Stanley Feld M.D.,FACP,MACE
He was hampered in moving forward in Repairing the Healthcare System when his own Republican Party did not pass the house of representatives’ bill to repeal Obamacare. The repeal would have enabled his administration to move the repair of the healthcare system forward quickly.
Most of President Trump’s ideas when it has related to repairing the healthcare system have been common sense. They are steps in the right direction.
Common sense solutions sometimes threaten to undermine extremely profitable private and public enterprises. The pharmaceutical industry and all related middlemen are an industry that is threatened by President Trump’s common sense solutions.
The industry will do everything in its power to spin the story so that the Trump administration’s plans sound sinister to the American public.
The American public can only make decisions on the information presented. In the post-true era the public does not know what to believe. The media has been anti-Trump and is not interested in presenting the details of President Trump’s blueprint for lowering drug prices utilizing free market principles.
We are privileged to have a president finally acting, by laying out a blueprint for solving these problems using private-sector competition and private sector negotiation.
We’re not going to propose cheap political gimmicks. The President’s blueprint is a sophisticated approach to reforming and improving our system.
Everyone at HHS is rolling up their sleeves to get to work on this.”
On October 28,2018 the WSJ editorial board wrote a negative view of the Trump administration’s plan to lower drug prices. It is almost as if the editorial board did not read President Trump’s proposal as it appears on the White House web site.
I believe it is worth discussing President Trump’s blueprint for lower drug prices.
I will then present the main points in the Wall Street Journal editorial.
The blueprint starts by stating:
These are the main problems with drug prices in the U.S.
Drug costs consume 30% of the healthcare dollar. Drug costs are unaffordable to both consumers and the government. Over 40% of elderly patients consume greater than nine drugs daily. Fifty percent of those 40% experience adverse drug reactions due to drug interaction. Many end up being hospitalized thereby increasing the cost of medical care.
If a patient cannot afford to buy a drug because of its cost it will not help control their disease. A hospitalization will occur increasing the cost of healthcare.
The public should take this comment at face value.
These are some of the facts;
- According to the Organization for Economic Co-operation and Development (OECD), the United States had the highest per-capita pharmaceutical spending in 2015.
- Senior citizens pay more in Medicare Part B and Part D because government rules prevent health plans and vendors from negotiating the better deals seen in other markets.
Isn’t that crazy? The government negotiates drug prices for the VA and Military but not for seniors. The government pays less than half for drugs in the VA healthcare system than seniors do for Medicare Part B and Part D.
- Some hospitals that receive drug discounts under the 340B program, ultimately pushing up drug prices for patients with private health insurance.
The 340B program was enacted in 1992 by congress. Section 340B requires pharmaceutical manufacturers to enter into an agreement, called a pharmaceutical pricing agreement (PPA), with the HHS Secretary.
Under the PPA, the manufacturer agrees to provide front-end discounts on covered outpatient drugs purchased by specified providers, called “covered entities,” that serve the nation’s most vulnerable patient populations. Medicaid patients get drugs free. The government pays the pharmaceutical companies the money through a series of middlemen.
- Lower-cost drugs are kept out of the market by drug companies gaming regulatory processes and the patent system in order to unfairly maintain monopolies.
- Lack of transparency in drug pricing benefits special interests and prevents patients from being able to make fully informed decisions about their care.
- Other countries use socialized healthcare to command unfairly low prices from U.S. drug makers. These lower prices place the burden of financing drug development largely on American patients and taxpayers and subsidizes foreign consumers.
- The United States pays more than 70 percent of branded drug profits among OECD countries.
- The drug companies claim this behavior by other countries reduces innovation and the development of new treatments. They have to make the loss of revenue up by increasing the price of drugs.
The HHS executive summary outlines not only the problem it outlines the Trump administration’s solution. President Trump’s HHS team which includes CMS has spent many years studying the abuses that have led to dysfunction of the healthcare system. I believe HHS figured out the solution.
HHS has identified four challenges in the American drug market:
High list prices for drugs
- Seniors and government programs overpaying for drugs due to lack of the latest negotiation tools
- High and rising out-of-pocket costs for consumers
- Foreign governments free-riding of American investment in innovation
Under President Trump, HHS has proposed a comprehensive blueprint for addressing these challenges, identifying four key strategies for reform:
- Better negotiation
- Incentives for lower list prices
- Lowering out-of-pocket costs
There is nothing sinister about these goals. Some will work. Direct negotiation with drug companies certainly will work. The middlemen get more money per capsule than the drug company that invented and manufactured the drug. The middlemen, who are marketers, are terrified that President Trump is going to destroy their business.
HHS’s blueprint encompasses two phases:
1) actions the President may direct HHS to take immediately.
2) actions HHS is actively considering, on which feedback is being solicited.
The president and his administration are not a heartless group of politicians who don’t care about cancer drug cost. They are interested in patients receiving the best care at an affordable price. They care about fair pricing. Their goal is to eliminate the mechanisms by which multiple stakeholders game the system. This includes the multiple middlemen and the tremendous bureaucratic load.
Is the diagram complicated enough? Can you visualize all the areas of potential abuse? Do you think a government bureaucracy can control the potential abuse?
Phase one of the blueprint:
- Lower prices on some Medicare Part B drugs could be negotiated for by Part D plans
- Leveraging the Competitive Acquisition Program in Part B.
- Working across the Administration to assess the problem of foreign free-riding.
The administration is aware of foreign free riding. They have not published a definite free market solution to change the situation yet.
- Considering further use of value-based purchasing in federal programs, including indication-based pricing and long-term financing.
- Removing government impediments to value-based purchasing by private payers.
“Value–Based Purchasing (VBP) Linking provider payments to improved performance by health care providers. This form of payment holds health care providers accountable for both the cost and quality of care they provide. It attempts to reduce inappropriate care and to identify and reward the best-performing providers.”
This is a stupid idea. It might save money but it tries to direct care and eliminate physician judgement. Healthcare providers will figure out how to game the system.
- Requiring site neutrality in payment.
It is about time this is happening. Hospitals are buying more and more physicians’ practices. Hospital systems bill the government hospital reimbursement prices. These prices are twice the government and private insurance companies approved office prices.
I suspect the hospital systems do not credit the physicians with this increase in reimbursement. The hospital systems leverage physicians’ intellectual property and outpatient surgical skills for the hospital systems’ own profit.
Hospital systems will fight this change tooth and nail. President Trump has the courage to go at it. Almost everyone in medicine has known about these unfair payments. However, past U.S. presidents have been afraid of the blowback from the powerful hospital lobby.
President Obama knew that this would drive physicians into selling their practices to hospital systems. The result is obvious. It would be easier to institute a single party payer system.
Evaluating the accuracy and usefulness of current national drug spending data.
- Incentives for Lower List Prices Immediate Actions
- FDA evaluation of requiring manufacturers to include list prices in advertising
- Updating Medicare’s drug-pricing dashboard to make price increases and generic competition more transparent.
- Measures to restrict the use of rebates, including revisiting the safe harbor under the Antikickback statute for drug rebates.
“The anti-kickback statute has been in place since 1971, but these specific safe harbors, protecting drug companies from anti-kickback laws, were introduced more than 2 decades ago.
The federal government provides an excellent resource for information about these safe harbors at the Federal Register website. It tells everything one needs to know about the opportunities for fraud and abuse in the current system. The website describes how the Trump administration plans to eliminate the government support of fraud and abuse.
A rebate given as an incentive to provide a drug (i.e., on formulary) or to utilize more of a product (i.e., “performance rebates”) would currently qualify for safe harbor protection.”
I will discuss this in more detail in the future. This is another act of courage by the Trump administration. It is also a common sense move to reduce the cost of healthcare in our dysfunctional healthcare system.
- Additional reforms to the rebating system.
- Using incentives to discourage manufacturer price increases for drugs used in Part B and Part D.
The high retail pricing of new drugs on the market must be control. Many of the new drugs are a reformulation of two old drugs. The reformulation does not change the effectiveness of either drug.
The retail price of drugs used to treat cancer must be controlled someway.
- Considering fiduciary status for Pharmacy Benefit Managers (PBMs)
- Reforms to the Medicaid Drug Rebate Program
- Reforms to the 340B drug discount program
- Considering changes to HHS regulations regarding drug copay discount cards
Lowering Out-of-Pocket Costs Immediate Actions
- Prohibiting Part D contracts from preventing pharmacists telling patients when they could pay less out-of-pocket by not using insurance
- Improving the usefulness of the Part D Explanation of Benefits statement by including information about drug price increases and lower cost alternatives.
Further Opportunities to Reduce Drug Costs to Consumers
More measures to inform Medicare Parts B and D beneficiaries about lower cost alternatives
- Providing better annual, or more frequent, information on costs to Part D beneficiaries
- Insurance Contract Reimbursement for Consumers’ Rx
- Share of Manufacturer Rebates.
- Consumers Payers Drug Manufacturer Pharmacies
- Pharmacy Benefits Manager Formulary Agreement
- Copayment Network Agreement
- PBM Agreement Payment for Dispensed Drugs Formulary
- Rebates & Other Fees Premium Drugs
- Money Contracting Dispensed Drugs
- Prime Vendor Agreement Shipped Bulk Drugs Payment for Wholesale Drugs Distributor
- Payment for Wholesale Drugs Shipped Bulk Drugs Distributor Agreement
Most physician do not know about this complicated system. All they care about is taking care of the patients. It is time physicians understand how ancillary providers have been ripping off the patients. Somehow, the ancillary providers manage to blame drug prices on physicians.
Finally, we have an administration that not only recognizes the problems but is not afraid to fix them.
The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.
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