CHPRE Director Len Nichols discusses the GOP tax plan
Marketplace morning addition asks CHPRE's Len Nichols about what it means for the Senate to consider the individual mandate repeal.
See the news brief here.
Dr. Len Nichols Describes How We Got to the Current State of Affairs in Healthcare
Len Nichols shows CFHA what reform may look like in the near future.
See a summary of the presentation here.
September 20, 2017
Len Nichols speaks with Lori Lundin on Voice of America International Edition
VOA calls on Dr. Nichols to update them on Senate Healthcare Legislation
See the broadcast here at 10:50.
August 14, 2017
August 1, 2017
Beyond ‘repeal and replace,’ area GOP lawmakers offer prescription for improving ACA
By Laura Benshoff
See the full article here.
July 31, 2017
Virginia ACA Providers Face a Federal Funding Cut With a Fast-Approaching Deadline
By Michael Pope
See the full article here.
July 21, 2017
Want Bipartisan Health Reform?
Make the Debate Honest Again
By Len Nichols and Bob O'Brien
See their contribution in The Hill here.
July 18, 2017
Len Nichols speaks with Lori Lundin on Voice of America International Edition
VOA calls on Dr. Nichols to update them on Senate Healthcare Legislation
See the broadcast here.
July 18, 2017
Kaiser Health News Asks Len Nichols about Senate Healthcare Legislation
Analysis: GOP Failure To Replace The Health Law Was Years In The Making
KHN is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation
By Julie Rovner
See the article here.
July 17, 2017
Public Radio International’s July 17, 2017 To The Point, hosted by Leon Krauze, features Len Nichols
The Senate health care bill nears the home stretch. Can it make it over the line?
Hear KCRW's podcast here.
Hosted by Leon Krauze
June 25, 2017
Lori Lundin asks Len Nichols for his assessment on the Senate Health Care Bill
Voice of America's June 25, 2017 International Edition can be played here. Len's assessments can be heard at 15:53.
By Lori Lundin
June 20, 2017
Marketplace quotes Len Nichols in article about health care spending
By Sabri Ben-Achour
Listen here to the podcast: "Why America spends more on healthcare than any other developed country"
June 15, 2017
Nichols quoted in Vox about the Senate’s Obamacare Replacement Plan
By Ezra Klein
Read here about how Republicans are about to make Medicare-for-all much more likely.
May 3, 2017
Len Nichols is Featured Keynote Speaker at World Health Care Congress 2017
The 14th Annual World Health Care Congress convenes decision makers from all sectors of health care to catalyze meaningful partnerships and change. See the Interview.
April 28, 2017
Len Nichols Moderates Panel at NAAG Presidential Summit
Challenges in the American Health Care Marketplace: Competition, Cost, and Innovation in a Rapidly Changing Industry.
Watch the Summit Video
April 12, 2017
March 27, 2017
How is the ACA Faring in Virginia?
by Michael Pope
Why the GOP’s alternatives to Obamacare are political time bombs
by Noam Levey
How to Fix Healthcare and Avoid a Backlash
by Cort Olsen
Trump’s First Order Has Strong Words On Health. Actual Impact May Be Weak.
by Julie Rovner
After Obama Care: Health Under Trump
Obamacare Isn’t Gone yet, But it is Doomed
by Alexandria Neason and Jon Campbell
Len Nichols Offers Perspectives on Curing America’s Healthcare Ills
Catching Up with Len Nichols
Donald Trump’s Proposed Healthcare Plan – Taking a closer look from various perspectives.
By Valerie Neff Newitt
An Academic Perspective
Len M. Nichols, PhD, professor, and director of the Center for Health Policy Research and Ethics, College of Health and Human Services at George Mason University, was quick to weigh in with the following point-by-point insights on Trumps seven-point plan.
Len Nichols on CNBC’s Nightly Business Report Discussing the Growing Costs of Prescription Drugs
by Joyce Frieden
News Editor, MedPage Today
by Shannon Firth
Dr. Len Nichols talking about rural hospital closures on PBS NewsHour
After tragic mistake, rural hospital transforms into model of success.
Not Up for Negotiation – Lowering drug prices is much more complicated than candidates make it sound.
By Kimberly Leonard
Republican front-runner Donald Trump surprised many when he endorsed a proposal that has been on President Barack Obama's wish list for years: allowing government-run Medicare to set drug prices to reduce the growth in healthcare costs.
"When it comes time to negotiate the cost of drugs, we are going to negotiate like crazy," Trump said at a campaign event in New Hampshire earlier this month.
This straightforward-sounding proposal has also been endorsed by Democratic candidates Hillary Clinton and Bernie Sanders.
A Kaiser Family Foundation poll shows that 93 percent of Democrats and 74 percent of Republicans support the idea. But like a lot of promises candidates make during campaigns, this one will be difficult to keep. For one, it would require an act of Congress. The pharmaceutical industry, which has a strong lobbying presence, opposes the idea of government-set prices.
Trump brought attention to campaign donations and lobbying during the New Hampshire event. "They get the politicians, and every single one of them is getting money from them," he said of the drug companies. Sanders echoed the sentiment during one of the Democratic debates, asking voters to consider why the price of medication could double, and the government could do nothing to stop it. "There is a reason why these people are putting huge amounts of money into our political system," he said.
In 2014, Medicare spent $143 billion on drugs, and total sales for the pharmaceutical industry surpassed $317 billion. Though prescription drugs have historically made up only 10 percent of federal health care spending, the growth in prescription costs in 2014 was more than double that of other health care sectors – including doctors and hospitals.
Recent headlines are also making voters take notice, even if they're highlighting a somewhat separate issue. Last May, a small company called Turing Pharmaceuticals announced plans to hike the price of Daraprim – a drug developed six decades ago that fights parasitic infection mostly in HIV patients – by 5,000 percent. The company, and its now infamous former CEO Martin Shkreli, faced public outcry and a congressional investigation.
"It may be mean and nasty and immoral – but it's legal," says Len Nichols, director of the Center for Health Policy Research and Ethics and professor of health policy at George Mason University.
Nichols notes that policies for new drugs are a big part of the problem.
One reason drug prices can be high is that pharmaceutical companies have several years of patent exclusivity to medicines before other companies are allowed to develop generics, which use the same drug recipe but are marketed at a cheaper price. This is meant to incentivize drug companies to invest in developing new medicines, but it also limits negotiators' power.
Patient-Centered Medical Home Keeps Spending Low, Quality High
By Jennifer Bresnick
“The push for value-based purchasing by the Centers for Medicare and Medicaid Services and Congressional passage of the Medicare Access and CHIP Reauthorization Act (MACRA) are immensely important steps in the right direction to scale and spread the PCMH,” said said co-author Len Nichols, PhD, an economist and director of the Center for Health Policy and Research at George Mason University.
“Our findings should help solidify support for investing in primary care. It’s the smart thing to do, but it isn’t simple.”
Fortini and Nichols: Medicaid expansion makes sense for Virginia, as it always has
By Robert J. Fortini and Len M. Nichols
Opponents never stop spreading misinformation about health reform, especially when the General Assembly is in town. Luckily, facts are stubborn, and evidence is pouring in from other states to validate proponents’ claims: Support for Medicaid expansion can be (and should be) bipartisan. Medicaid expansion will save Virginia money, create jobs, improve access to timely care and citizens’ health while strengthening communities and key health-care institutions.
Wisdom and math are chipping away at the solid block of “NO Obamacare” we’ve heard too long in Richmond and other state capitals. The new governor of Kentucky has backtracked from his promise to repeal Medicaid expansion, the governor of Arkansas has found a way to keep that state’s private-option Medicaid expansion going, and the new governor of Louisiana just reversed previously defiant opposition in Louisiana.
Each of these states has a strong Republican majority in its legislature, just as we in Virginia do. Ten other Republican-governed states, from Alaska to New Jersey, expanded Medicaid years ago, some using private health plans in creative ways.
What do these Republican leaders (as opposed to followers) see that ours don’t? They understand the math of federal funds that pay most of the cost of health care for newly eligible citizens. They understand that citizens in their state are paying taxes for benefits in other states. They understand that health-care providers would spend new money in ways that actually create jobs and benefit the local economy. A few years back U.Va.’s Weldon Cooper Center estimated that Medicaid expansion would create between 27,000 and 49,000 new jobs in Virginia. Turns out, hospitals that get paid for care hire more nurses, who buy groceries and furniture, which creates more jobs in local economies, which increases tax receipts.
In addition to job creation, payment for services rendered enables hospitals to keep costs down for payers. When an ER doesn’t get paid for caring for an uninsured patient, it must cover costs by raising the “hidden tax” — higher prices for all the rest. This is partly how we all pay for the uninsured now. Republican leaders know it makes more sense to fund their care more efficiently.
These leaders also understand there are savings from expansion. For example, Medicaid could pay for prisoners’ care and others’ mental health services now borne solely by state and county governments. Many states have reported savings, and Kentucky and Arkansas alone have saved more than $1 billion already.
Big laws like the Affordable Care Act spawn research, and some opponents claim that consumers don’t value or benefit from Medicaid coverage. However, a careful review of the all the evidence reveals that Medicaid recipients do value and use the coverage they could never afford to buy on their own.
Oregon recently expanded and permitted state of the art research to be done prior to the ACA’s Medicaid start date of 2014. Researchers found that, compared to similar people who did not get coverage, people who acquired Medicaid: had more doctor and ER visits and hospitalizations; were more likely to be diagnosed and treated for diabetes; were much less likely to be clinically depressed but more likely to be treated if they were; were much less worried about paying for health care; and had fewer unpaid bills sent to collection agencies. Finally, contrary to opponents’ claims, acquiring Medicaid coverage did not reduce work effort or employment.
Other recent surveys found that Medicaid recipients are more satisfied with their health insurance than those with employer-sponsored health plans. Low-income adults in Kentucky and Arkansas were more likely to be insured and less likely to have problems paying medical bills or affording prescriptions than low-income adults in Texas, which did not expand Medicaid.
Perhaps the most poignant recent research shows that residents of Massachusetts experienced lower mortality after “Romneycare” — Obamacare’s model and bipartisan inspiration — was implemented in 2006. Yes, that means lives are being saved by expansion, and more could be saved here. We could go on.
Instead we’ll focus on the opponents’ core argument: “I don’t trust the federal government. It will reduce what it promised to pay and therefore Virginia’s costs will rise beyond current projections.” This is a deep but unnecessary fear, for Virginia could simply make our expansion contingent on the federal government keeping its promise about the ACA federal share, as other states have. This fearful argument does not change the undeniable fact that expansion is very good for the commonwealth. Someday, we hope and believe, a majority of the General Assembly will respond more to facts than to fear.
Health co-op Difficulties Unlikely a Factor in Pending Insurance Merger Reviews
by Ryan Lynch in Washington DC and Madeline O’Leary in New York
The antitrust reviews of both the Humana (NYSE:HUM) and Aetna (NYSE:AET) merger and the Cigna (NYSE:CI) and Anthem (NSYE:ANTM) deal should not be adversely affected by the failure of numerous Consumer Oriented and Operated Plans (co-ops), several industry specialists said.
Co-ops, which are formed at the national, state or local level, are nonprofit organizations that offer insurance through the healthcare exchanges.
Created by the Affordable Care Act (ACA), co-ops were seen as an alternative to the public insurance option that health reform lacked. But more than one-third of 23 co-ops across the US have already failed, and other co-ops are expected to close their doors in the near future.
These failures, in states such as New York and Colorado, raise questions about the difficulty of entering and succeeding in health insurance markets. And they are particularly timely given Aetna’s proposed USD 37bn acquisition of Humana and Anthem’s proposed USD 54bn purchase of Cigna.
The DoJ is reviewing the two transactions, both of which were announced in July and are currently under a second request for information.
As reported by this news service, Peter Mucchetti, chief of the Litigation I Section in the Department of Justice Antitrust Division, said on 20 October that the success of co-ops is a “very important factor” as the agency examines competition on the health insurance exchanges.
However, an Aetna spokesperson said the experience of co-ops does not clearly relate to the Humana purchase. “Our proposed acquisition is about Medicare,” the spokesperson said. “Humana doesn’t have much commercial business and the co-ops aren’t in the Medicare business.”
A spokesperson for Anthem declined to comment.
Allen Feezor, former chair of the US Department of Health and Human Services (HHS) Advisory Board to the Co-op Program, said it was not clear why co-ops, which compete largely in the market for small groups, would affect the DoJ’s review of two mega-mergers. “That logic sort of escapes me,” he said.
Further, co-ops were not central to post-ACA competition, according to Len Nichols, a professor at George Mason University who served as a senior health advisor during the Clinton administration. “Their failure does not matter to competition in marketplaces, because their market shares were small,” he said.
Jeb’s Obamacare Repeal-And-Replace Plan Is More Repeal Than Replace – Conservatives will love it. But careful if you actually get sick.
Jonathan Cohn - Senior National Correspondent, The Huffington Post
Jeb Bush on Tuesday will introduce a plan to repeal and replace the Affordable Care Act.
But “replace” may not be quite the right word.
The Bush plan calls for a familiar mix of conservative ideas on health care, according to campaign documents obtained by The Huffington Post. It would eliminate the coverage scheme of “Obamacare” -- the tax credits, regulations on insurance, and individual mandate that have led to a historic reduction in the number of uninsured Americans.
In its place, Bush would introduce a new kind of financial assistance for people buying insurance on their own -- specifically, tax credits pegged to age but not to income, and not designed to guarantee access to the same level of coverage as Obama’s health care program does.
The Bush plan also would give control of Medicaid, the insurance program for low-income Americans, over to the states.
What would this all mean in practice? It’s impossible to say with any precision, at least without more details about the dollar amounts involved.
Still, the outlines of Bush plan look a lot like like some other plans now in circulation on the right, like the so-called 2017 Project Plan and a proposal from Rep. Tom Price (R-Ga.). These plans envision less government spending and regulation, but would likely result in some combination of fewer people with insurance and less financial protection for people who have coverage. Experts contacted by The Huffington Post said they expected Bush's plan, if enacted, would play out in a similar way.
Here’s why. The basic concept of the Affordable Care Act, like all universal health care plans, is to set some basic standards for private insurance, then provide financial assistance to people who cannot afford such policies on their own. Those standards include requirements that all plans include “essential benefits” -- in other words, not just hospitalization, but also services like rehabilitation, mental health, prescription drugs, and maternity care.
The Affordable Care Act also prohibits insurers from denying coverage or charging higher premiums for people with pre-existing conditions. In addition, it sets limits on out-of-pocket spending -- with even tighter limits for people with lower incomes, on the theory that the working poor simply don’t have the money to absorb high out-of-pocket costs.
These regulations are why the insurance plans that people buy through the Affordable Care Act’s exchanges can be so much more expensive than the plans many people bought before the law existed -- and why, under the Affordable Care Act, the government must spend so much subsidizing coverage for people who can’t pay those higher premiums.
The Bush plan would weaken those standards on insurance: People buying coverage would have more freedom to buy less-generous policies that cover only catastrophic costs. And the tax credits that Bush would provide, by design, guarantee access only to these catastrophic policies.
That’s cheaper than subsidizing the “silver” plans that the Affordable Care Act treats as its standard -- a result conservatives would certainly cheer. But without ACA levels of assistance, poorer people who want more comprehensive coverage probably wouldn’t have the money to buy it. Once they got sick, they’d be stuck with more punishing out-of-pocket expenses. And because these are people with lower incomes, they’d have less money to cover those costs.
“Repealing Obamacare and replacing it with fixed tax credits would hurt low-income folks who finally just got decent insurance,” Len Nichols, a former Clinton administration official and widely respected health economist at George Mason University, told The Huffington Post.
Bush’s designs on Medicaid would likely have a similar effect. While the campaign has not specified how much money the states would get under Bush’s scheme, conservative plans to hand control over to the states generally call for less spending on the program. Medicaid is already under-funded. If states had even less money with which to manage it, they’d almost surely have to restrict eligibility or cover fewer services -- either of which would mean less financial protection, in this case for the very poor. (This briefing by the Center on Budget and Policy Priorities explains in more detail.)
One more key footnote to the Bush plan is its protection for people with pre-existing conditions, which is different from the guarantee in the Affordable Care Act. The Bush plan calls for guaranteeing access, but only for people with "continuous" coverage. That means people whose insurance has lapsed -- say, because they lost a job and couldn't afford premiums for a few months -- could be subject to denial because of their current medical problems.
The Bush plan has some noteworthy and interesting wrinkles, befitting a politician who has promoted himself as the most serious policy candidate in the GOP race. (His plan may not have much detail, but it's considerably more substantive than what his rivals have produced.) Among other things, Bush calls for establishing targets and incentives for states to improve medical outcomes.
In addition, Bush calls for replacing the Affordable Care Act’s “Cadillac tax” with a cap on the tax exclusion for employer insurance. It’s a more direct and efficient way of accomplishing the same goal as the Cadillac tax, although -- as Phil Klein of the Washington Examiner has noted -- Bush would design the cap in such a way that it would affect fewer plans, at least initially.
A debate over the Cadillac tax seems likely in the next Congress, with calls for its repeal strong on both sides of the partisan aisle. Bush’s proposal may indicate one way that Republicans, and maybe even some Democrats, would prefer to reform it.
But the most important part of the Bush plan is its changes to the coverage scheme -- and it’s likely that more Republican candidates will call for similar changes before the campaign is over.
“There seems to be an emerging consensus among Republican candidates for how to approach health care, beyond repealing Obamacare,” Larry Levitt, senior vice president at the Henry J. Kaiser Family Foundation, said on Monday night. “It centers around more limited protections for people with pre-existing conditions, health insurance tax subsidies that don't vary with income, scaling back the tax subsidy for employer-based health benefits, and capping Medicaid. It means less regulation, and also less direct help for lower income people with their health needs.”
Sam Stein contributed reporting.
GAO Appoints Dr. Len Nichols to New HHS Advisory Committee on Physician Payment Models
Doubts Emerge on Clinton Drug Price Plan
By ROBERT KING
Hillary Clinton believes TV commercials touting new drugs contribute to high drug prices, but the Democratic frontrunner's plan to curb such ads may not do the trick, some experts say.
Clinton unveiled a plan this past week to combat rising prices, proposing reforms long championed by Democrats such as allowing Medicare the power to negotiate over drug prices.
Her plan also took on consumer TV ads of drugs. It stops direct-to-consumer advertising subsidies and makes drug companies reinvest marketing dollars into research and development of new drugs.
"Almost every country in the industrialized world bans or severely restricts direct to consumer advertising because it increases prescription drug costs, and can include confusing, misleading or incomplete information or exaggerated claims if not regulated effectively," her campaign said.
But proposing a plan and getting it implemented is another story. Congress has continually thwarted attempts to hinder or further regulate direct-to-consumer ads.
"Congress typically decides that any business has a right to talk about their product to whoever they want," said Daniel Mendelsohn, the CEO of the health research firm Avalere Health.
Mendelsohn said that there wasn't much new in Clinton's plan, and that a push toward demonstrating the value of a drug would be a better move.
"That is what health plans are expecting of drug companies at this point," Mendelsohn told the Washington Examiner on Friday. "To get your drug approved by a health plan you have to show the value to specific populations and that is where the commercial market is going."
The Clinton campaign did not immediately return a request for comment.
The goal of Clinton's plan is to shift resources from marketing to research and development, which could have an indirect impact on prices in the future, said Len Nichols, a health economist and professor at George Mason University.
"Shifting resources from marketing to R&D at least increases the chances we'll have more innovation and competition in the long run," he told the Examiner on Friday.
Another expert said consumer advertising is far from the only form of marketing drug companies use. Some companies rely much more on promoting their products directly to doctors through a sales force, a process called "detailing."
"The government does regulate that type of marketing as well, but it represents a much bigger chunk of spending than television ads aimed at patients," said Michael Sinkinson, a professor at University of Pennsylvania's Wharton School.
Mendelsohn said some drugs are advertised to consumers more than others. An antibiotic routinely used in a hospital, for instance, wouldn't need to hit the airwaves, he said.
Clinton would also change how the Food and Drug Administration regulates ads by requiring any prescription drug ad to be cleared before reaching the public.
The FDA has the authority to regulate prescription drug ads to consumers, but not over-the-counter product ads. Federal law prohibits a drug maker from making a misleading or inaccurate ad.
The agency, however, currently doesn't have a program that reviews a drug ad before it reaches the public. "We see many ads about the same time the public sees them," the agency said on its website. "Many drug companies voluntarily seek advice from us before they release TV ads."
However, if the agency is made aware of an ad in violation then it can go after the drug maker. Normally the agency sends the drug maker a letter asking for the ad to be stopped or corrected.
Common violations include ads that don't disclose all of the product's risks, or tout an unapproved use. The agency has also tried to tackle social media advertisements. Posts on popular social media sites such as Facebook or Twitter have to include risk information.
That is what got reality TV star Kim Kardashian in trouble earlier this year. An Instagram post for a birth control drug she was promoting neglected to include any risk information.
Clinton's plan was unveiled a few weeks after Clinton's closest competitor, Independent Vermont Sen. Bernie Sanders, issued legislation that tackles high drug prices.
Sanders' bill does not include anything on consumer ads, but does include some of the same reforms in Clinton's plan.
Her plan was also unveiled amid a public backlash against Martin Shkreli, who dramatically raised the price of a decades-old treatment for parasites.
How the Government Could Punish That Hedge Fund Bro Who Wanted to Raise a Drug’s Price 5,000 Percent
By Jordan Weissmann
This week, the prize for most-hated man in America goes to Martin Shkreli, the rap-lyric-spouting former hedge funder who has found a potentially lucrative and socially useless niche in the business world by buying up the rights to old pharmaceuticals that treat rare diseases, then radically raising their prices. In August, his company, Turing Pharmaceuticals, purchased Daraprim, a 62-year-old drug that treats toxoplasmosis, a potentially deadly parasitic infection affecting infants, AIDS patients, and cancer patients, among others. As the New York Times reported, Turing promptly raised Daraprim's cost from $13.50 to $750 per pill. Shkreli's various justifications for the move—that the drug was supposedly underpriced to begin with, and that his company was absolutely, 100 percent going to use its profits to produce better versions of the treatment (even though many doctors didn't seem to think one was needed)—did little to mute the uproar. Last night, amid all the scrutiny, he budged a bit and said Turing would lower the price, though not by how much.
Assuming his conscience doesn't send Daraprim's price all the way back to $13.50 a tablet, Shkreli will be able to get away with his price gouging for a simple reason: Even though the drug's patents are long-expired, nobody else makes it. Thus, he has an effective monopoly over a life-saving treatment that lacks an alternative. One could argue that this speaks to the fundamental flaws of American oversight of the pharmaceutical industry. While the rest of the developed world uses price controls to keep medication affordable, the U.S. allows drug companies to charge whatever they please, with the hope that once their patents expire, competition from generics will drive down costs. To some slight extent, that's worked—about 8 out of every 10 prescriptions filled in this country are for generic drugs. But as production has become concentrated in the hands of fewer and fewer manufacturers, the prices of some generics have rapidly risen in recent years. And the costs of some specialty medications, like Daraprim, have skyrocketed.
So, is there anything to be done, short of completely rejiggering American pharmaceutical regulation (which, let's be honest, isn't happening any time time soon)? Last year, a group of doctors offered one clever potential solution to this issue in the New England Journal of Medicine. When the price of an unpatented drug shoots up, they argued, the Food and Drug Administration should actively go out and look for another company willing to make a generic version and put it on a fast track through the official approval process. The government already does something similar to deal with drug shortages, which have cropped up more frequently in the past several years, and the idea could also help with cases like Daraprim.
Here's why: Theoretically, another company could take notice of Shkreli and Turing's stunt and decide try to make a profit by selling its own generic version of Daraprim for a cheaper price. The problem is it would take a while. Largely thanks to a lack of office funding, the approval process for generic drugs has been slowed by a massive backlog of applications. “Even if a company wanted to enter tomorrow, it would still have to wait three years,” Aaron Kesselheim of Harvard Medical School, who wrote the article with Jonathan Alpern of Regions Hospital in St. Paul, Minnesota, and William Stauffer of the University of Minnesota's Department of Medicine, told me. By promising to expedite things, though, the government would remove that roadblock, and maybe lure some competition into the market. During our talk, Kesselheim suggested that Washington could also offer other incentives, such as promising to buy some of the newly manufactured drugs through the Veterans Health Administration.*
The biggest hurdle, Kesselheim suggested, could be regulators themselves: “The problem here is the crisis relates to drug costs, and the FDA doesn’t see itself as an agency that gets involved in drug costs.” But, he added, there's no reason that mindset couldn't change.
Some experts have suggested that it's unlikely that another company would try to steal Turing's market share because the market itself is so small—in 2011, before several price increases, fewer than 13,000 Daraprim prescriptions were filled. Moreover, even if a company were to try to undercut the drug's current price, that might mean selling it for $300 a pill instead of $750. Hence, they say the only solution to the rising cost of generics, especially for specialty drugs, is more direct government regulation. “Given the size of this market, [encouraging competition] may not be a practical solution," Alan Sager of Boston University's School of Public Health said when I asked him about Kesselheim & co.'s proposal. "When we encounter natural monopolies, we regulate. Adam Smith didn’t have just one string on his violin.”
Nonetheless, recruiting generic manufacturers seems like a concept at least worth trying. As of now, companies that manage to corner the market for an obscure but essential old drug are more or less guaranteed a window of obscene profitability. Even if public outrage might dissuade some from trying—see Shkreli's second thoughts, or the recent case of Rodelis Therapeutics—there's still every reason to expect some companies will attempt to pull off the trick. But by showing that it's willing to go out and solicit other players into the market, the government might make gouging helpless cancer and auto-immune disease patients a slightly riskier proposition, and convince investors to put their money elsewhere.
It might not be the perfect fix. But, as George Mason University health policy professor Len Nichols put it to me, "We’re hostage to the reality that we depend on competition to keep prices down.” Until Congress finally does something bolder with pharma regulation, we might as well try to introduce as much competition as we can.
Modernizing Medicare: Supporting Minorities And Low-Income Patients
By Doug Holtz-Eakin and Len Nichols
Mr. Holtz-Eakin is president of the American Action Forum. Mr. Nichols is director of the Center for Health Policy Research and Ethics, GMU
Medicare turned 50 at the end of last month and has proven to be a popular and indispensable component of the social safety net. Still, like any 50-year-old, the program needs to learn some new tricks to bring it more comfortably into the modern age, where budget pressures, rising health costs and equitable access to quality care must be addressed. Specifically, Medicare’s reliance on the fee-for-service model has contributed to rising budgetary pressures. Considerable research has shown that fee-for-service plans are one way our system incentivizes quantity of treatment over quality.
In addition to the payment reform pilot projects that both predate and have been expanded by the Affordable Care Act, there is another powerful exception; one part of Medicare this is already not fee-for-service: Medicare Advantage (MA). MA offers seniors a one-stop option for all three legs of the Medicare stool: hospital care, outpatient physician visits and prescription drug coverage. It’s also popular; enrollment in MA has increased every year since 2004 and reached 16 million individuals in 2014, which represents 30% of the Medicare population.
MA may be younger than Medicare, but it still has some issues
In order to address quality of care issues that are especially germane to low-income beneficiaries, the government ranks the performance of MA plans on a 5-star scale. The MA Stars program is designed to inform beneficiaries of the quality of the various plan options, and beginning in 2012, plan payment adjustments have been made based on their star rating, with higher-rated plans receiving bonuses.
The problem is that as currently structured, the Stars system gives unfairly low grades to plans enrolling the lowest-income enrollees. That’s because a significant fraction of the performance measures are driven in part by patients’ socioeconomic conditions and determinants of health, not actual plan or provider performance. Importantly, the majority of measures of performance are not adjusted for patient characteristics or socioeconomic status.
Since MA plans tend to have lower co-pays and deductibles than traditional Medicare, they attract a high number of lower-income and minority beneficiaries. Also, low-income enrollees are less likely to have supplemental coverage (employer plans or Medigap plans) that covers these costs. Among minority beneficiaries, Hispanics are twice as likely and African–Americans are 10% more likely to enroll in MA.
The consequences of a flawed rating system
Unless the rating system adjusts for the risk factors these populations bring to the table, the outcome measures will be biased against plans that serve them. That, in turn, leads to lower (or no) bonuses and higher premiums. Poor performance measurement turns into lack of access to the MA plan of their choice. At the same time, there are concerns that an inverse problem is occurring at the other end of the MA income scale: plans that serve healthier, high-income patients receive relatively higher ratings and income than they should, such that we end up subsidizing patients who don’t need as much help.
This concern has led to calls for either establishing a separate rating system for plans in which enrollees are disproportionally low-income, or at least providing a score adjustment for such plans in order to compensate for those patient differences. As a rough calculation, it appears that removing the socioeconomic bias could mean higher payments to lower-income beneficiaries – to the tune of over $330 annually. That is real money that could align the incentives of the program with twin goals of efficiency and equity.
The Center for Medicare and Medicaid Services recognizes these potential problems and is committed to fixing them. The Congress is increasingly aware of the issue and, hopefully, will have comparable resolve. As Medicare moves into its second 50 years, all parts of the program need to work fairly, especially in support of the least affluent and most vulnerable populations.
Drug Prices Soar, Prompting Calls for Justification
By Andrew Pollack
As complaints grow about exorbitant drug prices, pharmaceutical companies are coming under pressure to disclose the development costs and profits of those medicines and the rationale for charging what they do.
So-called pharmaceutical cost transparency bills have been introduced in at least six state legislatures in the last year, aiming to make drug companies justify their prices, which are often attributed to high research and development costs.
“If a prescription drug demands an outrageous price tag, the public, insurers and federal, state and local governments should have access to the information that supposedly justifies the cost,” says the preamble of a bill introduced in the New York State Senate in May.
In an article being published Thursday, more than 100 prominent oncologists called for support of a grass-roots movement to stem the rapid increases of prices of cancer drugs, including by letting Medicare negotiate prices with pharmaceutical companies and letting patients import less expensive medicines from Canada.
“There is no relief in sight because drug companies keep challenging the market with even higher prices,” the doctors wrote in the journal Mayo Clinic Proceedings. “This raises the question of whether current pricing of cancer drugs is based on reasonable expectation of return on investment or whether it is based on what prices the market can bear.”
Pressure is mounting from elsewhere as well. The top Republican and Democrat on the United States Senate Finance Committee last year demanded detailed cost data from Gilead Sciences, whose hepatitis Cdrugs, which cost $1,000 a pill or more, have strained the budgets of state and federal health programs. The U.A.W. Retiree Medical Benefits Trust tried to make Gilead, Vertex Pharmaceuticals, Celgene and other companies report to their shareholders more about how they set prices and the risks to their businesses from resistance to high drug prices.
The trust cited the more than $300,000 per year price of Vertex’s cystic fibrosis drug Kalydeco and roughly $150,000 for Celgene’s cancer drug Revlimid.
Even former President Bill Clinton, in a speech to pharmaceutical executives in Philadelphia last month, said it would be in the industry’s best interest to say more about its costs and pricing.
“Explain, explain, explain and disclose, disclose, disclose,” Mr. Clinton said, according to The Philadelphia Inquirer. “Don’t expect everybody to love you, but at least they will hear your side of the story.”
The pharmaceutical industry has already had the veil lifted on various practices. Drug companies now have to report the payments, including meals and entertainment, that they make to doctors for research, consulting and giving promotional speeches. The companies have also had to disclose more results of their clinical trials and in some cases have started to provide raw data to outsiders.
It is unclear if cost and pricing will become the next such area. The state bills, which are supported by some health insurers and consumer groups, have not progressed. The two senators, Republican Charles E. Grassley of Iowa and Democrat Ron Wyden of Oregon, have not reported the results of their inquiry. And shareholders of Gilead, Vertex and Celgene voted down the resolutions proposed by the U.A.W. trust, though the trust says it reached settlements with Eli Lilly and with two other drug companies it would not identify.
Even some people concerned about drug prices say that the cost to develop a particular drug has little to do with that drug’s price and that knowing such information will not keep prices down.
“The past R&D cost is really kind of a red herring,” said Len Nichols, a health care economist at George Mason University, referring to research and development. “The current revenue doesn’t pay for past R&D; it pays for current R&D.”
With Merging of Insurers, Questions for Patients About Costs and Innovation
The nation’s five largest health insurance companies are circling one another like hungry lions closing in on prey.
On Friday, Aetna said it would acquire its smaller rival Humana to create a company with combined revenues of $115 billion this year. Anthem is stalking Cigna. UnitedHealth Group, now the largest of the five, is looking at its options. At the end of the maneuverings, three national behemoths are likely to emerge.
There is also a scramble among the smaller insurers. On Thursday, Centene, which specializes in offering Medicaid coverage, said it planned to buy Health Net, a for-profit insurer with headquarters in Los Angeles.
As insurers grow larger, will consumers benefit from the companies’ ability to bargain with hospitals and doctors for lower prices? Will diminishing competition translate to fewer choices of plans? And what effect will mergers have on innovation in health care?
The answers depend largely on how successfully the other insurers, particularly those that were created or attracted by the Affordable Care Act, can compete with these much larger companies.
“All politics are local,” the saying goes, and it is similarly so with insurance companies.
The big (and getting bigger) for-profit companies — which make most of their revenue from employer and Medicare and Medicaid plans — still face significant competition from the regional or state-based nonprofit Blue Cross and Blue Shield plans, particularly in the market for employer-based coverage.
“What people miss is the regional strength of regional Blue Cross plans,” said Paul H. Keckley, the managing director for the Navigant Center for Healthcare Research and Policy Analysis.
Blue Cross Blue Shield plans, including the for-profit versions owned by Anthem in 14 states, have traditionally dominated the markets for individuals and employers. In more than 30 states, a nonprofit Blue Cross sells the most policies to large employers, with almost a dozen capturing three-quarters of the market, according to 2013 data from the Kaiser Family Foundation, the latest information it has compiled.
The large for-profit insurers do not have a significant presence in about a dozen states, including Massachusetts, Minnesota, Oregon and Washington, according to the Kaiser data. “They have national share, but they don’t have big share in a lot of places,” said Gary Claxton, an executive with the Kaiser Family Foundation.
The picture is different outside the employer market, however. In the business of selling private Medicare plans, which the insurers offer as an alternative to the traditional Medicare program, the five companies — particularly UnitedHealth and Humana — command about half the market, according to Kaiser data from 2015. The big for-profits are frequently the dominant players in an individual state, and the proposed combination of Aetna and Humana will create a larger force in that market.
In an interview about the proposed combination of Aetna and Humana, Mark T. Bertolini, Aetna’s chairman and chief executive, emphasized the need to be large enough to invest the capital and resources necessary to be competitive in a rapidly changing environment.
“People who did not invest significantly enough in health care reform and a retail marketplace are going to struggle,” said Mr. Bertolini, who, at the combined company, would assume the same roles he has at Aetna.
The smaller companies will have a harder time accomplishing the transition, he said.
One primary reason for the latest merger mania is the companies’ need to have more clout in more local markets so they can negotiate better deals with local hospitals and doctors. Across the bargaining table are increasingly powerful local health systems that have been consolidating to become more efficient and to gain more say about the price of care and the networks they will join. “What it all comes down to is the relative market share between plans and the hospitals,” said Len Nichols, a health economist at George Mason University.
But consumer advocates are skeptical that more consolidation is the answer. “In most markets, insurers are pretty consolidated already,” said Claire McAndrew, who follows the private insurance market for Families USA, a consumer advocacy group in Washington. “I’m not sure if further consolidation is going to have a further impact.”
The challenge for the nonprofit Blue Cross plans, meanwhile, is whether they will be able to offer a competitive alternative to a combined Aetna-Humana or Anthem-Cigna.
The nonprofit Blue Cross plans still face the same pressures that the for-profit companies do in needing to generate more revenue to offset their costs, said Bret Schroeder, a partner with PA Consulting Group. “They all have existing cost structures that are similarly high,” he said, adding, “They are still faced with market forces” including decreasing revenues and more competition. The question is what Blue Cross plans like Wellmark in Iowa will do to compete better, he said.
The large for-profits also face more competition from some of the market’s newest entrants, which have benefited under the Affordable Care Act. The law created a new species of insurer, the consumer-oriented co-op plans. But the introduction of statewide online marketplaces also helped attract new players, including large health systems like Ascension, the nonprofit Catholic system, and North Shore-LIJ in New York.
The well-regarded health systems should be able to capitalize on their standing in the local community, said Ceci Connolly, managing director for PwC’s Health Research Institute, as compared with “the national Goliath coming in from the outside.”
And just as the state marketplaces have benefited some of the newest competitors, allowing them to grab market share by offering the lowest-price plans, the advent of similar marketplaces offered by employers could bolster competition. Known as private exchanges, these would be similar in that employers could present their workers with a broad range of offerings through an online exchange that would include smaller or regional insurers.
“A small plan still has the ability to compete on price and network,” said Larry Boress, the chief executive of the Midwest Business Group on Health. He pointed to Land of Lincoln Health, a co-op in Illinois that attracted more than 50,000 customers through the state marketplace after significantly dropping its prices.
But smaller insurers may still have difficulty competing with much larger companies, which will have significantly more resources. The big insurers have more money for sophisticated data analyses that allow them to better judge how to price their policies and more reserves if they guess wrong. Competing in this environment “is not for the faint of heart,” said Sabrina Corlette, a health policy expert at Georgetown University. Many of the smaller outfits have “no cushion, no margin for error,” making it harder to survive, she said.
High Court Ruling Offers Chance to Alter Health Law Debate
WASHINGTON — The country finally has an opportunity to change the subject on health care, after the Supreme Court again upheld President Barack Obama's law.
There's no shortage of pressing issues, including prescription drug prices, high insurance deductibles and long-term care.
But moving on will take time, partly because many Republicans want another chance to repeal the Affordable Care Act if they win the White House and both chambers of Congress next year.
Also, it's difficult to start new conversations when political divisions are so raw, and there's a big disconnect between what people perceive as problems and the priorities of policymakers, business and the health care industry.
Democrats say a change in focus is long overdue.
"I do think the energy has already shifted," said Neera Tanden, president of the Center for American Progress, a think tank often aligned with the White House. "It would be great if the health care conversation moves to where people are, not relitigating these insurance issues."
Wishful thinking, say Republicans.
"The politics of this has gotten so unpleasant that we're locked into 'repeal-and-replace' for the next year and a half," said lobbyist Tom Scully, who ran Medicare in President George W. Bush's administration. "It may not be great for America, but that's the reality."
Scully says Republicans may be able to make substantial changes but not repeal Obama's law entirely.
What would a different health care conversation sound like? Some possibilities:
PRESCRIPTION DRUG PRICES
Nearly three-quarters of the general public see prescription drug costs as unreasonable, according to a recent Kaiser Family Foundation survey. That concern seems to be driven by new breakthrough drugs that can cost $100,000 a year and even more. Last year it was Sovaldi, a cure for liver-wasting hepatitis C infection. Next it could be skin cancer drugs in the approval pipeline.
Economist Len Nichols of George Mason University in Virginia says the cost of new medications is "unsustainable," but government price controls could stifle innovation.
Most patients are not exposed to those excruciating cost pressures because the vast majority of prescriptions are for lower-priced generic drugs. Overall, only 1 in 5 people taking prescription drugs say it is difficult to afford their own medications, the same survey found.
How to Lower Specialty Drug Prices
Gilead Sciences did us all a favor. Their business decision to charge $84,000 for Sovaldi, which cures Hepatitis C, elevated the issue of specialty drug pricing to a level of health policy awareness that rivals the King v. Burwell Supreme Court decision. Without the ruckus over high prices, not many would have noticed that Gilead earned a cool $12.1 billion in profit off its $24.9 billion in 2014 sales. Even for risky products like prescription drugs, with a rate of return that high, the price far exceeds what anyone would have considered justifiable.
Simply put, this level of profit is not required to induce innovation. These kinds of prices, increasingly charged for many complex drugs often targeted to relatively small patient populations (hence the name, “specialty” drugs), are so unaffordable for people and for governments that they threaten other vital health services and priorities. We must do better. As a nation, we cannot afford the monopoly power we are now granting to encourage innovation.
Obamacare Debate Will Still Rage After Court Ruling
By Melissa Attias, CQ Staff
For all the uncertainty the Supreme Court case over health law subsidies has cast on the future of the statute, one thing is almost certain: Any decision that fails to leave the law intact will put the fate of President Barack Obama’s signature achievement in the hands of the next administration.
Michael Carvin, lead attorney for petitioners in King v. Burwell, with Oklahoma Attorney General Scott Pruitt, right, after the Supreme Court hearing in March. (Alex Wong/Getty Images)
A ruling against the government in King v. Burwell could scramble the system for distributing aid to the 6.4 million low- and middle-income people who have enrolled in health plans through the federal insurance exchange under the law and blow a hole in a health care overhaul Democrats have spent the last five years defending.
Republicans who find the law anathema still recognize it could be political suicide to allow the financial assistance to lapse, and they’re planning accordingly.
Senior House Republicans presented their caucus with a framework for a legislative response June 17 that would repeal the individual and employer mandates while continuing financial assistance into 2017 through a combination of state block grants and subsidies. Other GOP lawmakers have offered bills, including one (S 1016) by Sen. Ron Johnson of Wisconsin, that would end the mandates while extending the law’s subsidies through August 2017, well into the first term of Obama’s successor.
A GOP-approved transition would reconceive Obamacare in a distinctly conservative way and be sold as a stepping stone to eventual replacement — something Democrats would surely oppose. The question is whether the parties, after the requisite sound and fury, could agree on a compromise that temporarily keeps the aid flowing with some strings attached and makes the health law a pre-eminent issue for the second straight presidential campaign.
“They can boot it down to ’17 and say, ‘Okay, we’ll go pick it up after the next election. See if we get a president,’” says Rep. Jim McDermott of Washington, the top Democrat on the House Ways and Means Health Subcommittee.
Formulating contingencies for the case has been vexing because there’s no way to predict how broadly the justices will rule on the question of whether subsidies should be available in 34 states that didn’t create their own health insurance marketplaces, or exchanges. And any decision against the government may not take effect immediately.
But whatever the court does, a Congress so deeply divided over the law and its effects on the health sector is extremely unlikely to come to a quick agreement on how to respond. It’s not clear, for example, how amenable conservatives in the House and Senate would be to even temporarily extending components of the law, or whether they would seek to convert the subsidies into another form of aid, such as tax credits. Texas GOP Sen. Ted Cruz has suggested he won’t support a subsidy extension but would back language allowing states to opt out of the law’s requirements.
The competing agendas raise the prospect for delays and disruption to insurance markets whose rules and regulations would vary dramatically state-by-state.
“If we could come up with an approach that really makes sense, I mean even this president would probably have to say, ‘Oh, I hate it, but I’m probably going to have to take it,’” says Senate Finance Chairman Orrin G. Hatch of Utah. “We’ve got to find a program that’s too difficult for the president not to take.”
Hoping For a Reprieve
That process could be particularly messy if justices rule against the subsidies but don’t prescribe much of a delay before the aid disappears.
Republican governors in states now relying on the federal exchange would be under enormous pressure to set up their own marketplaces to maintain the subsidies, and likely would urge congressional Republicans to come up with a quick fix. They’d be joined by health plans that fear they will lose younger, healthier customers if subsidies disappear, skewing the risk pool and potentially driving up coverage costs.
“The first scream you hear after that ruling, if it happened, would be the insurance industry,” says Jonathan Oberlander, a health policy professor at the University of North Carolina, Chapel Hill.
For most members of Congress, the first concern is avoiding blame for millions of people losing coverage and souring public opinion toward whichever party is deemed most responsible. If polls continue to show the vast majority of the public wanting Congress to act, that would boost pressure too.
The Obama administration may also make life difficult for the GOP by proposing an administrative fix that would allow states not in compliance with a ruling to take over some federal exchange functions and declare the market their own. Republicans fear that would further entrench the law, though it would offer a potential workaround to congressional gridlock.
Joseph Antos, a health policy expert at the conservative American Enterprise Institute, foresees House Republicans passing legislation before the summer recess that includes age-related subsidies rather than a straight extension of those distributed under the health care law. The aid would be coupled with other policies allowing states to move away from the law’s requirements.
Though Senate Democrats could filibuster such a bill or Obama could veto it, Antos says a showdown would be welcomed by Republicans who would portray Democrats as unyielding and incapable of accepting a reasonable proposal. Serious negotiations could then start in September, with Republicans bargaining down from the legislation they previously passed.
Democrats’ opening gambit, meanwhile, will be to enact language to permanently extend the availability of subsidies for people in states affected by a decision. But when the give and take begins, they’ll almost certainly have to concede to something on the GOP wish list in order to keep financial assistance coming.
Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University, thinks Democrats could live with a repeal of the law’s requirement that employers offer health coverage or pay penalties. Scrapping the law’s 2.3 percent excise tax on medical devices or a still-unappointed Medicare cost-cutting board — the subject of two bills (HR 160, HR 1190) scheduled to move through the House before recess — could also be on the short list.
Antos predicts the employer mandate, which the administration twice delayed enforcing and the left-leaning Urban Institute has suggested dropping, would be one of the easiest things to give up and still be an appealing trophy for Republicans.
“The word mandate gets their hearts thumping,” he says. “That’s what it’s going to take.”
Shades of a Budget Deal
Oberlander says crafting a compromise will be analogous to a budget deal, with party leaders looking for the “sweet spot” where they can cobble together enough votes from both sides to get a majority.
But Republicans and Democrats are already pointing fingers in case that turns out to be too heavy of a lift.
Senate Majority Leader Mitch McConnell of Kentucky predicted in an interview with conservative radio host Hugh Hewitt this month that Obama would veto whatever Congress sends him and put the pressure on governors to establish their own exchanges. Democrats insist it’s up to Republicans to come up with a workable plan.
“From the Democratic point of view, that’s their problem,” says Rep. Gerald E. Connolly of Virginia. “We passed a bill. And it’s a good one. And it’s working. If they want to screw around with it with their ideologues on the Supreme Court, then it’s back in their court.”
Those arguments would almost certainly echo on the campaign trail as presidential candidates confront questions about next steps, no matter how the court rules. Competing visions for a post-ruling health care system will be one of the defining issues in the 2016 races.
Rep. Phil Roe of Tennessee, co-chairman of the GOP Doctors Caucus, bets that policymakers will be happy to settle on a transition plan rather than sow disruption.
“A lot of conservatives are saying, ‘Just let it blow up.’ Well there’s a lot of collateral damage out there when you do that,” Roe says. “I don’t think that will happen.”
But Nichols says he doesn’t see how Republicans could agree on a patch that wins Obama’s signature. And if the subsidies lapse, he predicts they won’t reappear until after a new Congress and administration are sworn in.
“If King wins, the next Congress is going to be very busy,” Nichols says. “The question is whether there will be a patch or they will be picking up from scratch.”
Should Pharma Returns be Limited if Prices are too High? A Reader Poll
By Ed Silverman
The debate over prescription drug prices has been peppered with complaints, criticisms and cries for legislation. But while some payers are pushing back and extracting discounts, little has so far changed. Now, a health economist is offering a proposal that he hopes can make a difference – revoke the exclusive time that drug makers have to market specialty medicines if prices are too high.
“We want companies to innovate and provide needed medicines. And I want to keep that golden goose alive,” says Len Nichols, a health policy professor at George Mason University, where he heads the Center for Health Policy Research and Ethics. “But the prices are just too high for what our health system can afford… We need more socially responsible pricing behavior.”
But how high is too high?
As Nichols explains it, a price is too high when a drug maker earns a rate of return that is 20% or greater than its current cost of capital, although he would set the threshold at 50% for new companies with new products. But he says that any drug maker earning a higher rate of return would risk losing exclusive marketing time. For biologics, which is how he refers to specialty medicines, this runs 12 years.
Paper Suggests Making Drug Exclusivity Contingent On Reasonable Prices
By John Wilkerson - InsideHealthPolicy.com Daily News
The government should condition exclusivity on companies charging reasonable prices for drugs, according to health economist Len Nichols, who served as the senior health policy adviser to the Clinton White House. Nichols' proposal would control drug prices, lead to paying drug companies for performance and force drug makers to disclose their profit margins, research spending and marketing spending.
A recent Kaiser Health tracking poll found that the public believes keeping drugs affordable for patients should be a priority for Congress, and the Campaign for Sustainable Rx Pricing plans to release a voter poll next week that the group's Executive Director John Rother said will show that voters are worried about rising drug prices. Nichols' proposal is one of the few to be put forth since drug spending grew 13 percent last year.
The government can't mess with patents because that would violate international trade agreements and unnecessarily hurt other industries. However, Congress may do what it wants with the exclusivity -- although biologics exclusivity also would be off limits were the United States to get its way on 12 years of exclusivity for biologics in the Trans-Pacific Partnership.
Nichols said exclusivity is a powerful incentive that Congress should use to influence drug prices.
“Most of the recently approved and coming specialty drugs that clinicians and payers are worried about paying for are biologics,” Nichols writes in a policy paper for George Mason University's Center for Health Policy [Research & Ethics], which he heads. “Thus, threatening to revoke exclusivity for bad pricing behavior by specialty biologics is a powerful deterrent in the hands of policy makers.”
Nichols proposes separate rules and thresholds for established companies with robust research programs and for companies without products on the market. For established firms, Nichols suggests setting the threshold for the rate of return on sales at 20 percent above a company's cost of borrowing money, called the cost of market capital. Thus, if a company pays a 7 percent interest rate on the money it borrows, it could set a price that results in a profit margin of 8.4 percent, after subtracting the cost of production, marketing and current research and development. Gilead Sciences last year earned nearly a 50 percent profit on its hepatitis medications. Nichols said he'd prefer to limit how much spending on marketing that established companies could subtract to avoid encouraging them to market too aggressively, and he thinks up-and-comers should be allowed to subtract all marketing costs to encourage competition.
“Thus, the 'regulated' price preserves cash flow for a robust amount of R&D, the major purpose of new cash flow for an established firm,” the paper states.
Drugs designated as breakthroughs could earn a rate of return on sales up to 40 percent above the cost of borrowing money, under Nichols' proposal.
“Remember the point of regulation is to keep launch prices below the profit maximizing one with which the firm would capture all of the social welfare value of the drug until competition -- however long it takes -- begins to erode profit,” the paper states. “One could preserve incentives for 'breakthrough' investments by allowing them to earn 40% more than the cost of capital, compared to 20% more for a more modest clinical and social value drug. This calibration could evolve into a form of 'pay for performance' for new drugs,” the paper adds.
Nichols would let new firms set prices that earn them profit margins of 50 percent higher than the cost of market capitalization. New firms with new products or that are without a portfolio of products to sell and a pipeline that is being developed need higher rates of return than established companies, he says. Younger companies must pay off past research and development or at least pay back venture capitalists.
Offering a higher rate to companies without products on the market also would discourage the common practice of large companies buying small companies with promising products, he adds.
“[I]n the long run more drug companies implies more competition both post-marketing and in the development stages,” the paper states.
Nichols' proposal comes as the pharmaceutical industry battles with insurers over which is responsible for making drugs unaffordable to patients. The health insurance lobby recently blamed the pharmaceutical industry's high drug prices for plans' proposed rate increases. But drug lobbyists say plans are overstating the impact of drug price, noting that a little less than a year after the high-priced, breakthrough hepatitis C drug Sovaldi hit the market, FDA approved AbbVie's competing Viekira Pak. Viekira Pak is not a generic, but with two drugs on the market, pharmacy benefit managers were able to negotiate lower prices.
However, the debate continues over whether the negotiated prices for hepatitis C drugs are still too high. Even assuming the negotiated prices are reasonable, Nichols told Inside Health Policy that hepatitis C drugs are an anomaly because they're oral drugs, and most specialty medicines in the development pipeline are biologics, which he said are less likely to be subject to prompt competition. The Affordable Care Act in 2010 created a path to approval for biosimilars, and it wasn't until 2014 that FDA approved the first biosimilar, and that drug, once it hits the market, will compete against a biologic approved in 1991.
CHPRE will lead the evaluation of a Virginia collaborative project – Heart of Virginia Healthcare
George Mason University’s Center for Health Policy Research and Ethics (CHPRE) will lead the evaluation of a Virginia collaborative project that is one of seven grantees across the U.S. awarded as part of EvidenceNOW – Advancing Heart Health in Primary Care, an Agency for Healthcare Research and Quality initiative. The Virginia collaborative, which will be called Heart of Virginia Healthcare, will work with primary care practices to utilize patient-centered outcomes research findings to improve the percentage of patients successfully managing health issues such as high blood pressure and high cholesterol management.
The Virginia collaborative Principal Investigator will be Anton Kuzel, M.D., chairman and professor, Department of Family Medicine and Population Health, VCU School of Medicine. VCU received the three-year $10.7 million grant on May 1 to establish the statewide collaborative. The project will serve up to 300 practices in the commonwealth and focus on improving heart health.
Len Nichols, Ph.D, Director of the Center for Health Policy Research and Ethics (CHPRE) at George Mason University will be the lead evaluator for this three year project. His evaluation team will include Alison Evans Cuellar, Ph.D, Iwona Kicinger, Ph.D, Sonya Vlaicu, Ph.D., Hua Min, Ph.D, as well as survey and focus group specialists from Alan Newman Research in Richmond, VA. The CHPRE graduate research assistants that will be working on this evaluation are Sachin Garg, Mathur Gandham, and Meng-Hao Li.
June 5, 2015
HAP Student Selected as David A. Winston Health Policy Scholarship Recipient
Stephen Petzinger, a graduate student in the Masters of Science in Health and Medical Policy program, has been selected to receive one of ten $10,000 scholarships from the highly competitive and prestigious David A. Winston Health Policy Scholarship Program, offered by the Association of University Programs in Health Administration (AUPHA). During his time at Mason, Stephen has worked as a graduate research assistant to Dr. Len Nichols, Director of the Center for Health Policy, Research & Ethics (CHPRE). He currently serves as the President of the award-winning GMU AcademyHealth Student Chapter and has just accepted a Program Examiner position at the Office of Management and Budget (OMB) within the Executive Office of the President in Washington.
The Program aims to increase the number and quality of individuals trained in healthcare policy at the state and federal level by awarding deserving health policy students financial support to further their education. It recognizes student excellence and achievement based upon the student’s record, recommendations from faculty and colleagues, and evidence of their interest in and commitment to health policy. In the fall, in addition to the financial incentives of the program, Stephen will attend a 2-day health policy symposium, designed to provide Winston Scholars with an in-depth and unique view of health policy in Washington.
Partnership for Quality Care’s Policy Forum
The forum on addressed the dramatically rising costs of prescription drug prices in the United States.
"Our policy problem is rooted in the reality that striking the right regulatory balance between encouraging innovation -- by granting temporary monopoly pricing power -- and ensuring affordability for patients and those who typically pay on their behalf (employers, health plans and governments), is very, very hard. In essence, our policy effort has not been commensurate with the complexity of the problem," said Len Nichols, PhD, Director of the Center for Health Policy Research and Ethics and Professor of Health Policy, George Mason University. "We have a compelling social interest in promoting competition as well as innovation, and we need to make clear that monopolies come with responsibility and accountability. Competition is more important to public policy than a blank check for innovation."
WASHINGTON, May 15, 2015 /PRNewswire-USNewswire/ -- Link to story:
“Key Perspectives on the Future of Population Health”
Dr. Taylor-Clark participated in a webinar "Key Perspectives on the Future of Population Health"
Read more here.
“Value of a Dollar in Indiana’s Medicare Expansion”
Dr. Nichols quoted in the Marketplace.
Read the full article here.
“Quiet Start Seen for Obamacare Enrollment Period”
Dr. Len Nichols was quoted in the Journal Sentinel.
Read the full article here.
“A Bad SCOTUS Ruling Could Deepen Polarization of Health Care System”
In this article by Greg Sargent, Dr. Len Nichols is quoted.
Read full article here.
‘Republican-Controlled Senate Considers Health-Law Changes”
Dr. Len Nichols was quoted in this article by Louise Radnofsky, Stephanie Armour and Kristina Peterson for the Wall Street Journal
Read the article here.
“U.S. Health System Among Least Efficient Before Obamacare”
Dr. Len Nichols was quoted in Bloomberg in this article by Anna Edney.
Read the full article here.
“Ending Obamacare subsidies: Risks vs. Rewards debated ”
In this CNBC article by Dan Mangan, Dr. Len Nichols “questioned the political wisdom of attacking subsidies that go to the one group of adults ‘paying retail’ for insurance. Nichols noted that poor adults in a little more than half the states can get Medicaid, at no cost to them, while employer-sponsored insurance is subsidized by a tax exemption for such benefits.
‘Why would you want to turn 30 million people into opponents of your political positions?’ Nichols asked, referring to the people now eligible for Obamacare subsidies. To read the full article, here