Last month, Slate columnist Reihan Salam wrote a provocative article about outrageous hospital prices that are driven, according to Salam, by greed, avarice, and market power. Salam gets a few things dead right, namely his diagnosis that we have a massive hospital pricing problem that is bleeding us dry and that the problem is largely caused by growing hospital market power. However, he misses the mark when laying out policy recommendations to curb monopoly-driven hospital prices.
Antitrust: Salam favors using antitrust enforcement to prevent health care consolidation and to reduce barriers to entry for competition. The biggest problem with antitrust enforcement is that it can do little to reverse or break up existing monopolies. Antitrust laws will be unable to help the vast majority of hospital markets that are already concentrated. Second, even with its improving success rate in court, the FTC simply cannot prevent or police the ongoing wave of hospital mergers, resulting in price increases up to 40% price increases in some areas. To be sure, increased antitrust enforcement is a necessary element of the strategy to control hospital prices to stem the tide of consolidation that is driving prices upward. But antitrust is no silver bullet, especially for hospital markets that have already become noncompetitive. Continue reading →
April 13, 2015 5:00 PM
Griswold Hall, Room 110 (Harvard Law School)
1525 Massachusetts Ave., Cambridge, MA [Map here.]
Presentation Title: “Rethinking the Incentives/Access Dichotomy: Prescription Drug Reimbursement as Innovation Incentive.” This paper is not available for download. To request a copy in preparation for the workshop, please contact Jennifer Minnich at firstname.lastname@example.org.
Rachel E. Sachs is an Academic Fellow at the Petrie-Flom Center. She earned her J.D. in 2013 magna cum laude from Harvard Law School, where she was the Articles Chair of the Harvard Law Review and a student fellow with both the Petrie-Flom Center and the John M. Olin Center for Law, Economics, and Business. Rachel has also earned a Master of Public Health from the Harvard School of Public Health, during which she interned at the United States Department of Health and Human Services. She holds an A.B. in Bioethics from Princeton University. After law school Rachel clerked for the Honorable Richard A. Posner of the United States Court of Appeals for the Seventh Circuit. Rachel’s primary research interests lie at the intersection of patent law and public health, with a particular focus on problems of innovation and access and the ways in which law helps or hinders these problems. Her past scholarship has examined the interactions between patent law and FDA regulation in the area of diagnostic tests, and explored the mechanisms behind the passage of patent-related legislation. Her current scholarship applies this focus on innovation and access to the intersection of patent law and drug reimbursement policies.
At the end of January, the House Energy & Commerce Committee released a discussion draft of the 21st Century Cures Act. This document marks the beginning of the legislative phase of the 21st Century Cures Initiative, during which the Committee has held numerous roundtables and hearings and issued several white papers. The first discussion draft of the Act, clocking in at nearly 400 pages (even with several sections “to be supplied”), is incredibly wide-ranging, including proposals that could affect every stage of the innovation process.
The discussion draft should be of interest to everyone in the health policy field. One series of proposals is targeted at the NIH, including more support for the National Center for Advancing Translational Sciences and for the NIH’s BRAIN initiative. Another set would act on the FDA, including one provision giving new drugs for unmet medical needs the option of 15 years of exclusivity. This provision, based on the MODDERN Cures Act, is particularly likely to inspire a great deal of controversy and opposition. The draft also contains a series of proposals designed to promote the development of new antibiotics, in keeping with President Obama’s recent focus on this issue. Its attention to the use of social media by drug companies and to the FDA’s regulation of health-related software will be of interest to many, as well.
The proposed draft is much too long to catalog fully in this brief blog post, although those who are interested in a broader summary might enjoy the 13-page summary of the Act put out by the Committee, the Sciencesummary by Kelly Servick and Jocelyn Kaiser, or Alexander Gaffney’s comprehensive Regulatory Explainer. But I do want to highlight one section of the draft which deserves more attention than it has gotten: section 2021, which would create a national Medical Product Innovation Advisory Commission.
Last year Endo Pharmaceuticals paid just under $182 million to settle a Department of Justice prosecution over its illegal marketing of Lidoderm for uses that the FDA had not approved. This settlement reflects a widespread practice in which pharmaceutical firms illegally promote drugs for off-label uses. In recent years, pharmaceutical firm settlement agreements for off-label promotion have included Johnson and Johnson ($2.2 billion for off-label promotion of Risperdal, Invega and Natrecor); Pfizer ($2.3 billion for off-label promotion of Bextra); and GlaxoSmith Kline ($3 billion for off-label promotion of Avandia). However, the problem of off-label drug use is more complex than it appears.
Manufacturers are prohibited from marketing drugs off-label, that is, for purposes that the FDA has not found to be safe and effective. However, physicians may prescribe drugs off-label for a different therapeutic purpose, with a different dose or for a different category of patients than that on which the drug was tested. Physicians—with the manufacturer’s encouragement—prescribe off-label much more frequently than is justifiable and risk harming their patients. In fact, 70 percent of off-label uses lack significant scientific support.
Physicians value the right to prescribe off-label, but it is the pharmaceutical firms’ incentive to increase sales that drives this practice. More sales means increased profits, so manufacturers have financial incentives to promote off-label use. The First Amendment protects certain off-label promotion as commercial free speech. Furthermore, manufacturers sometimes engage in illegal off-label promotion when the expected revenue exceeds potential penalties.
Unmanaged off-label drug use compromises good medical practice and the FDA’s ability to protect consumers from unsafe and ineffective drugs. Yet typical reform proposals, such as stronger sanctions for illegal promotion, don’t eliminate the problem. Public policy should manage off-label drug use by tracking off-label prescribing, removing economic incentives to sell off-label, and evaluating the safety and effectiveness of off-label uses.
Whereas “allocation of scarce resources” is a buzz phrase that inspires a great deal of distress and desire for good ethical argument, “waste avoidance” strikes us as a relatively uncontroversial method for containing health care spending. Perhaps this is because rationing implies a trade-off between two individuals, each of whom have the potential to benefit from a possible intervention, whereas waste avoidance, on the other hand, implies a trade-off between two services – one of which has the capacity to benefit an individual, and the other which does not. Surely the latter trade-off is preferable, and perhaps even imperative, to make before we take up the former. This week U.S. Secretary of Health and Human Services Sylvia Burwell signaled a commitment to making the latter trade-off in her announcement on a complex area of health care financing: Medicare payment & payment reform. Medicare payment is one of the few levers that the federal government has relatively direct control over when it comes to controlling health care spending, and Burwell’s announcement was a welcome change in the policy discourse from the oft-lamented “doc fix”/SGR debacle (a fix for which was just bypassed again).
In her announcement and this perspectives piece in NEJM, Burwell set goals to (1) move 50% of Medicare payments to alternative payment models such as Alternative Care Organizations (ACOs) and bundled payment arrangements by 2018, and (2) tie 90% of all Medicare payments made under the traditional fee-for-service model to quality or value, through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs, by 2018. Notably, these are the first explicit goals for transitioning to alternative payment models and value-based payments that have been set in the history of the Medicare program – though it remains to be seen how these goals will be pursued.
Actavis is back in the spotlight regarding its allegedly anticompetitive behavior. Last month, the U.S. District Court for the Southern District of New York issued an injunction against Actavis and its subsidiary, Forest Laboratories LLC based on the New York Attorney General’s “product hopping” suit.
The suit concerns Actavis’ attempt to extend monopoly protection for its drug Namenda. Namenda is one of only a few FDA approved drugs to treat Alzheimer’s disease, and the only approved drug in a class of medications that act on the glutamatergic system by blocking NMDA receptors. Namenda is also Actavis’ largest revenue generating drug; it brought in $1.5 billion in sales last year. Unfortunately for Actavis, Namenda’s patent protection is due to expire in 2015. Once the patent protection for Namenda has expired, Actavis should ordinarily expect to see a dramatic reduction in sales revenue, as much as 90% in the first year, as consumers switch to a lower-cost generic version.
As the backlog of Medicare appeals indicates, Medicare claimants are seeking many more hearings than we can currently provide. The mismatch makes a fundamental question particularly acute: Why do we hold hearings to review Medicare coverage decisions in the first place?
It’s a question worth asking. The Affordable Care Act mandated that denials of private health insurance coverage be reviewed by external, contract medical specialists, without a hearing. (See here.) If we are comfortable with private, sometimes profit-motivated coverage decisions obtaining external review review by someone other than an Administrative Law Judge (ALJ), without a hearing, why do we feel differently about Medicare coverage decisions? Continue reading →
Next week (on October 29) Medicare’s Office of Medicare Hearings and Appeals (OMHA) is holding another appellant forum to discuss the ongoing backlog of Medicare claims waiting for a hearing. In one sense, a lot has happened since the last forum in February (I covered that here): OMHA announced pilot projects to try statistical sampling and facilitated settlement in some cases (see here and here); CMS (effectively the “defendant” for settlement purposes in these appeals; functionally independent from OMHA) announced a willingness to settle a subset of pending inpatient hospital billing claims for 68 cents on the dollar (see Nick Bagley’s post at the incidental economist); the backlog came up at a couple congressional hearings; and two lawsuits were filed to challenge it, one by providers (see here) and another by beneficiaries (see here).
In another sense, not that much has happened. Unless Thursday’s forum brings big news—and I know that OMHA and CMS have been working hard on reforms so perhaps it will—there is still a big backlog of Medicare appeals, there is still not a resource fix in sight, and the influx of Medicare appeals seems to still far outstrip OMHA’s capacity to hold hearings.
In advance of the forum, I’m planning a series of posts offering my thoughts, such as they are, on where we are and where we are going. I invite anyone who disagrees or thinks I’ve gotten something wrong to post their own views in the comments. Or you can email me and I will look into sharing your thoughts as an independent posting. You can get all my posts on this subject, including new ones as they come in, by clicking here.
A caveat: I’m approaching these as blog posts—trying to get my educated thoughts based on everything I have read out in a timely way—but I might be missing something. If the upcoming forum or comments reveal that I am–I won’t be there in person but will be watching remotely–I will either post a general update or go add particular updates in the text of my posts as necessary.
And a disclosure: I’ve said this before but want to do it once more again before pontificating—I worked in government until a little over a year ago, so my views on these matters may be biased. (And of course I will not discuss anything I worked on.) But I’ve done my best to be objective.
Nick Bagley has written a great post at the Incidental Economist responding to Elisabeth Rosenthal’s recent article in the NY Times on out-of-network emergency physician billing. This phenomenon arises when a patient goes to an in-network hospital, but the physicians staffing the emergency room are out-of-network. As a result, patients get balance-billed by the out-of-network physicians for large amounts that are not subject to their deductible or out-of-pocket limits. I wanted to pile on to the moral outrage and add some thoughts about legal solutions.
(1) DOL and HHS should issue rules to include out-of-network physician services provided at an in-network facility (not just emergency rooms) in calculations of an individual’s out-of-pocket maximum.
Nick suggests that the Department of Labor require out-of-network emergency services to count toward the ACA’s out-of-pocket spending cap. HHS should do the same for plans sold on the Exchange. Emergency rooms are an easy target, because in an emergency most people have little choice but to go to the nearest ER or the one to which the ambulance delivers them. My 2-year old fell and hit her head when we were traveling out of town, and I can personally attest to the difficulty of trying to figure out whether the nearest ER is in-network even for a law professor who writes about the perils of balance billing.
However, the out-of-network doctor problem goes beyond emergency care. Even for non-emergencies, you could dutifully select an in-network hospital and in-network surgeon to perform your hip replacement or bypass surgery, but the anesthesiologist or the other physicians working on you may be out-of-network, and you would be stuck with a large out-of-network charge. So the regulatory solution must reach beyond emergency services. Continue reading →
For all those who are interested in issues of global health, access to medicines, and drug pricing, yesterday Gilead formally announced its access program for enabling many developing countries to purchase its new Hepatitis C drug, Sovaldi, at low prices. This announcement is particularly noteworthy because Sovaldi represents a significant improvement over the current standard of care for Hepatitis C, as it can cure a much greater percentage of sufferers than could standard therapies, and it does so with many fewer negative side effects. Gilead’s partnership-based program will permit seven Indian generic drug companies to produce and sell the drug in 91 developing countries. The discounts are significant: although Gilead formally charges $1,000 a pill (or $84,000 for a course of treatment) for Sovaldi in the United States, it will charge just 1% of that, or $10 a pill, in India (the total cost there is estimated at $1,800, given the difference in strain prevalence).
The global health community has reacted to the announcement with mixed reviews. The 91 countries in the program include more than half of the world’s Hepatitis C patients. But tens of millions of other patients in large nations like China, Brazil, Mexico, and Thailand are left out of the program. Going forward, some of the excluded nations may seek to issue compulsory licenses in an effort to expand access to Sovaldi.
Gilead has also drawn fire in the United States for Sovaldi’s $84,000 sticker price (which, for various reasons, very few if any will actually pay), to the degree that members of both houses of Congress haveasked Gilead to justify the price of the drug. Those opposing Sovaldi’s price have generally not come out publicly against the high price of many orphan drugs, which can cost $250,000-$350,000 per year. But because Hepatitis C afflicts about 2.7 million people in the US, as compared to the few thousand people with one of the relevant orphan diseases, its impact on insurers (both public and private) is likely to be much larger (as this very blog has previously noted). Continue reading →
After last week’s foray into patents and pharmaceutical policy, which is perhaps the most technical and specialized area of pharmaceutical policy, I will return to the never-ending story of pharmaceutical prices and the controversy over Sovaldi, Gilead’s break-through Hepatitis C drug. Sovaldi has a “sticker price” of $84,000 for a 12-week course of treatment, at the end of which 90% or more of patients would be expected to be cured. Since Sovaldi is a pill that is given once a day, the 12-weeks of treatment means that there are 84 daily doses. The math is easy, even if the price, unlike the pill, is hard to swallow–$1,000 per pill. The drug has been a huge financial success for Gilead, which reported $2.274 billion in sales in just the first quarter of 2014. However, the backlash has been equally huge. In a rare display of bipartisanship in Washington, Senator Ron Wyden (D.-Ore), the Chair of the Senate Finance Committee and Senator Chuck Grassley (R.-Iowa), the Ranking Member of the Finance Committee, sent a demand for information concerning the development costs of Sovaldi and Gilead’s pricing decision. However, even more than the investigation by two senior senators, the impetus for today’s post came from the blog RxObserver, which featured a post entitled Sovaldi: A Poster Child for Predatory Pricing [sic]. Before discussing the epithet “predatory pricing,” the perspective of RxObserver requires a bit of explanation. RxObserver is a site that primarily provides the views of pharmaceutical benefit managers (PBMs), or as the blog itself states its purpose: “the Clearinghouse of the Future for Pharmacy Benefits.” It is, in general, a very high-quality blog, with an editorial staff composed primarily of well-recognized academic and government experts in health care policy. I regularly read it and find it useful, although I was taken aback by that “predatory” epithet. Continue reading →
Several months ago, I promised to post my thoughts on the viability of the American Hospital Association’s threatened lawsuit against the Secretary of Health and Human Services challenging the growing backlog of coverage appeals. (See my post here). That issue has become timely, because the AHA and several providers filed suit in May in the District of Columbia, and a few days ago filed a motion for summary judgment. (See here). There has been some coverage of the suit. (See here and here.) In short, their argument is that the statute says that a hearing must be held in 90 days and Medicare officials admit that the plaintiffs will not get a hearing for years, so therefore the court should order “mandamus,” forcing compliance with the 90 day deadline.
When I was in practice before moving to academia, I represented the Secretary in cases like this, so keep in mind my view might be biased. But the government’s response to the complaint is due (by my calculation) Monday, July 28, so I wanted to offer my quick reactions about the case and what sort of response we might hear from the government. I’ve just read over the AHA’s motion for summary judgment and I think that in a case like this, with an admitted violation of a statutory requirement, you have to start with the presumption that things could go bad for the government. But with that said, I don’t think that the government’s case is as gloomy as it might at first appear, so this could be an interesting case to watch going forward.
Last month Medicare’s policy on coverage for sex change therapy changed somewhat. (See Matt’s earlier post here.) Specifically, Medicare’s Departmental Appeals Board invalidated the long-standing National Coverage Determination that dubbed sex change therapy to be non-covered, per se.
Co-blogger Elizabeth Guo and I have done some further digging on this issue and put together two posts answering some questions left open by Medicare’s decision and the news coverage surrounding it. In this post we discuss next steps: what the change in coverage policy means for Medicare beneficiaries who want coverage for sex change therapy, and what, if any, additional developments are likely to follow. In a companion post, we will be discussing the somewhat unusual process that was used to make this policy change.
On March 25, Susan Jaffe published a blog post in the New York Times about Medicare’s recent change to cover skilled therapy (e.g. physical therapy, nursing care) where it is “reasonable and necessary” maintain a patient’s condition and to prevent deterioration, even when it is not likely that the patient will improve. Jaffe notes that the revisions will likely have a substantial impact on thousands of Medicare beneficiaries even though the change has been largely unnoticed.
The revision highlights a potential problem with the system in place for challenging Medicare coverage. The revision itself is unremarkable, reflecting what national Medicare policies professed, but what local contractors sometimes ignored. What is remarkable is the time it took for Medicare to make the revision, from when the controversy appeared to when Medicare posted the change in its manuals. This delay is problematic because it reflects a dichotomy in how coverage decisions are challenged and changed under Medicare – due not to medical necessity but to political and financial circumstances beyond patient control.
Constituents can change Medicare coverage policies through two processes. One is through the litigation system. Judges can overturn Medicare coverage decisions after patients have exhausted Medicare’s internal adjudication process. Yet, litigation can take years and judges usually defer to Medicare’s judgment. National Coverage Determinations (NCDs) provide an alternative under which constituents can encourage Medicare to reconsider or overturn a prior coverage decision. NCDs supersede Local Coverage Determinations (LCDs) – coverage decisions that affect a region of the United States. When Medicare determines that the LCDs for a specific technology or service are “inconsistent or conflict with each other to the detriment of Medicare beneficiaries,” Medicare can decide to issue an NCD to provide uniform coverage.
Please find attached a ppt presentation on “New regulatory pathways and incentives for sustainable antibiotics: Recent European & US Initiatives” given on March 7, 2014 at the Broad Institute of MIT and Harvard. The presentation was followed by a discussion moderated by US patent attorney Melissa Hunter-Ensor, Partner at Saul Ewing, Boston.
I started out by emphasizing increasing problems of antimicrobial resistance (AMR) on a global level, providing new statistics and facts. This was followed by a discussion of main reasons for these alarming developments, such as inappropriate use in agriculture and medicine, insufficient precautions, lack of education, climate change, travel behavior, insufficient collaboration and funding of R&D, scientific complexities, and the problem that incentives provided by the traditional innovation system model often fail in the case of antibiotics.
Next the presentation focused on a variety of solution models that could be discussed to fight AMR. These include both conservational and preventive approaches comprising use limitations, increased public awareness, and better hygiene, but also reactive push & pull strategies, such as increased investments, new collaborative models for R&D in antibiotics, prizes, “sui generis” IP-related incentives, regulatory responses and new pathways for approval.
Three weeks ago I blogged about my recent review of “Pharmaceutical Innovation, Competition and Patent Law – a Trilateral Perspective” (Edward Elgar 2013). The full review, which is forthcoming in a spring issue of European Competition Law Review (Sweet Maxwell), is now available at SSRN: http://ssrn.com/abstract=2396804.
Yesterday the HHS Office of Medicare Hearings and Appeals (OMHA) held a forum for appellants affected by its decision, which I blogged about last month, to hold off on assigning incoming appeals to ALJs while they work to clear a large backlog. I was able to go, and enjoyed every minute. This issue has received its share of attention in the news (Washington Post here, National Review online here), as well as controversy (see here and here), but I have not yet seen an article discussing some of the policy developments that came out of yesterday’s forum. So I am going to play journalist for a minute, rather than academic, and share yesterday’s developments. There were a lot of them: Continue reading →
When Medicare refuses to cover a treatment (such as inpatient hospitalization) or device (like diabetes testing supplies), the statute gives the disappointed beneficiary the right to appeal. Furthermore, there are mechanisms by which the provider–which may be a hospital, doctor, durable medical equipment manufacturer, etc.–that recommended the treatment (and often stands to profit if it is covered) can appeal on the beneficiary’s behalf (or on their own if the claim is assigned).
The statute sets deadlines for decisions on appeal, but in recent years a flood of new cases has led to a growing backlog and long delays. (The backlog is caused in large part by the Recovery Audit Contractor program, through which Medicare has been revisiting and revising coverage determinations from the past several years. That is a subject for another day.)
On Christmas Eve, the office in the Department of Health and Human Services responsible for hearing appeals (that is, the Office of Medicare Hearings and Appeals), adopted a controversial mitigation measure: They’ve stopped hearing new appeals, while they work to clear the backlog. Which will take at least two years. (See recent coverage here.)
Yes, the law says that Medicare must hear appeals, so yes, this temporary measure is technically inconsistent with the law (which is not to say it is illegal, more below on that). But in my view it is actually a good idea, and consistent with what I think is the best ultimate solution to the “backlog” problem. Here’s why:
On December 12, a bipartisan bill entitled the Excellence in Diagnostic Imaging Utilization Act of 2013 (HR 3705) was introduced in the House of Representatives which would require clinicians to use electronic clinical decision support tools (CDS) before ordering advanced diagnostic imaging tests for Medicare patients. Structured around appropriate use criteria developed by professional medical societies, the tools would aim to increase the value of advanced imaging studies by informing and guiding practitioners’ decisions across a variety of clinical settings.
Such tools would provide active feedback on the appropriateness and evidence base of various imaging modalities, and would require physicians to furnish rationales for ordering tests that are inconsistent with appropriate use criteria. The bill also envisions the creation of registries that document how diagnostic tests are used in order to facilitate research and to enable feedback to clinicians on metrics related to appropriate use criteria. In a press release, the American College of Radiology lauded the proposed legislation, stating that it would “revolutionize the specialty of radiology.”
Mandating the use of electronic clinical decision support tools portends at least three key improvements in clinical workflows and healthcare quality more broadly.
So reads the cover of the MIT Technology Review this month. The article is available for free online. The article begins with the story of Kalydeco, which is priced at $294,000 per year.
The company also pledged to provide it free to any patient in the United States who is uninsured or whose insurance won’t cover it. Doctors and patients enthusiastically welcomed the drug because it offers life-saving health benefits and there is no other treatment. Insurers and governments readily paid the cost.
Hold on. If patients can get the medicine for free even when their insurers decline to pay the cost, why would insurers “readily pay the cost?”