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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Nikki Haley's "personal conversation" with Trump

President Donald Trump and U.S. Ambassador to the United Nations Nikki Haley at Trump's National Golf Club in Bedminster, N.J. (Pablo Martinez Monsivais / AP)

U.S. ambassador to the U.N. Nikki Haley told CNN today that she had a "personal conversation" with President Trump about how he handled the fallout from Charlottesville, per Politico.

"Well, I had a personal conversation with the president about Charlottesville, and I will leave it at that," Haley said on CNN. "But I will tell you that there is no hate in this country. I know the pain that hate can cause, and we need to isolate haters, and we need to make sure that they know there is no place for them."

On "Good Morning America," Haley brought up her conversation with Trump again, adding that her message was "taken very well." As for whether Trump believes he was in the wrong with his response? "The president clarified so that no one can question that he's opposed to bigotry and hate in this country," said Haley.

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Chelsea Clinton wants Barron Trump to have a "private" life

AP

Chelsea Clinton defended fellow first child, Barron Trump, on Twitter Monday after a Daily Caller reporter criticized the 11-year-old for his fashion choices.

The critique: "The youngest Trump doesn't have any responsibilities as the president's son, but the least he could do is dress the part when he steps out in public," entertainment reporter Ford Springer wrote in the Daily Caller.

Clinton's kickback: "It's high time the media & everyone leave Barron Trump alone & let him have the private childhood he deserves" she tweeted, linking to the story.

Why it matters: Clinton, who has otherwise been known to rail against Trump and his administration on social media, has come to Barron's defense on several occasions. Twice she's tweeted that Barron deserves the right and the privacy to be a kid.

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Former Uber exec will be H&R Block's next CEO

Photo courtesy of H&R

Jeff Jones, the former Target CMO who spent just six months at Uber as its president of ride-sharing, will be H&R Block's next CEO, starting in October, the company said today.

  • Despite the enthusiasm around Jones' hiring last year, his departure was less positive. He left amid a flurry of controversies bubbling at Uber, including allegations of sexual harassment and discrimination within the company, and shortly after it announced plans to hire a COO.
  • Jones on his departure: "It is now clear, however, that the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber, and I can no longer continue as president of the ride sharing business."

Jones is not the only Uber executive to leave the company in the last six months. Others include its head of finance, head of its AI labs, its head of product and growth, its PR chief, and several employees from its self-driving car teams — including Marakby's boss, former head of Google Maps Brian McClendon.

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Bree Fowler / AP

Blue Apron, the meal kits company that went public in June, has been hit with multiple shareholder lawsuits. They allege that the company misled investors about its business prior to going public, although only two suits have been formally filed, Axios is told. Now, these investors are angry and want their money back.

Tough crowd: Despite being a media darling while a private company, Blue Apron has had a tough time on the markets since going public — its stock price is now nearly half of what it was at the IPO. The company is also facing competition from Amazon, which recently debuted its own meal kits business, which investors claim Blue Apron knew and hid.

Amazon declined to comment on the lawsuits.

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Uber adds new options for driver flexibility

Eric Risberg / AP

Over the last few months, Uber has been on a campaign to repair its relationship with drivers via changes to its policies and service. This time, it's trying to make their driving more flexible thanks to new options in their mobile app, such as setting a trip arrival time if they need to be done by a certain time to pick up their kids from school, and notifications before long trips, for example.

  • In the last six months, it's become clear to the company that it needs to take a friendlier approach in many aspects of its business, including its relationship with drivers.
  • Driver turnover is a big problem for ride-hailing companies, and Uber has to compete for them with rival Lyft, which has cultivated a driver-friendly image.
  • Uber published a paper on time and income flexibility for drivers to support its new policies.
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Study: knowing more doesn't change disbeliefs about science

Associated Press

If someone is already pre-disposed to disbelieve scientific conclusions around issues like human evolution, climate change, stem cell research or the Big Bang theory because of their religious or political views, learning more about the subject actually increases their disbelief, a new study finds.

Why it matters: The research flies in the face of commonly held views that more science literacy and greater education around controversial scientific issues will diffuse polarization but supports a growing body of evidence about how our identity forms our views.

  • For stem cell research, the Big Bang theory and evolution, religious identity overrode science literacy.
  • Political beliefs surrounding climate change led to polarization.
  • They found little evidence (yet) of political or religious polarization for nanotechnology and genetically modified food.

What they found: Carnegie Mellon social scientists looked at Americans' beliefs around six potentially controversial issues: stem cell research, the Big Bang theory, nanotechnology, GMOs, climate change and evolution. The found people's beliefs about topics associated with their religious and political views become increasingly polarized with more education (measured by markers like the number of years in school, highest degrees earned, aptitude on general science facts or the number of science classes taken). Baruch Fischhoff from CMU said:

"These are troubling correlations. We can only speculate about the underlying causes. One possibility is that people with more education are more likely to know what they are supposed to say, on these polarized issues, in order to express their identity. Another possibility is that they have more confidence in their ability to argue their case."

One bright spot for science literacy advocates: If someone is already pre-disposed to trust the peer-reviewed science process and scientists, they're likely to believe what they say and find in all of these areas.

Go deeper: Arizona State University's Daniel Sarewitz got to the heart of it in the Guardian yesterday.

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Susan Walsh / AP

The U.S. Treasury has unveiled sanctions targeting Chinese and Russian entities doing business with North Korea, which is intended to add pressure to the North to soften its nuclear program. North Korea's number one trading partner is China, and most of the sanctions target Chinese companies, per The Washington Post.

Why it matters: This comes the same week as the U.S. and South Korea are conducting military exercises that China, Russia, and North Korea have all been opposed to, given that it looks like the U.S. is escalating its threat to the North — making an already tense week that much more precarious.

The sanctions target 10 entities and 6 individuals that help those who are already sanctioned who support North Korea's missile program or assist the country with its energy needs. It also targets people who help North Korea's export of workers, per CNBC.

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Carolyn Kaster / AP

The Cipher Brief got reactions to President Trump's speech on Afghanistan from top former national security officials — including former acting CIA director John McLaughlin, former Army vice chief of staff Gen. Jack Keane, former CIA and NSA director Michael Hayden, and former acting CIA director Michael J. Morrell.

All are worth reading in full for their diversity of opinions, but here are three major takeaways across the interviews:

  • Trump sounded and acted presidential, which all four officials agreed was vital to delivering this speech effectively.
  • There was no outlined timetable for withdrawal — a departure from Obama-era policies that was seen as a positive and necessary step.
  • Trump's call to have India more involved in Afghanistan was the biggest news, but it could have a potentially destabilizing effect with the United States' relationship with Pakistan.
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Pence explains why Trump didn't announce troop numbers

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Vice President Mike Pence defended President Trump's speech on Afghanistan in a USA Today op-ed.

His overarching message: "Trump has determined that conditions — not arbitrary timetables — will guide our strategy. The previous administration alerted our enemies ahead of time by announcing troop numbers and timelines, something President Trump has wisely refused to do."

  • Trump's plan vs. Obama's: "We need only look at Iraq, and the rise of the Islamic State of Iraq and Syria following the last administration's withdrawal of U.S. forces, to see where this path leads."
  • Focus on Pakistan: "America will not write a blank check for countries that fail to root out the same forces who try every day to kill our people. Pakistan has much to gain from partnering with our effort in Afghanistan. It has much more to lose by supporting terrorists. The president has put them on notice."