Latest Drugwonks' Blog

Making America Resilient

  • 03.20.2020
  • Robert Goldberg

Every time President Trump takes action, the response has been predictable.  

Critics said banning travel from Europe was a xenophobic decision that "injects past grievances and prejudices into delicate scientific and political equations. In this spiraling thriller cum horror novel, Trump's emergence, full of hostility and conspiracy…heralds a darkening turn—an early indication of the power of a pandemic to infect global decision making and international relations."

That's one way of looking at it. Another approach would be to note that the President's quick decision to restrict travel from China bought us the time we need. Or that other countries quickly followed suit.  

Of course, there are other reasons people give to claim that the President's handling of the pandemic has been a total failure. For instance, critics are blaming the President for the delay in the development and distribution of coronavirus test kits. The Food and Drug Administration was too busy rejecting test kits used in South Korea and delaying approval of American made diagnostics. The Centers for Disease Control were developing the only test available. The product's rollout was botched because its components were defective. 

The White House stepped in and now we have several tests commercially available and at no charge to Americans. He has forced the FDA to move faster (when outlets like the NY Times were urging the FDA to go slower). I hope that the Trump administration has learned from this experience and takes the same approach in ensuring the availability and use of “antibody tests to detect if someone has already had coronavirus.”

As Jim Pinkerton points out in an excellent article on Breitbart: “we should seize the opportunity to create a Medical E-Verify, which would stipulate that all employers must verify the contagious health status of all employees. “  Such testing will boost confidence and allow more workers to get back to their jobs quickly. 

Vice President Biden has claimed that "he" did a better job responding to the H1NI outbreak in 2009. Not really. 

First, while rapid test kits for H1N1 were available in 2009, many of the tests were inaccurate. " The rapid influenza detection test (RIDT) (developed at the time only detected 10-70% of influenza A viruses and couldn’t distinguish between swine flu and other types of influenza A viruses.

Moreover, Trump is not the first president wrongly accused of making an outbreak worse. In 2009, the Obama administration pledged to speed up the development and production of vaccines against the H1N1 virus. As a contemporary account notes: The Obama administration fast-tracked the production of a vaccine, but it will not have 120 million doses ready by the expected peak of the season, as it had hoped. Forty-five million doses will be available in mid-October, with 20 million more available each week afterward."

The lack of adequate testing and sufficient vaccine supply was not Obama's fault back then. It's not Trump's fault now.  

Now, critics are howling Trump has failed to ensure we have enough critical care beds for the likely surge in people with COVID-19. A recent report noted: "medical staff have been told to prioritize the patients with the highest chances of survival because of the lack of the equipment."

Oh wait, that was about Italy, one the many single health payer paradises that some Trump critics claim is superior to our system. The fact is, the United States has more critical care beds per capita than any other country.  It's probably not enough to handle the surge in patients who need ICU care, but we have a better chance of doing so than any other country. 

Then there is the need for ventilators. 

Trump critics are demanding the federal government take over the manufacture and distribution of equipment. Meanwhile, the European Commission, President Ursula von der Leyen is pleading with member states to "ramp up the production of medical equipment (mostly ventilators) and share those goods within the bloc. Von der Leyen said no country had the capacity to produce on its own what will be needed to treat patients in the fight against coronavirus.

America? We have several companies ready to roll. Indeed, our manufacturers will have the ability to make enough for the entire world now that the administration has cut the red tape inhibiting ramp up. (I will discuss the threat of potential drug shortages in another piece.)

We live in an age where everyone gives their opinion instantly and endlessly. No doubt that another president, regardless of party, would also be the subject of a diarrheic stream of commentary.  How can we drown out the psychotic chatter and evaluate presidential leadership in times of trouble?

As Tevi Troy demonstrates in his book, "Shall We Wake the President? Two Centuries of Disaster Management from the Oval Office" (Lyons Press. Kindle Edition), successful presidential responses consist of enabling people to cope in a resilient fashion with dangers when they manifest themselves.  Resilience, as Aaron Wildavsky notes, "is the capacity to cope with unanticipated dangers after they have become manifest, learning to bounce back." Making America Resilient: That describes the goal of President Trump's leadership and objective during this current crisis. After a slower than ideal start, we are heading in that direction.

Getting RESULTs Against Coronavirus

  • 03.18.2020
  • Robert Goldberg
Senator Ted Cruz is at this moment introducing legislation-- the RESULT act -  that would enable the FDA to automatically approve drugs that are on the market elsewhere to treat the coronavirus.  The bill would also allow novel treatments such as cell therapy to receive conditional approval for specific high risk patient groups with phase 1 data.   

We have done both to fight infectious diseases before.  The RESULT act would provide companies, patients, researchers and the FDA an efficient framework to help the sickest and advance the battle against COVID in real time.  

You can read the bill here.

You can learn about the promise of cell therapy here.


Part D Rebates: Nothing but Net

  • 03.18.2020
  • Peter Pitts
Drug Cost-Sharing Based on Net Price Benefits Medicare Part D Patients

A new Schaeffer Center white paper finds almost half of individuals with Medicare Part D coverage would see a reduction in out-of-pocket spending if patient cost-sharing were based on the price negotiated after the rebate (or net price), rather than the pre-rebate list price.

“Drug rebates have become an increasingly significant component of the Part D program, but our analysis shows beneficiaries are not necessarily benefiting in terms of out-of-pocket spending,” explained Schaeffer Center Associate Director Erin Trish, who co-authored the analysis.

“Although rebates help keep Part D premiums low, they do so in a way that disadvantages those who rely on high cost, high rebate drugs,” says co-author Geoffrey Joyce, Schaeffer Center director of health policy. Joyce and Trish are also faculty at the USC School of Pharmacy.

The study team – which included Trish, Joyce, and Schaeffer Center Research Programmer Katrina Kaiser –used 2016 Medicare Part D claims data to conduct the analysis. To model the policy change basing cost-sharing on net price, rather than list price, they discounted the list price of each claim by the estimated rebate and calculated what the patient’s cost-sharing would have been under this alternative scenario.

The researchers found that basing cost-sharing on net price would reduce out-of-pocket spending for about 47 percent of beneficiaries who do not receive low-income subsidies. For some, the amount would be considerable: approximately 20 percent of beneficiaries would save more than $100 and almost one percent would save more than $1000 annually.

The study also suggests another important advantage to this net-price shift: it would reduce the number of consumers reaching Part D’s catastrophic coverage phase, during which the federal government pays most of the drug costs. The authors found that 36 percent fewer beneficiaries would reach catastrophic coverage, which would result in a 19 percent reduction in federal reinsurance spending.

The findings show overall savings could be substantial for many patients. The authors note that one concern blocking this reform is that it would likely result in higher premiums. However, the authors also note that that is because some beneficiaries are paying more out-of-pocket, which helps to reduce premiums for everyone. The authors urge federal policymakers to consider implementing this change to how Medicare Part D cost sharing is calculated. Either alone or in conjunction with other reforms, basing rebate amounts on net prices rather than list prices would limit beneficiaries’ out-of-pocket spending and make cost-sharing more reflective of the actual cost of the drug.

Key Takeaways

* Rebates – as a share of total drug spending – have grown considerably over the last decade.

* Because of how rebates are implemented in Medicare Part D, patient cost-sharing is based on the list (pre-rebate) price of drugs, not the net price reflecting these negotiated discounts.

* If cost-sharing were based on net price, it would reduce out-of-pocket spending for nearly half of Part D beneficiaries who do not receive low-income subsidies.

* Approximately 20 percent of these beneficiaries would save more than $100 per year and about one percent would save more than $1,000 per year.

* Basing cost-sharing on net price, rather than list price, would provide meaningful financial relief to many Part D beneficiaries.

An important paper on a crucial reform. Worth a read.

Playing the Spread

  • 03.13.2020
  • Peter Pitts
When it comes to drug pricing, some questions are easier to answer than others. Here’s an easy one – why do physicians prefer innovator biologics to biosimilars? A big part of the answer is --  because the more expensive the product, the more money they make. (Although Medicare pays the provider the same administration fee for a biosimilar and the originator biologic – that is not the case with commercial plans.) That’s Econ 101. As Adam Smith reminds us, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.”

How can we make that “self-interest” work in the interests of lowering costs via a more robust use of biosimilars? (Hint: It’s not by making them more expensive.)
That’s the theory of the Increasing Access to Biosimilars Act. Its main idea is to develop a pilot program (run by the Department of Health and Human Services) to explore ways to encourage physicians to prescribe biosimilars within Medicare Part B. Since Medicare is the largest insurer in the country, any changes in its reimbursement policy will ultimately change behavior in the private insurer sector.

Better physician education as to the safety and efficacy of biosimilars? It’s in there. More education (properly scientific, balanced and vetted) is important. (This is also a legitimate focus of the joint FDA/FTC program to address the same issue.) More important, however, is the physician pocketbook strategy. Per this legislation, physicians would share in the savings. What does that mean? Simply put, it means doctors will receive a percentage of the spread between the cost of the innovator product and the biosimilar. De minimus, this will remove the perverse incentive for physicians to prescribe a more expensive product over its biosimilar cousin. Obviously, cost isn’t the only parameter in product choice – but it’s a potent counterweight to “their own self-interest.”

The proposed legislation also eradicates the need to pursue foolish policies such as the Administration’s concept of an International Pricing Index. Also, the Increasing Access to Biosimilars Act is a shot across the bow to payers who will swiftly recognize the incentives to stop using the tools of exclusionary contracting for non-Medicare Part B patients. Why? Because it will be in “their own self-interest” to do so.

More as more develops.

Vaping Has Its Wakefield Moment

  • 03.12.2020
  • Robert Goldberg
Last July, the Journal of the American Heart Association (JAHA) published an article that claimed vaping doubled the risk of heart attacks.  The research, conducted by Stanton Glantz, director of the University of California, San Francisco’s Center for Tobacco Control Research and Education was unveiled right in the middle of a wave of articles, hearings and statements by public health officials asserting e-cigarettes were dangerous.  

The Glantz article fueled fear that vaping was deadly just as Andrew Wakefield’s 1998 Lancet study linking autism to the measles-mumps-rubella vaccine triggered anti-vaccine panic that in turn led to a decline immunization rates.  We now face the possibility of millions rejecting flu shots or a coronavirus vaccine because of the fears sowed by Wakefield. 

There’s something else both articles have in common.  They were both retracted by the journals that published them. The Lancet retracted the Wakefield paper in 2010 for being untrustworthy and fraudulent.  The Glantz article was yanked for similar reasons.

However, there is a big difference.  Wakefield was swiftly condemned after the retraction by the Food and Drug Administration (FDA), the National Institutes of Health (NIH), WHO and the Centers for Disease Control and Prevention. Today these same agencies are funding Glantz and relying upon his publications to shape public perceptions and regulation of e-cigarettes. In fact, Glantz  has received nearly $50 million from the Food and Drug Administration and the National Institute of Health to “inform the FDA’s regulation of the manufacture, distribution, and marketing of tobacco products to protect public health.”   

The JAHA article claimed that independent of other factors, e-cigarettes were as likely to increase the risk of heart attacks as smoking. When other public health researchers, including Dr. Brad Rodu, who chairs the Center for Tobacco Harm Reduction Research at University of Louisville analyzed the data Glantz used they found the majority of patients in the study who had heart attacks had them before they started vaping — by an average of 10 years earlier. 

In fact, one JAHA reviewer raised this issue with Glantz and asked him to redo the analysis by excluding people who had previously smoked or had a heart attack.  Glantz failed to do this simple calculation. Instead, he told JAHA editors that he controlled for previous heart attacks by analyzing only those people who had one five or fewer years ago. JAHA published the study and to its credit, pulled the paper after Rodu and other researchers continued to press the issue. 

This was not the first time Glantz used statistical gerrymandering to produce misleading results that aligned with aggressive anti-vaping forces.  In 2018 he published another study about e-cigarettes causing heart attacks in the American Journal of Preventive Medicine (AJPM) that has not been retracted.  Nor was it the last. In December of 2019  AJPM published a Glantz study that was hailed as the first study on the long-term health effects of electronic cigarettes finds that the devices are linked to an increased risk of chronic lung diseases

Indeed, Glantz doubled down on the link, telling the New York Post: "Everybody, including me, used to think e-cigarettes are like cigarettes but not as bad. …It turns out you're worse off. E-cigarettes pose unique risks in terms of lung disease." 

To reach this conclusion, Glantz again counted people who smoked as e-cigarette users.  Also, he didn’t control for the fact adults with asthma are 11 times more likely to develop other types of COPD (independent of smoking).   

Moreover, Glantz said it only took 3 years for e-cigarettes to trigger lung disease. That’s a remarkable finding for two reasons. First, it takes at least a decade or longer of consistent smoking for COPD to develop. Second, most clinical trials show that biomarkers of tobacco use associated with lung and heart disease decline when people switch to e-cigarettes.

The Glantz retraction raises questions not just about his other research, but the use of his research methods to influence public opinion and regulation of e-cigarettes.  As Aaron Wildavsky wrote, “when noble lies" are told in the belief that the system is so bad that any argument against it can only counteract a small part of its falsehoods, the task of the citizen is made much more difficult.”  In this case, it is now harder to determine whether restricting or eliminating e-cigarettes – which means leaving combustible tobacco products on sale, increase or reduce the 500,000 deaths a year attributed to smoking?  

After Wakefield’s fraud was exposed, the British Medical Journal wrote that “the damage to public health continues, fueled by unbalanced media reporting and an ineffective response from government, researchers, journals and the medical profession.”  Today, Glantz is still being published by mainstream medical journals, championed by major media outlets, given legitimacy by other scientists and politicians. Can we even imagine having the response to the coronavirus based on such fraudulent research?

The JAHA retraction was a Wakefield moment. Jacob Bronowski, the great science historian and mathematician observed that “no science is immune to the infection of politics and the corruption of power.”  The way to prevent such distortion is more people engaging in better science.  But when government funding supports one point of view, then it becomes easy to overrun scientific discourse, bully those with different points of view and control public policy.  The JAHA retraction can be a step back from that abyss. 


Occam's Co-Pay

  • 03.12.2020
  • Peter Pitts
Here’s the headline:

“OptumRx and UnitedHealthcare are expanding their innovative consumer point-of-sale prescription drug discount programs to apply to all new employer-sponsored plans, making medications more affordable and improving health outcomes.”

Translation: Lower out-of-pocket costs result in higher medication adherence rates.  And this equals many good things – not the least of which is – better patient outcomes!

According to a new paper from the Progressive Policy Institute, Progressive Policy Institute on point of sale (POS) rebates:

* POS clarifies the true cost of prescription medications and allows consumers and physicians to make better cost-benefit trade-offs.

* POS reduces the incentive for companies to raise their list prices while offering bigger rebates to insurance companies and pharmacy benefit managers (PBMs).

* And, perhaps most important,  passing the manufacturer rebates through to consumers helps the high spenders, who would be able to take better advantage of discounts and rebates.

Per the OptumRx/UnitedHealthcare press release, “UnitedHealthcare’s fully insured members at the point-of-sale; consumers already seeing average savings of $130 per eligible prescription in 2019” and “Programs strengthen prescription drug adherence by up to 16%, lead to improved patient health.”

Bravo. But this welcome and appropriate bragging begs the question – why are they still pushing patient-punitive measures such as co-pay accumulators – the bleeding edge of the co-pay razor?

High Science

  • 03.07.2020
  • Peter Pitts
Last week the FDA issued its most recent thinking on CBD.

Under the title, “FDA Advances Work Related to Cannabidiol Products with Focus on Protecting Public Health, Providing Market Clarity,” it was, to anyone paying attention, a regulatory finger-wag to a still-nascent industry that still just doesn’t get it. Alas, a lot of bad science doesn’t equal even a little good science. Sometimes the view from the front of the black helicopter gets boring.

The FDA statement begins, “Over the past year, the U.S. Food and Drug Administration has embarked on a comprehensive evaluation of cannabidiol (CBD) products, with a focus on educating the public about the risks and unknowns of these products, gathering the science needed to better understand both these safety concerns and potential benefits to inform our regulatory approach, as well as taking steps when necessary to address products that violate the law in ways that raise a variety of public health concerns.”

Translation: There’s no good science and we’re going to start writing enforcement letters.

The agency continues, “Today, we are providing updates on our efforts in this area, including several new steps in areas of education, research and enforcement with the ultimate goal of continuing to protect the public health and working to provide market clarity."

Translation: It’s going to be a slow process. We’re obviously going to have to help you. Ignore the need for real science at your own peril. Oh, about those claims, “… we are concerned that some people wrongly think that the myriad of CBD products on the market have been evaluated by the FDA and determined to be safe, or that using CBD ‘can’t hurt.’ Aside from one prescription drug approved to treat two rare, severe pediatric epilepsy disorders, no other CBD products have been evaluated or approved by the FDA.” Better lawyer up, bro.

Safety issues? “There may be risks that need to be considered before using CBD products outside of the monitored setting of a prescription from your health care provider.”

Translation: We think there may very well be safety issues such as:

“… potential liver injury, interactions with other drugs and male reproductive toxicity, as well as side effects such as drowsiness. In addition, there is still much we do not know about other potential risks. For example, other than the approved prescription drug, we know little about the potential effects of sustained and/or cumulative use of CBD, co-administration with other medicines, or the risks to vulnerable populations like children, pregnant and lactating women, the elderly, unborn children and certain animal populations. This does not mean that we know CBD is unsafe …”

Translation: … or if CBD is an antidote to COVID-19. But we have our suspicions.

“To address the questions and concerns we’ve already raised, we’re seeking reliable and high-quality data.”

Translation: We don’t have it because it doesn’t exist.

“This includes data on, among other things: the sedative effects of CBD; the impacts of long-term sustained or cumulative exposure to CBD; transdermal penetration and pharmacokinetics of CBD; the effect of different routes of CBD administration (e.g., oral, topical, inhaled) on its safety profile; the safety of CBD for use in pets and food-producing animals; and the processes by which “full spectrum” and “broad spectrum” hemp extracts are derived, what the content of such extracts is, and how these products may compare to CBD isolate products.”

Translation: You guys had better hire some pharmacologists.

“Given the importance of answering these questions, we’re exploring a number of ways to address the data gaps as quickly as possible. This includes encouraging, facilitating and initiating more research on CBD, providing venues for industry and researchers to share new data with the agency and identifying opportunities to further collaborate with our federal partners at Centers for Disease Control and Prevention, Substance Abuse and Mental Health Services Administration and National Institute on Drug Abuse on this important issue.”

Translation: We’re going to hold meetings!

But there is also good news:

“Importantly, the Agriculture Improvement Act of 2018 … has opened significant new opportunities for research, and as that body of research develops and grows, there will be considerably more information available. In particular, there’s been an increased interest in drug development from CBD and other compounds found in cannabis and we are working to support drug development as much as possible.”

Translation: Goodbye IPO dreams and hello CRO expenses and academic research grants that don’t care a brass farthing about marketplace needs and schedules.

Comrades, it’s going to be a long and winding road.

“In the coming days we are re-opening the public docket we established for our May 2019 public hearing. The docket provides a valuable conduit for submission of scientific data on CBD to the agency, so we have decided to extend the comment period indefinitely to allow the public to comment and to share relevant data with the agency. As the agency continues to move forward to explore viable pathways for CBD products outside the drug context, this extension will allow stakeholders to continue to provide relevant data as research in this area evolves.”

Translation: Key word, “indefinitely.”

And in conclusion:

“We recognize the significant public interest in CBD and we must work together with stakeholders and industry to develop high-quality data to close the substantial knowledge gaps about the science, safety and quality of many of these products. We are committed to working efficiently to further clarify our regulatory approach to these products – as always, using science as our guide and upholding our rigorous public health standards.”

Translation: Stop moaning and groaning, take off the tin foil hats and science-up.

At the same time the World Health Organization (WHO) was dithering about the dangers of the coronavirus, it was perpetuating another public health threat of greater magnitude. 

Specifically, WHO took to Twitter to claim, in the middle of the epidemic that it was slow to recognize, that “e-cigarettes increase the risk of heart disease and lung disorders and pose significant risks as they can damage the growing fetus”.

These claims are false. People using non-combustible sources of nicotine have better lung function and fewer attacks. Quitting reduces death from lung and heart disease. In fact, "Quitting smoking before age 40, and preferably well before 40, gives back almost all of the decade of lost life from continued smoking."

As for damaging the growing fetus, pregnant women use to nicotine patches to stop smoking. In fact, compared to infants whose mother smoked infants born to women who used nicotine patches had higher rates of 'survival without developmental impairment’. Additionally, "nicotine patch replacement therapy also decreased the risk of prematurity and small for gestational age."

Indeed, while the WHO has bungled its response to the coronavirus, SARs, Avian Flu, Ebola, and tuberculosis outbreaks, it has waged an aggressive, unscientific campaign against e-cigarettes. It regards e-cigarettes not as less lethal alternative to smoking, but as a Trojan Horse built by tobacco companies to enslave billions more to nicotine. 

The WHO's latest act of fearmongering was prompted by the Phillip Morris Inc., UnSmoke Your Mind"campaign. The effort is designed to get people to stop smoking and providing people who can't quit a technology-based solution to reduce the harms of cigarettes. 

PMI developed and markets a smoke free product called IQOS which heats the tobacco without combusting, In application to the Food and Drug Administration, (which designated the product as a modified risk tobacco product) PMI demonstrated that lower temperature and lack of combustion reduces the levels of chemicals released compared to those released in cigarette smoke. 

As part of the Unsmoke initiative, PMI wants to get 40 million people who use cigarettes but are unlikely to quit smoking to switch to a smoke-free product. In fact, the IQOS is rapidly reducing cigarette sales in Japan, at the expense of PMI cigarette brands such as Marlboro. That's consistent with US data showing that a decline in smoking was 2-4 times fast after 2014 as vaping became more prevalent.  As for claims that people are trading one addiction for another, a recent randomized trial found that 18% of those assigned to use e-cigarettes were smoke-free after a year, compared with 9.9% of using other nicotine replacement therapies such as patches and gum. 

Yet the WHO claims the Unsmoke effort, along with the e-cigarette generated decline in cigarette smoking, is part of a well-funded covert Big Tobacco strategy that has the “goal of weakening tobacco control." In addition to peddling falsehoods about smoke free products, the WHO is also planning to push for vaping bans around the world this coming year.  To help lead the fight, the WHO’s agency for developing such proposals – the Framework Convention on Tobacco Control (FCTC) -- elected Iran (who the WHO may not realize is a state sponsor of terror) as its chair. Indeed, Iran and WHO appear to take the same approach to truth in their crusade against smoking: The Iranian Anti-Tobacco Association claimed that PMI is a Zionist company smuggled Marlboro cigarettes into Iran laced with pig blood and nuclear material. 

The WHO's sluggish response to epidemics and its fearmongering against e-cigarettes reflect the values and politics of the agency as well as the fact that it functions mainly as a launching pad for the pet agendas of donors and public health technocrats.  As an article in the Independent notes: "WHO has moved from being a global health ambassador to a pernickety lifestyle watcher, campaigning on subjects like sugar taxes, obesity and (via the Framework Convention on Tobacco Control) for a global ban on e-cigarettes, for plain cigarette packaging, and against the effects of smoking in films. At an anti-tobacco conference last year, it left itself open to accusations of censorship after banning the press."

Pandemics cause hundreds of thousands of deaths each year.  Nearly 8 million people die from smoking-related diseases in same time period. Telling people e-cigarettes are as lethal as smoking is like saying that vaccines being developed to prevent the coronavirus are as dangerous as the disease itself.  The WHO war of misinformation against vaping, much like its tardy response to the coronavirus, can be deadly.


In advance of the 2020 election, AARP has launched a Stop Rx Greed campaign that is demanding elected officials and candidates “crackdown on price gouging and the greedy practices that keep prices artificially high.”

That’s a noble objective.  But if AARP wants to crack down on such behavior, it should start with its own profiteering. 

AARP is a for-profit financial juggernaut with $4 billion in assets (including $365 million in cash) that generates nearly $1 billion a year in fees and royalties from marketing Medicare Part D prescription drug and health plans for United Healthcare.
 AARP- United Healthcare Medigap plan (insurance that covers certain drugs and other expenses not covered by the traditional Medicare program) currently serves 4.9 million seniors nationwide through various Medicare Supplement products in association with AARP. With 34 percent of the market, AARP is the largest Medigap insurer in the country. That’s three times the share of its closest competitor Mutual of Omaha.

Anyone who buys Medigap insurance knows,  premiums keep climbing.  Yet AARP doesn’t use its buying power to help offset such increases. Instead, nearly 60 percent of AARP’s total revenues— $940 million - comes from a 4.95% rebate paid to them by United Health Care and other insurance companies who license the AARP name to sell Medicare supplemental plans and other insurance products.  In fact, the 4.9% rebate is the single largest expense of United’s Medigap program and more than double the 1.85% profit that UnitedHealthcare makes on the insurance product.

Next, AARP also collects premium payments for United Healthcare.  It holds the payments for 31 days. During that time, AARP invests the money in real estate, hedge funds, bonds and stocks before transferring the money to United. All told, AARP collected $11.8 billion in premium dollars in 2018. It has used that money to build a portfolio of about $4 billion in net assets that generate about $300 million a year in cash, tax-free.

AARP also gets a flat fee for sponsoring United HealthCare  Medicare part D  and Medicare Advantage plans.  Both forms of insurance have the largest share of their respective markets. Such plans get cash rebates from drug companies in exchange for covering specific medicines. Those rebates don’t reduce the out of pocket cost of drugs patients take.  Indeed the biggest portion of rebates come from expensive new drugs used by people with life-threatening conditions such as cancer, autoimmune diseases, and HIV.   Patients taking such medicines don’t get to use rebates to reduce their spending.  Indeed, AAPR plans require them to pay up to 40 percent of the retail cost of such medicines.   

And the rebates don't reduce premiums either: While the Stop Rx Greed campaign claims drug prices are skyrocketing rebates reduced net brand drug prices by 52 percent between 2014-2019   Meanwhile, AARP Medicare Part D premiums jumped by 68 percent during the same time period. 

The campaign criticizes the rising price of insulin medications.  But AARP plans do not cover Basaglar a less expensive biosimilar version of brand-name insulin’s, Lantus.  The retail price of Lantus has increased, but the net price has fallen due to rebates, which the AARP part D plans pocket.  It covered Neulasta, a drug that boosts the immune system of cancer patients, that retails for $6100 a month but not biosimilars  Udenyca and Fulphila which retail for $4100. 

Even when they cover generic versions of high-priced brand drugs,  AARP plans still have seniors pay up to a third of the retail price of medicines. AARP plans cover a brand drug for  versions hepatitis C called Epclusa as well as its generic formulation. It turns out that the post-rebate prices of these drugs are about the same.  As a result, AARP plans will maximize the spread between list and net prices even when generics are available.

You would think that AARP and its campaign support passing rebates dollars to patients.  Think again.  AARP aggressively lobbied against government regulations that would have required part D plans to use rebates to reduce out of pocket costs.  Then again, AARP makes billions from plans that profit by forcing the sickest patients to pay the most. Perhaps before campaigning against price gouging, AARP should first stop screwing the consumers they claim to represent.   


Follow the Money

  • 01.14.2020
  • Peter Pitts
Nearly 50% of Brand Medicine Spending Goes to the Supply Chain and Others

Nearly half of total spending on brand medicines – the sum of all payments made at the pharmacy or paid on a claim to a health care provider – went to the supply chain and other entities in 2018, according to a new analysis from the Berkeley Research Group (BRG). This transformative research shines a spotlight on the misaligned incentives in the supply chain and underscores the need to fix the rebate system.

BRG found that hospitals, health insurers, pharmacy benefit managers, the government and others got nearly 50% of what was spent on brand medicines in 2018, up from 33% five years prior. By contrast, innovative biopharmaceutical companies that research, develop and manufacture medicines retained just 54% of total point-of-sale spending on brand medicines.

According to the analysis, the share of total spending on brand medicines that biopharmaceutical companies retain has been steadily declining as rebates and discounts have increased. Between 2015 and 2018, the amount innovative biopharmaceutical companies retained from the sale of brand medicines increased, on average, 2.6% annually, in line with inflation. In this same timeframe, companies brought nearly 200 new innovative treatments and cures to patients.

Meanwhile, nearly half of the increase in the total amount spent on brand medicines went back to payers during this same time period. And 20% of the overall increase went to hospitals, pharmacies and other health care providers, which is the same amount that went to biopharmaceutical companies that research, develop and manufacture medicines.
The amount hospitals, pharmacies and other health care providers retained on the sale of brand medicines nearly doubled between 2013 and 2018, increasing from $24.7 billion to $48.6 billion. This trend was primarily driven by unprecedented expansion in the 340B drug pricing program. In fact, the amount hospitals and other 340B entities retained from the sale of brand medicines purchased through the 340B program was 9 times larger in 2018 than in 2013.
We are committed to ensuring patients benefit from significant discounts and rebates at the pharmacy counter, and this analysis reaffirms the need to look at the entire supply chain to fix misaligned incentives. We must work to fix the broken rebate system, as well as programs like 340B, to lower out-of-pocket costs and solve patient affordability challenges.

The full study from BRG can be viewed here.

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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