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Health Insurers Warn on Premiums
By ANNA WILDE MATHEWS and LOUISE RADNOFSKY
Health insurers are privately warning brokers that premiums for many individuals and small businesses could increase sharply next year because of the health-care overhaul law, with the nation's biggest firm projecting that rates could more than double for some consumers buying their own plans.
The projections, made in sessions with brokers and agents, provide some of the most concrete evidence yet of how much insurance companies might increase prices when major provisions of the law kick in next year—a subject of rigorous
UnitedHealth Group, the nation's largest carrier, and other health insurers said premiums for some individuals and small businesses could rise.
The projected increases are at odds with what the Obama Administration says consumers should be expecting overall in terms of cost. The Department of Health and Human Services says that the law will "make health-care coverage more affordable and accessible," pointing to a 2009 analysis by the Congressional Budget Office that says average individual premiums, on an apples-to-apples basis, would be lower.
The gulf between the pricing talk from some insurers and the government projections suggests how complicated the law's effects will be. Carriers will be filing proposed prices with regulators over the next few months.
Part of the murkiness stems from the role of government subsidies. Federal subsidies under the health law will help lower-income consumers defray costs, but they are generally not included in insurers' premium projections. Many consumers will be getting more generous plans because of new requirements in the law. The effects of the law will vary widely, and insurers and other analysts agree that some consumers and small businesses will likely see premiums go down.
Starting next year, the law will block insurers from refusing to sell coverage or setting premiums based on people's health histories, and will reduce their ability to set rates based on age. That can raise coverage prices for younger, healthier consumers, while reining them in for older, sicker ones. The rules can also affect small businesses, which sometimes pay premiums tied to employees' health status and claims history.
The law's 2014 effect on larger companies is likely to be more limited. Many of the big changes coming next year won't touch them as directly as individual consumers and small businesses, though some will have to grapple with the cost of covering more workers or paying a penalty.
The possibility of higher premiums has become the latest focal point of the political tussle over the health law, which marks its third anniversary Saturday. Republican lawmakers have held hearings on the issue, and six GOP members of the House Energy and Commerce committee wrote last week to more than a dozen insurers asking them to turn over internal analyses on the law's impact on premiums and costs.
The insurance industry has also been talking publicly about big potential premium increases in lobbying for tweaks to the law.
The individual market includes about 15 million people, and around 18% of the roughly 149 million with employer coverage were at small companies, according to 2011 figures from the Kaiser Family Foundation. The individual market is expected to grow to around 35 million people by 2016 as a result of the law.
In a private presentation to brokers late last month, UnitedHealth Group Inc., UNH +0.33% the nation's largest carrier, said premiums for some consumers buying their own plans could go up as much as 116%, and small-business rates as much as 25% to 50%. The company said the estimates were driven in part by growing medical costs not directly tied to the law. It also cited the law's requirements that health status not affect rates and that plans include certain minimum benefits and limits to out-of-pocket charges, among other things.
Jeff Alter, who leads UnitedHealth's employer and individual insurance business, said the numbers represented a "high-end scenario," not an average. "There are some scenarios in which a member could see as much as a 116% increase or over," he said, though others, such as some older consumers, could see decreases. He said the company dwelled on the possible increases because it was trying to prepare brokers to speak with clients facing big jumps.
Other carriers have also projected steep rate increases during private meetings and conversations with brokers. Brokers say they are being told to prepare the marketplace for small-business and individual rate increases as carriers get ready to file specific rate proposals and plan designs with regulators.
Insurers are "not being shy that premiums are going to increase in 2014," and are urging brokers to "brace our clients," said John Lacy, vice president of group benefits at Bouchard Insurance, a brokerage in Clearwater, Fla. His firm has been hearing from carrier representatives that individual premiums in Florida could go up 35% to 50%, on average, and small-business rates around 30%, though it hopes to find strategies to blunt the impact.
Aetna Inc., AET +0.42% in a presentation last fall to its national broker advisory council, suggested rates on individual plans not being grandfathered under the law could go up 55%, on average, and gave a figure of 29% for small business rates. Both numbers included 10 percentage points tied to medical-cost inflation, not the law. An Aetna spokesman said the numbers are "still generally in line with what we've been estimating," and represented the average impact in a typical state.
An official with Blue Cross & Blue Shield of North Carolina told a gathering of brokers last week that individual premiums could go up by as much as 40% to 50%, according to brokers who were present. A spokeswoman for the insurer said "we don't have final numbers" yet on premiums.
There has long been debate, even among insurance experts, over how the law will affect premiums. Because the effect is likely to vary, different measurements can arrive at different conclusions. The CBO analysis cited by the administration determined that average premiums for consumers who buy their own coverage would be 14% to 20% lower because of the law—if the law didn't change the types of plans they purchased.
But the CBO also suggested the law would lead to consumers buying more expensive plans, largely because it requires coverage to include certain benefits and limit charges such as deductibles. When this effect was taken into account, the average premiums would go up 10% to 13%, the agency said, though subsidies would ease the bite for most people. The agency also said small-business policies were likely to cost within a few percentage points of the amount they would have without the law.
Health and Human Services officials say competition among insurers, as well as provisions to limit their financial risk from attracting high-cost consumers, will exert downward pressure on premiums, and point to the tax subsidies that will limit many consumers' costs.
Subsidies will be available on a sliding scale for people with incomes of up to four times the federal poverty level—currently $45,960 for a single person and $94,200 a year for a family of four. More than half of the 35 million people expected to be in the individual market by 2016 are likely to qualify for credits. People whose incomes are around the poverty level could see almost all of the cost of their insurance subsidized, while people at the upper end will get only a small discount toward their premiums.
BioCentury reports that Senator Ron Wyden (D-OR.) sent a letter to NIH requesting a list of medicines that have reached the market as result of NIH research since 1995 -- when the agency removed the reasonable pricing clause from cooperative research and development agreements (CRADAs).
Wyden also asked NIH to convene a panel to reexamine the pricing of medicines and treatments that are developed with public funding.
Assuming (and it is not a big assumption) that Senator Wyden wants to show that it’s public money responsible for new drugs – he needs better staff work.
This question has been asked and answered a number of times from a number of different angles. And, at the end of the day, the answer is that NIH-funded research grants are rarely responsible for pharmaceutical breakthroughs – and are never responsible for the complicated and expensive research behind the development phase of drug programs.
Does Senator Wyden even understand the difference?
As the New York Times reported in January 2011, “The National Institutes of Health has traditionally focused on basic research, such as describing the structure of proteins, leaving industry to create drugs using those compounds.”
A quick look at the grants given out by NIH to investigators in academic research demonstrates that taxpayer money is given to pre-clinical activities. The track record of academics moving something into the clinic is quite poor for a variety of reasons. That's where venture capital, biotech, and pharma come in. Indeed without such investment -- which comes earlier than ever before in the discovery process -- taxpayer support for NIH would not be worth the effort. It's the private investment -- which by the way is now increasingly translational in nature and now involves the development of new drug development tools -- that enhances the NIH investment.
Indeed, without contracts and contracting out in key areas such as genomics, proteomics, high throughput screening, biomarker development, the NIH would not be relevant. It relies upon constant collaboration with the private sector at all levels. In fact, efforts to bar NIH scientists from consulting and working with private companies have lead to a massive exodus of key researchers to for profit companies where there is more freedom and resources.
Wyden also requested information about a CRADA covering research on JAK-3 that he said helped lead to the development of rheumatoid arthritis drug Xeljanz tofacitinib from Pfizer. According to Wyden, "taxpayer-funded research was foundational" to the development of the oral pan-Janus kinase (JAK) inhibitor, though he acknowledged Pfizer funded all drug discovery, preclinical and clinical development expenses.
Um, not so fast. In response, Pfizer said it has invested over $1 billion over the past 20 years for the discovery, development and commercialization of Xeljanz. Pfizer also said the CRADA did not yield any compounds or patentable IP.
Wyden made similar requests in the early 90s seeking to regulate prices on drugs developed with the aid of federal resources.
The definition of insanity, said Professor Einstein, “is doing the same thing over and over again and expecting different results.”
Words to the Wyden.
I am delighted to inform you that, effective today, Kathleen (“Cook”) Uhl, M.D., will serve as acting director of the Office of Generic Drugs (OGD) while we initiate a nationwide search for a permanent director. Dr. Uhl most recently served as the senior advisor to the director for OGD.
Dr. Uhl brings a wealth of regulatory and medical policy, scientific, and management experience to the position. In her fifteen years with FDA, Dr. Uhl has become widely-regarded both inside and outside of the Agency as a compassionate, committed, and dedicated leader. Because of her strong management skills and extensive expertise in clinical pharmacology, I am confident in her abilities to lead OGD during a time of transition as we work to evolve quality throughout the Center and implement the Generic Drug User Fee Amendments of 2012.
Dr. Uhl began her FDA career in 1998 as a medical officer in what is now CDER’s Office of Clinical Pharmacology. She has served in numerous positions at FDA, including five years as the assistant commissioner for Women’s Health and as director of FDA’s Office of Women’s Health (OWH). Among her many accomplishments, she is credited with forging new relationships with other federal agencies and the scientific community by establishing a cross-Agency Women’s Health Advisory Council to more effectively identify, communicate, and act on key women’s health issues in the Agency -- and to more closely align OWH’s scientific program with Agency scientific initiatives.
Dr. Uhl returned to CDER in 2010 to serve as deputy director, Office of Medical Policy (OMP) -- a position she held until January of this year. She provided exemplary leadership to OMP during a time of extraordinary change and growth as OMP underwent a major organizational change by becoming a “Super office” -- an office that houses subordinate offices within its organizational structure. Dr. Uhl played a critical role in facilitating OMP’s significant growth in personnel and expanded scope of operations. Further, she was instrumental in FDA’s negotiations with industry for the authorization of the new Biosimilar User Fee Act of 2012 (BsUFA), which was enacted on July 9, 2012, as part of the Food and Drug Administration Safety and Innovation Act. Additionally, Dr. Uhl has extensive knowledge of current quality and risk management processes, as well as standards relevant to FDA’s laws and regulations.
Dr. Uhl received her medical degree from the Medical College of Pennsylvania and completed residency training in family medicine with subsequent fellowship training in medical research and clinical pharmacology. She has held a variety of leadership positions with the American Society of Clinical Pharmacology and Therapeutics (ASCPT), to include serving on their board of directors and as an associate editor for their journal. Further, in 2008 she received ASCPT’s distinguished service award for her outstanding efforts in advancing clinical pharmacology and therapeutics.
Before joining the Agency, she was a clinical investigator and clinician at Walter Reed Institute of Research and Walter Reed Army Medical Center. She retains faculty appointments as associate professor in family medicine and internal medicine at the Uniformed Services University and is a retired officer of the United States Public Health Service Commissioned Corps.
Please join me in welcoming Dr. Uhl to this position. We are fortunate to have someone with her expertise, experience, and abilities leading OGD at this critical juncture.
Janet Woodcock
Indeed, the cost of specialty drugs loom large on the horizon as the new driver of pharmaceutical costs (U.S. Drug Costs Dropped in 2012, but Rises Loom, NYT, March 19, 2013), but there are two issues absent from this article – and often from the larger debate, that are worth mentioning.
The first is that drug costs represent only 11.5% of our national healthcare expense (only 8.5% for on-patent “name brands.”) The second is that, as we make continued strides towards more and more accurate companion diagnostics, we will be able to grab the brass ring of the “four rights” (the right medicine in the right dose to the right patient at the right time). This is the real definition of “personalized medicine” and the ensuing reduction in therapeutic guesswork will save lives and the enormous expense of failing our way to clinical success.
BioCentury reports that in a speech to the Massachusetts Biotechnology Council on Friday, FDA Commissioner Margaret Hamburg provided an update on the status of two of the agency's regulatory initiatives -- the breakthrough drug and biosimilars pathways. Hamburg said the agency has received a total of 31 breakthrough therapy designation requests, nine of which have been granted and 10 denied. One request was withdrawn, and 11 are pending.
Breakthrough drug designation, which was created by the FDA Safety and Innovation Act, commits FDA to collaborate with a sponsor to enable expedited development and review of compounds for serious or life-threatening diseases that show substantial improvements over existing treatments in early trials. Hamburg said FDA is developing guidance to describe and explain the criteria for its expedited development and review programs, including breakthrough designation.
Additionally, Hamburg said the agency has not received any applications for a biosimilar or interchangeable biologic under the 351(k) pathway, which was signed into law in 2010 as part of the Affordable Care Act. As of March 14, Hamburg said the agency had received 51 requests for meetings for 12 different reference products, with 38 initial meetings held with potential sponsors. She said FDA has received 15 INDs for biosimilar development programs.
US Supreme Court is slated to hear oral arguments involving a case in which a patient sued the manufacturer of a generic version of the nonsteroidal anti-inflammatory drug, Clinoril (sulindac), alleging use of the NSAID caused her to become physically disfigured, disabled and almost completely bind. The blog said tomorrow's case could "likely settle lingering questions about a small but high-impact class of lawsuits against generics." Meanwhile, Democratic lawmakers "are at odds" with the Department of Justice, which is "siding with drug makers, arguing that the courts shouldn't be able to second-guess" the FDA's "approval decisions." In contrast, Rep. Henry Waxman (D-CA), who "wrote almost all" of the nation's generic drug laws, and Sen. Tom Harkin (D-IA) "disagree. ... Congress never intended for FDA approval to preempt lawsuits over drug safety, Waxman said in a court brief."
I believe you have my stapler.
So, what of the OPDP reorg?
The article below (from FDA Week) does a good job with the particulars. Let me add to (and slightly better position) my quotes therein.
One way to look at the problem is that OPDP is under-resourced in terms of dollars, staff – and staff expertise. True.
Another way to look at it is that the form and function of this Office needs to be reexamined. Also true.
And the answer isn’t user fees.
Sources Mixed On Impact Of FDA Drug Advertising Office Reorganization
The new structure of FDA's drug advertising compliance office -- a switch that divides up oversight by therapeutic area rather than by type of advertising -- could have mixed results, sources said following the agency's March 8 announcement of the reorganization. The more generalized approach could lead to less predictability for industry, but the change could also help focus reviewers, leading to greater efficiency and a more critical view of the data, sources said, noting the impact on enforcement actions is unclear.
Agency drug center chief Janet Woodcock said the changes will allow OPDP to more effectively review direct-to-consumer and health professional advertising by increasing efficiency, improving work distribution and eliminating redundancy, while also emphasizing the agency's commitment to providing close oversight of DTC advertising. The move comes as FDA vows to continue its tough scrutiny of off-label drug promotion despite a recent court decision that some have said could stem such oversight.
FDA announced March 8 that it is restructuring its two divisions overseeing consumer and professional drug advertising, and realigning them among various therapeutic divisions overseeing the two promotion categories.
Under the new structure, the new Division of Advertising and Promotion Review I will include four teams that will oversee consumer and professional advertising related to neurology and psychiatry; hematology; oncology; and analgesics, anesthetics and antivirals. Four teams in the new Division of Advertising and Promotion Review II will review promotion for osteoporosis, reproductive and urology; dental, dermatology, and metabolic and endocrine; allergy, gastroenterology, pulmonary and rheumatology; and anti-infective, cardiovascular, medical imaging, ophthalmology, renal and transplant.
Some sources contend the move is little more than "rearranging the furniture." Peter Pitts, president of the Center for Medicine in the Public Interest and a former associate commissioner for external relations at FDA, said the move shows OPDP is understaffed, adding that the move spreads existing resources too thin.
"It is simply taking an under-resourced office and relocating its existing expertise," he said.
Pitts said the move could have a downside as reviewers will need to become more generalized to oversee both consumer and professional advertising. A more generalized approach could mean less predictability, he said.
"What it will do is it will further decrease the predictability and advice that office offers," Pitts said. "That is certainly not a step in the right direction."
Arnie Friede, an attorney with his own practice, said in theory, the reorganization will allow reviewers to become experts on the science related to a certain class of drugs and reduce duplication, allowing more efficient reviews over time. He added that expertise could allow reviewers to view the data with a more critical eye. A better understanding of a class of drugs could make reviewers more sensitive to analysis that industry has done or it could lead them to be more skeptical, Friede said.
"I think that time will tell whether the rationale for the changes will accomplish those things," he said. "The rationale seems, in theory, reasonable. Whether that translates into more enforcement or less enforcement over time, that is hard to know."
The latest reorganization comes after FDA, in 2011, renamed and elevated OPDP within a new super office, creating separate divisions to examine consumer drug promotion and professional drug promotion. The most recent change was prompted by a review of the workload and review processes in OPDP's two divisions to improve their overall impact and effectiveness, according to Woodcock.
A review of generic medicine pricing in Europe
Generics and Biosimilars Initiative Journal (GaBI Journal). 2012;1(1):8-12.
“The penetration of generic medicines is more successful in countries that permit free pricing of medicines than in those that have price regulation. Although tendering systems may reduce (generic) medicine prices in the short term, little is known about the overall long-term impact of such systems.”
The rest of the story can be found here.
Also, see here for a related story in the Pink Sheet.
Michael Moore, are you listening?
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.
