High drug prices emerge as 2015’s top is­sue

Modern Healthcare - - NEWS - By Har­ris Meyer

HIGH PRESCRIPTION DRUG PRICES pushed aside the never-end­ing wran­gling over the Af­ford­able Care Act as health­care’s No. 1 po­lit­i­cal and pol­icy is­sue in 2015.

A bi­par­ti­san scrum of providers, in­sur­ers, pa­tient ad­vo­cates and politi­cians called for strong mea­sures to curb drug costs, which rose more than twice as fast as the rest of health­care spend­ing over the past two years. Tur­ing Phar­ma­ceu­ti­cals’ 5,000% price in­crease for a decades-old anti-in­fec­tion drug merely put an ex­cla­ma­tion point on the de­bate.

“That has to be noted as the low­light of the year,” said Dr. Daniel Goldstein, an as­sis­tant pro­fes­sor at Emory Univer­sity.

It was only one of many ex­am­ples where drug com­pa­nies slapped sky-high prices on new drugs, es­pe­cially new spe­cialty and on­col­ogy drugs, and levied as­tro­nom­i­cal price hikes on old ones.

Other 2015 devel­op­ments that sig­nif­i­cantly shifted the health­care land­scape in­cluded:

The con­gres­sional break­through on the long­stand­ing headache of Medi­care physi­cian pay.

Huge data hacks of health in­sur­ers and providers, which raised alarms about cybersecurity.

The emerg­ing con­sen­sus on Capi­tol Hill to re­duce drug and med­i­cal-de­vice reg­u­la­tions to speed new prod­ucts through the Food and Drug Ad­min­is­tra­tion ap­proval process.

To cap off the year, two mass shoot­ing at­tacks against health­care and so­cial ser­vice work­ers led to re­newed calls to ad­dress gun violence through a pub­lic health preven­tion ap­proach. Higher spend­ing on men­tal health ser­vices also gar­nered new sup­port.

The par­ti­san po­lit­i­cal war over the Af­ford­able Care Act dragged on de­spite the U.S. Supreme Court’s June de­ci­sion in King v. Bur­well, which up­held the le­gal­ity of the law’s pre­mium sub­si­dies and averted a health in­sur­ance mar­ket melt­down. By year- end, Se­nate Repub­li­cans had passed a bill re­peal­ing most of the ACA, which the pres­i­dent promised to veto.

But nib­bling at the ACA’s fringes be­came a bi­par­ti­san af­fair. In a year-end bud­get pack­age, Congress froze three ACA taxes that helped fund the law’s cov­er­age ex­pan­sions.

The ACA re­mained squarely in the crosshairs in the early ma­neu­ver­ings for the 2016 pres­i­den­tial nom­i­na­tions. Repub­li­can can­di­dates con­tin­ued to prom­ise to re­peal and re­place the law if their party wins the White House and holds onto both houses of Congress next fall. Demo­cratic pres­i­den­tial can­di­date Hil­lary Clin­ton pro­posed sig­nif­i­cant ACA changes to im­prove af­ford­abil­ity.

Oba­macare con­tin­ued to re­ceive tepid pub­lic sup­port even though the na­tion’s unin­sured rate hit a record low, largely due to the law’s cov­er­age ex­pan­sions. A Cen­ters for Dis­ease Con­trol and Preven­tion sur­vey found that only 9% of Amer­i­cans, or 28.5 mil­lion peo­ple, lacked cov­er­age as of June, down from 16% in 2010 when the law was en­acted.

“This has been tremen­dous progress,” said Larry Le­vitt, a se­nior vice pres­i­dent at the Kaiser Fam­ily Foun­da­tion. “The ques­tion now is will it go lower?”

Ex­panded cov­er­age came at a price. To­tal health­care spend­ing dur­ing 2015 grew faster than it had since the start of the Great Re­ces­sion. The faster growth rate prompted fears of a re­turn to high med­i­cal in­fla­tion. “It’s ab­so­lutely no sur­prise” that spend­ing went up be­cause more peo­ple were in­sured, said Paul Gins­burg, a Univer­sity of Southern Cal­i­for­nia health econ­o­mist. “The pur­pose of cov­er­ing them was al­low­ing them to use more ser­vices.”

How­ever, the rate of in­crease be­gan to mod­er­ate over the course of the year. Some ex­perts noted the pro­lif­er­a­tion of high-de­ductible health plans was forc­ing some con­sumers to limit their med­i­cal uti­liza­tion.

Health­care providers en­joyed con­sid­er­able bal­ance sheet re­lief in 2015 as they saw fewer unin­sured pa­tients. For most, rev­enue growth out­paced ex­penses. The fi­nan­cial im­prove­ment led credit-rat­ing agen­cies to raise the over­all out­look for not-for-profit hos­pi­tals from neg­a­tive to stable. En­ticed by low rates, health­care bor­row­ing in­creased in 2015 af­ter reach­ing the low­est level in more than a decade the prior year. Most of that money was ear­marked to re­fi­nance older debt rather than for new cap­i­tal ex­pen­di­tures. A num­ber of health sys­tems re­turned to bond-fi­nanced build­ing projects. “There are still larger in­sti­tu­tions that have new tow­ers in mind,” said Colleen Mul­laney, who heads TD Bank’s Southern health­care di­vi­sion.

Health in­sur­ers de­cided in 2015 that they needed greater size as providers in­creas­ingly con­sol­i­dated to bet­ter de­liver co­or­di­nated care and gain more bar­gain­ing clout. Aetna an­nounced it was ac­quir­ing Hu­mana, a Medi­care Ad­van­tage pow­er­house, for $37 bil­lion. An­them agreed to ac­quire Cigna in a deal val­ued at $54 bil­lion. The in­sur­ers said the deals would en­able them to di­ver­sify their prod­ucts, ne­go­ti­ate lower rates with providers and boost earn­ings.

But the merg­ers, which now face an­titrust scru­tiny, have prompted warn­ings about re­duced com­pe­ti­tion, ex­ces­sive in­surer abil­ity to dic­tate rates, and higher health­care costs. Thomas Gre­aney, a St. Louis Univer­sity law pro­fes­sor, said the “sumo wrestler” the­ory that dom­i­nant in­sur­ers bar­gain­ing with dom­i­nant hos­pi­tals make the in­dus­try more com­pet­i­tive is wrong. “Some­times we find out that the sumo wrestlers would rather shake hands than com­pete,” he said.

EX­PANDED COV­ER­AGE CAME AT A PRICE. TO­TAL HEALTH­CARE SPEND­ING DUR­ING 2015 GREW FASTER THAN IT HAD SINCE THE START OF THE GREAT RE­CES­SION.

Given the po­lit­i­cal po­lar­iza­tion in Wash­ing­ton, health­care lead­ers didn’t ex­pect much from the na­tion’s cap­i­tal. But there was one ma­jor out­break of bi­par­ti­san­ship when Congress over­whelm­ingly re­pealed Medi­care’s for­mula for pay­ing physi­cians. The leg­is­la­tion cre­ated a new two-track pay­ment sys­tem that’s de­signed to prod doc­tors to­ward risk-based pay­ment mod­els.

“It was a ma­jor achieve­ment and an ex­am­ple of how sen­si­ble peo­ple can do sen­si­ble things,” said Henry Aaron, a se­nior fel­low at the Brook­ings Institution.

DRUGS AND DE­VICES

Polls this year found that the pub­lic con­sid­ers drug costs the na­tion’s most press­ing health­care is­sue. Ex­perts and pol­i­cy­mak­ers of­fered so­lu­tions such as let­ting Medi­care ne­go­ti­ate drug prices, bas­ing prices on the ef­fi­cacy and cost-ben­e­fit value of the prod­ucts, and cap­ping what con­sumers have to pay out of pocket for drugs.

“The de­bate over the price of drugs may have fi­nally crossed a thresh­old that prompts fed­eral and state law­mak­ers to pass leg­is­la­tion to rein in th­ese prices,” said Dr. Michael Carome, di­rec­tor of the Pub­lic Cit­i­zen Health Re­search Group.

Yet law­mak­ers fo­cused most of their at­ten­tion on how to speed pa­tients’ ac­cess to in­no­va­tive drugs and med­i­cal de­vices. In a sur­prise, Repub­li­can and Demo­cratic House lead­ers came to­gether to draft and win over­whelm­ing ap­proval for the 21st Cen­tury Cures Act. Supporters said the bill would pro­vide greater ac­cess to ef­fec­tive new treat­ments by stream­lin­ing the reg­u­la­tory process and help re­duce drug costs. The bill in­cluded $9.3 bil­lion in ad­di­tional fund­ing for the Na­tional In­sti­tutes of Health over the next 10 years.

While crit­ics warned the leg­is­la­tion could jeop­ar­dize pa­tient safety by loos­en­ing re­view stan­dards and drive up drug costs, the Se­nate be­gan work on its own version of the leg­is­la­tion.

HEALTH IN­SUR­ANCE MAR­KET

The ACA’s in­sur­ance ex­changes op­er­ated rel­a­tively smoothly for the 2015 sign-up pe­riod, and so far have run glitch-free for 2016 en­roll­ment. “This was the year when the ACA got sort of bor­ing,” said the Kaiser Fam­ily Foun­da­tion’s Le­vitt.

But there are grow­ing con­cerns about the sus­tain­abil­ity and af­ford­abil­ity of the re­formed mar­kets. Av­er­age pre­mi­ums for sil­ver-level bench­mark plans sold on the fed­eral ex­change were up 7.5% for 2016. In ad­di­tion, in­sur­ers gen- er­ally raised de­ductibles and out-of-pocket costs.

Plans also con­tin­ued to nar­row their provider net­works, which led to a grow­ing num­ber of sit­u­a­tions in which pa­tients faced sur­prise med­i­cal bills when they were un­wit­tingly treated by out-of-net­work providers. Some states ei­ther im­ple­mented or con­sid­ered new rules to pro­tect pa­tients from such bills.

Some ob­servers warned that higher pre­mi­ums and out-of-pocket costs will slow en­roll­ment growth and dim the chances that the ACA will cover the many mil­lions of re­main­ing unin­sured Amer­i­cans. Out of cau­tion, the Obama ad­min­is­tra­tion low-balled its 2016 en­roll­ment pro­jec­tion at 10 mil­lion.

The fail­ure to make in­roads among health­ier young peo­ple made the Oba­macare mar­ket more costly and less ap­peal­ing to in­sur­ers. Unit­edHealth Group’s CEO an­nounced in Novem­ber that his com­pany had lost lots of money on its ex­change busi­ness and may exit the ex­changes in 2017.

An­other blow to the law was the fi­nan­cial fail­ure of 12 of the 23 not­for-profit co-op health plans that were es­tab­lished through ACA loans to cre­ate more in­sur­ance com­pe­ti­tion. The law’s op­po­nents cheered, say­ing the col­lapse of the co-ops proved that the ACA mar­kets were not vi­able. But co-op plan lead­ers said the key fac­tor was the fed­eral gov­ern­ment’s fail­ure to de­liver promised “risk-cor­ri­dor” pay­ments de­signed to com­pen­sate plans that at­tracted a dis­pro­por­tion­ate share of sicker-than-av­er­age mem­bers.

MED­I­CAID RE­FORMS

To the dis­ap­point­ment of hos­pi­tals, Repub­li­can and Demo­cratic elected of­fi­cials in Florida, Ten­nessee, Utah, Vir­ginia and Wy­oming tried and failed to en­act Med­i­caid ex­pan­sion in 2015 due to con­tin­u­ing op­po­si­tion from many Repub­li­cans.

But the CMS ap­proved In­di­ana’s Med­i­caid ex­pan­sion plan, which re­quires ben­e­fi­cia­ries to make

THERE ARE GROW­ING CON­CERNS ABOUT THE SUS­TAIN­ABIL­ITY AND AF­FORD­ABIL­ITY OF THE RE­FORMED MAR­KETS.

mod­est pre­mium pay­ments. Mon­tana and Alaska fol­lowed with ex­pan­sions, bring­ing the to­tal num­ber of ex­pan­sion states to 30 plus the Dis­trict of Columbia. Louisiana’s newly elected Demo­cratic gov­er­nor also pledged to ex­tend Med­i­caid. So far, the Med­i­caid ex­pan­sion has cov­ered nearly 8 mil­lion adults.

By year-end, Repub­li­can gov­er­nors in Alabama and South Dakota were sig­nal­ing their in­ter­est in ex­pan­sion mod­els with fea­tures such as pre­mi­ums and work re­quire­ments. Pa­tient ad­vo­cates watched ner­vously to see how far the Obama ad­min­is­tra­tion would go in ap­prov­ing such “per­sonal re­spon­si­bil­ity” pro­vi­sions.

The CMS also pro­posed sweep­ing new reg­u­la­tions of Med­i­caid man­aged-care plans that would cap ad­min­is­tra­tive costs and prof­its. The agency also wants more rig­or­ous su­per­vi­sion of net­work ad­e­quacy and state qual­ity-rat­ing sys­tems.

IN­FOR­MA­TION TECH­NOL­OGY

The health­care in­dus­try pulled off the manda­tory, thrice-de­layed switch to the ICD-10 cod­ing sys­tem rel­a­tively smoothly. Most hos­pi­tals, health plans, claims clear­ing­houses, in­for­ma­tion tech­nol­ogy ven­dors and physi­cian of­fice prac­tices con­verted on Oct. 1 with only scat­tered prob­lems. “Part of it may have been a bit of good luck, but a lot of it was good prepa­ra­tion,” said Stan­ley Nachim­son, a health IT con­sul­tant.

But the in­dus­try didn’t fare well on the se­cu­rity front. The three largest health­care data breaches recorded by HHS’ Of­fice for Civil Rights occurred in 2015, with four of the top six breaches in­volv­ing cy­ber­at­tacks. Com­bined, they com­pro­mised over 104 mil­lion pa­tient records. That in­cluded the worst health­care breach in history at An­them, whose 78.8 mil­lion mem­bers’ records were al­legedly hacked from China.

The year “should have been a wakeup call for ev­ery­body,” said com­puter se­cu­rity con­sul­tant Michael McMil­lan. But “we’re still not spend­ing enough on the prob­lem and we don’t have a han­dle on it.”

VALUE-BASED PAY­MENT

Jan­uary brought the an­nounce­ment by HHS Sec­re­tary Sylvia Mathews Bur­well that Medi­care would in­crease the amount of non-man­aged-care spend­ing in val­ue­based con­tracts to 50% by 2018. She said th­ese goals would “drive trans­for­ma­tive change.”

Eleven months later, Medi­care re­quired hun­dreds of hos­pi­tals in 67 met­ro­pol­i­tan ar­eas to ac­cept bun­dled pay­ments for hip and knee re­place­ment. Un­til then, provider par­tic­i­pa­tion in bun­dled-pay­ment pro­grams had been vol­un­tary.

In the pri­vate sec­tor, the Health Care Trans­for­ma­tion Task Force, in­clud­ing ma­jor com­mer­cial in­sur­ers, health

sys­tems, em­ploy­ers and pa­tient groups, said its mem­bers would shift 75% of their busi­ness into risk-based con­tracts by 2020.

But Deep Ban­er­jee, di­rec­tor at S&P Rat­ings Ser­vices, said, “Un­for­tu­nately, fee for ser­vice is still the preva­lent method in the in­dus­try.”

QUAL­ITY AND SAFETY

Hos­pi­tals and physi­cians con­tin­ued to protest the pro­fu­sion of ques­tion­able qual­ity mea­sures used to rate and fi­nan­cially pe­nal­ize providers. “Wher­ever I go, peo­ple com­plain about the bur­den of mea­sure­ment,” said Derek Fee­ley, who is tak­ing over as CEO of the In­sti­tute for Health­care Im­prove­ment.

Only one-quar­ter of more than 3,400 hos­pi­tals avoided fis­cal 2016 Medi­care penal­ties for high rates of pre­ventable read­mis­sions, re­new­ing con­cerns about that met­ric. Other stud­ies found ty­ing physi­cian pay to qual­ity has not had the de­sired im­pact.

In Novem­ber, the Joint Com­mis­sion halted one of its most pop­u­lar hos­pi­tal per­for­mance award pro­grams to re­design the pro­gram. “It’s fair to char­ac­ter­ize the cur­rent en­vi­ron­ment as chaos,” said CEO Dr. Mark Chas­sin.

There also were mount­ing con­cerns about the need to im­prove post-mar­ket sur­veil­lance of drugs and de­vices, in­clud­ing stronger use of reg­istries to track prob­lems. One prod­uct that came un­der the spot­light this year was the Es­sure per­ma­nent birth con­trol de­vice mar­keted by Bayer, which has prompted thou­sands of com­plaints from women and was the sub­ject of a spe­cial FDA fo­rum in Septem­ber.

ONLY ONE-QUAR­TER OF MORE THAN 3,400 HOS­PI­TALS AVOIDED FIS­CAL 2016 MEDI­CARE PENAL­TIES FOR HIGH RATES OF PRE­VENTABLE READ­MIS­SIONS.

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