Separating the Healthcare Wheat from the Political Chaff

  • by: Peter Pitts |
  • 02/05/2019
Last night during his State of the Union, the President addressed the issue of drug costs. Some of the ideas are sound while others deserve, shall we say, more careful consideration. Let’s look at the record.
BAD IDEA: Adopting an international pricing index (IPI) payment model for Medicare Part B in which a “reference price” for a prescription drug will be generated by taking the average price of that drug from 16 countries.

The president claims that proposal will lower the cost of drugs, makes America first again by stopping foreign freeloaders and limits “out-of-control” prices.
In reality these proposals reduce access for patients:
* These countries utilize government controlled and single-payer healthcare systems where governments leverage their purchasing power to dictate prices, meaning that these “reference prices” have nothing to do with actual market values. 

* In these systems, governments can only contain healthcare costs by restricting or refusing care, meaning that if a drug costs more they are willing to pay, they can refuse to cover it for patients or limit the number of patients who can receive the treatment. 

* This is why “of 74 cancer drugs launched between 2011 and 2018, 70 (95%) are available in the United States. Compare that with 74% in the U.K., 49% in Japan, and 8% in Greece.”

Access to these cutting-edge drugs means that patients can use the latest treatments to help cure their conditions; it’s why the United States has the highest five-year survival rate for cancers in the world.
Price controls reduce innovation:
* By leveraging CMS’ purchasing power to impose these price controls, the proposal creates a dramatic market imbalance which would force innovators to adjust business models and reduce investment in R&D – reducing high-risk research into complex conditions such as Alzheimer’s Disease. For example, there were numerous, high-profile failures in late stage clinical trials for Alzheimer’s treatments just in 2018. These failures represent years and billions of dollars in research which will yield no return – all part of the risk of scientific research. 

* The U.S. “funds about 44% of world medical R&D, invests 75%of global medical venture capital, and holds the intellectual property rights for most new medicines,” due to our market forces which incentivize the kind of risk that companies routinely take despite potential failures. 

GOOD IDEA: Increasing transparency around rebates in Medicare will bring down costs for patients.
The administration has proposed increasing restrictions around how pharmacy benefit managers (PBMs) and insurers process rebates for pharmaceutical drugs with the intent of ensuring such rebates and savings go to the patient at the point of sale.
This proposed rule also reduces incentives for PBMs to opt for higher-cost treatments:
* As higher-cost treatments often have some of the largest rebates, PBMs are currently incentivized to choose more expensive treatments and pocket the rebate savings, increasing costs for insurance companies, keeping list prices high without lowering costs for patients. 

* By mandating rebates and savings are provided to patients at point of sale, PBMs are no longer incentivized to keep list prices high or to choose the most expensive treatments. 

BAD IDEA: A rule weakening protections for six-protected classes in Medicare Part D will hurt patients.
The administration has proposed loosening regulations in Medicare Part D which ensure access to “all or substantially all” medications that treat diseases in six-protected classes. These medicines are protected because the treat serious, chronic and often life-threatening illnesses like clinical depression, HIV and cancer.
The president believes this proposal Is another example of reigning in out-of-control healthcare costs and that the new rule will force providers to make better drug choices and help fix Medicare’s cost issues
The reality is that this proposed rule will restrict access for patients.
The rule would implement what’s known as “step therapy,” commonly referred to as “fail first.” 

This means that even if a patient’s doctor has recommended a treatment, insurance companies are empowered to force a patient to first try a different treatment, waiting to see if it fails before a patient can “progress” to other options or eventually the doctor’s original prescription. 

For patients, this means that they will need to endure long periods of treatment before finally arriving at one that works, lengthening the period of illness and causing increased discomfort. 

GOOD IDEA: Transparency on the hospital pricing front.
The President rightly noted that hospitals are largely unchecked when it comes to procedure or prescription drug prices. On January 1, a new rule forcing hospitals to disclose their prices went into effect, creating greater transparency throughout the system and providing consumers with more information to make informed decisions about their care. In the long term, these disclosures could allow consumers to act rationally and opt for the best value for their care, creating incentives to reduce prices for patients.
GOOD IDEA: Enhanced PBM Transparency.
Last autumn, the President signed legislation banning “gag clauses” in pharmacy benefit contracts. These clauses stopped pharmacists from disclosing to patients when they could save at the pharmacy counter. By banning these practices, the administration rightly targeted the added costs that middlemen like PBMs add to the system, reducing burdens for patients and shining a light on unfair practices.
The best ideas are common property. – Seneca
The President wants to protect insurance coverage for pre-existing conditions. Bravo. The President wants to “reduce the price of healthcare and prescription drugs," eradicate HIV-AIDS and defeat pediatric cancers.  Bravo. Now that “the speech” is behind us, the President and Congress should focus and build upon the administration’s successes  in bringing down the real costs of healthcare instead of pursuing fantasy land socialist policies that puts our healthcare system under government control, deters urgent innovation and rations patient care.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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