises Congress on health care policy, think pharmacy benefit managers are overly covert. "There is a real complexity in how PBMs operate and where they get their revenues," the commission said in a June 2016 report. "Because rebate amounts are proprietary, it is difficult to know with certainty."

Why this won't go away: New York Gov. Andrew Cuomo unveiled new regulations for the benefit managers this month, such as requiring them to be licensed and disclose reasons why certain drugs are promoted. If the federal government doesn't look into those companies, more states could.

Balto said pharmacy benefit managers operate in a "regulatory-free zone" and rules like those in New York will help. But Merritt countered that regulations will raise drug costs, and the New York measure could be illegal based on the Employee Retirement Income Security Act, the federal law that governs many pension and health plans.

Size and scope: CVS, Express Scripts and OptumRx dominate the pharmacy benefit manager space, processing about 75% of all prescription drug claims. Although they have relatively small profit margins, they are handling a lot of money. Express Scripts, for example, banked $2.5 billion in profits in 2015 off of $102 billion in revenue.

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New Trumpcare amendment would require states to define essential health benefits

(Alex Brandon / AP)

A final amendment to the American Health Care Act was introduced Thursday night by the authors of the legislation, a last-minute attempt to win conservatives over by requiring states to define what services insurers must offer enrollees.

Here's what's in the amendment, which will be voted on in the Rules Committee tomorrow before the bill heads to the House floor for a final vote:

  • Beginning in 2018, states will determine essential health benefits. There are currently 10 federal ones under Obamacare, which apply to the individual and small group markets.
  • The repeal of the Medicare payroll tax on high earners would be delayed until 2023.
  • The original bill's Patient and State Stability Fund would get an extra $15 billion to be used for maternity coverage and newborn care, as well as mental health and substance abuse disorder treatment.
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Apple says flaws in latest WikiLeaks disclosure are all old

Mike Deerkoski / Flickr cc

Although much was made about a new batch of iPhone and MacBook flaws disclosed by WikiLeaks on Thursday, Apple says the issues appear to all be old, since-fixed vulnerabilities.

"We have preliminarily assessed the Wikileaks disclosures from this morning," Apple said in a statement to Axios. "Based on our initial analysis, the alleged iPhone vulnerability affected iPhone 3G only and was fixed in 2009 when iPhone 3GS was released. Additionally, our preliminary assessment shows the alleged Mac vulnerabilities were previously fixed in all Macs launched after 2013."
Apple added that it has "not negotiated with Wikileaks for any information."

We have given them instructions to submit any information they wish through our normal process under our standard terms. Thus far, we have not received any information from them that isn't in the public domain. We are tireless defenders of our users' security and privacy, but we do not condone theft or coordinate with those that threaten to harm our users.
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Trump orders tougher Visa screenings

J. Scott Applewhite / AP

President Trump is ordering tougher screenings for Visa applicants as part of his "extreme vetting" policy. Last week Secretary of State Rex Tillerson sent four cables to U.S. embassies and consular officials demanding scrutiny be tightened up, as originally reported by Reuters.

The new rules don't apply to 38 countries who can be admitted using the visa waiver program, including Australia, New Zealand, Japan, South Korea, and most of Europe.

Profiling and delays: This will include "mandatory social media check" if an applicant has been in a territory controlled by ISIS. Such checks are rarely done at present, former officials told Reuters. Consular officials and immigration experts told the NYT this will make it much more common to be denied a Visa to the U.S. and they fear this might lead to profiling based on nationality. It will likely also extend Visa review times.

Context: The cables were issued to complement the travel ban that was upended by a court in Hawaii, but some provisions were remedied to abide by the temporary restraining order. Namely, questions specifically aimed at applicants from the six countries listed in the ban were rescinded.
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Trump's ultimatum: If vote fails, Obamacare stays

AP

Budget Director Mick Mulvaney has just laid down a gauntlet to House Republicans on behalf of President Trump: pass this bill, or Obamacare remains in place.

Members of the conservative Freedom Caucus want more concessions but, according to Mulvaney, Trump will not negotiate further.

The president demanded a vote tomorrow, and now it appears he will get it. He is all but daring Republicans to vote no.

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Richard Drew / AP

Twitter is considering whether to build premium software geared toward power users of its service.

The company already owns TweetDeck, a program geared toward those who juggle multiple Twitter accounts and spend a lot of time on the social media service. A paid version could offer extra features and bypass advertising.

Andrew Tavani, managing editor of Women in the World, first spotted a message from Twitter about the potential service.



Still pondering: It appears the idea is still in the early stages and Twitter hasn't decided if it'll build this. "We're conducting a survey to assess the interest in a new, more enhanced version of TweetDeck," a Twitter spokesperson told Axios, adding that Twitter is "exploring several ways to make TweetDeck even more valuable for professionals."

Why it matters: Twitter acquired TweetDeck in 2011 from developer Iain Dodsworth, but hasn't done much with it since as far as expanding features and capabilities. This could be a welcome option for users for whom Twitter is a critical part of doing their job.

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Here are the AHCA changes demanded by the Freedom Caucus

Alex Brandon / AP

The key changes to the Republican health care bill demanded by the conservative Freedom Caucus:

  • A repeal of ACA's Essential Health Benefits (like emergency or maternity treatment) guaranteed under Obamacare
  • An elimination of the "single risk pool," which prevents insurers from splitting the market into healthy and sick groups
  • An elimination of rating restrictions, which allow insurers to base premiums only on age, area, tobacco use and family vs individual plan
  • A repeal on lifetime or annual limits
  • A reversal of standard documentation mandates, which make it easier to compare insurance plans
  • A reversal on Medical Loss Ratio standards, which force large insurers spend at least 85% of premiums on claims

Why it matters: These changes would appease the Freedom Caucus, but could see moderates abandon the bill.

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Fox News: GOP expects 'smoking gun' proving Obama admin spied on Trump

Jack Gruber / AP

Republicans in Congress are expecting a "smoking gun" showing the Obama administration intentionally spied on Trump associates, and possibly Trump himself, Fox News reports:

The intelligence is said to leave no doubt the Obama administration, in its closing days, was using the cover of legitimate surveillance on foreign targets to spy on President-elect Trump, sources said.

A source told Fox that the surveillance left a "paper trail" indicating there was "no other plausible purpose... than to damage the incoming Trump administration." No, Trump Tower wasn't bugged, as POTUS claimed, but if the report is accurate his transition team was targeted for surveillance.

What's next: Fox says the House Intelligence Committee expects to receive the evidence this week. Trump said he felt "somewhat" vindicated by Devin Nunes' statements yesterday about "incidental" surveillance of Trump's communications. Expect him to be less restrained if this report proves accurate.




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Marketo apologizes after video promo for its conference panned as sexist

Marketo, which specializes in helping companies promote themselves, apologized Thursday after one of its own promotions fell flat.

The ad, promoting an upcoming Marketo conference, featured a ditzy female newscaster and the company's male CEO, Steve Lucas. Marketo told Axios the ad, which was roundly criticized on Twitter, has been pulled down.

We sincerely apologize for the offense we caused with what was intended to be a light-hearted promotion for Marketing Nation Summit. The video was created to promote the conference, playing off our theme of engagement. Marketo has always had a steadfast commitment to championing diversity and empowering female leaders in technology and beyond.
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Theranos offers shares to investors if they promise not to sue

Theranos

Theranos, the embattled blood-testing company, plans to offer additional shares to existing investors if they agree not to sue the company, according to a report from the Wall Street Journal citing anonymous sources. Theranos reportedly only has $200 million in cash left, but is already facing multiple lawsuits, including from former partner Walgreens and investor Partner Fund Management.

The deal: The shares would come from founder and CEO Elizabeth Holmes' personal stake in the company, which would result in her losing her majority ownership. According to the Journal, early investors aren't included in the deal, and weren't even informed of it.

Murdoch exit: Theranos has reportedly agreed to buy back the stake Rupert Murdoch, the executive chairman of News Corp. and 21st Century Fox, purchased for $125 million in 2015.

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Valeant's ousted CEO made $72.5 million in 2016

Manuel Balce Ceneta / AP

Michael Pearson, former CEO of Valeant Pharmaceuticals, cashed in $72.5 million worth of stock and severance pay in 2016 even as he and the drug company were under federal investigation for accounting fraud and a billing scheme tied to a specialty pharmacy it secretly owned.

Pearson took home $60.5 million in stock and the rest in severance pay and other benefits, Valeant disclosed Thursday to the Securities and Exchange Commission. He also still used Valeant's corporate jet. Joseph Papa replaced Pearson last year, and Papa earned $62.7 million even though Valeant remains mired in trouble.

Valeant's stock has cratered since the middle of 2015, and it has become a pariah in the pharmaceutical industry. Pearson led Valeant since 2008, building the company up on the controversial practice of acquiring drugs and jacking up the prices.