April 15, 2009

Give Me Back the Shoebox

The big news last week was that Express Scripts (ESI) bought Wellpoint’s prescription drug operations for $4.68 billion.  ESI also sent out a notice to its market contacts last week to explain that it was reducing the amount of its "discounts" in response to a March 30, 2009 settlement approved by the U.S. District Court. A critical part of the announcement reads: "According to the relevant terms of the amended settlement, FDB [First DatBank] will be required to adjust its reporting of Blue Book AWP for those prescription drugs covered under the settlement by reducing the mark-up factor used to calculate the drugs' AWP to 1.20 times the Wholesale Acquisition Cost ("WAC") or direct price, instead of using a markup to WAC or direct price that exceeds 1.20.

The announcement later explains, "Our PBM Agreement contemplates that, in the event of this type of change to the relevant AWP calculation, there will be a modification of the AWP discounts in the PBM Agreement so the parties are returned to their comparable economic position prior to the change by FDB in its calculation of AWP." The essence is that the government changed the definition of the benchmark Average Wholesale Price (AWP) and, hence, reduced the value of it.  So, ESI is reducing the value of its "discounts" to maintain the same net sales price to the buyer. First of all, my hat is off to ESI for publicly admitting this change.  Secondly, I'm not sensing a real PBM value-add here.  Have they really provided the marketplace with a discount?  Or are its contracts set-up to allow manufacturers to just inflate their pricing to offset the negotiated “discounts” (and the plan sponsors are now also paying big middlemen PBMs like ESI to help distribute the drugs to plan members)?  Last year, we observed 14% to 15% price increases on average for brand drugs (before discounts).  Furthermore, there is an article in the Wall Street Journal today that highlights some dramatic first quarter 2009 price increases by the drug manufacturers:  Viagra +20.7%, Sprycel +32.7%, Strattera +15.6%, and others. 
Give me back the shoe-box effect of major medical plans.  I think the PBMs and their promises of "discounted" drug cards have taken us for a ride.

Posted by Rick Chelko at 11:07 AM | | Comments (0) | TrackBacks (0)

February 11, 2009

Federally Funded COBRA?

As you may have seen in the news recently, President Obama has been actively campaigning in support of his economic stimulus package. The package includes such items as a tax cut for lower-income wage earners, an increase in unemployment benefits and numerous other items in an effort to help Americans survive the worst recession in decades. A couple of items in this package that should be of special interest to benefit plan managers are the proposals to expand COBRA. The first proposed change to COBRA is to provide a Federal subsidy for those employees who have been involuntarily terminated from 9/1/2008-12/31/2009. This subsidy is proposed to run for either 9 or 12 months (depending on conference committee negotiations). The Federal subsidy is 65% in the stimulus package that passed the House of Representatives, and 50% in the package that passed the Senate yesterday. The subsidy is to be collected by employers via an annual tax credit. One obvious point of concern for employers is the likelihood of adverse selection, as COBRA continuees account for a higher than average amount of health care spending. However this likelihood of adverse selection may be mitigated if "healthy" employees, who would have gone without medical coverage without the subsidy, now elect to retain coverage.

The second proposed change to COBRA coverage allows any involuntarily terminated employee who is 55 years or older, or who has 10 years of service, to elect COBRA coverage until Medicare eligibility. Under this proposal, and employee could theoretically be terminated at the age of 35 after 10 years of service, and elect to purchase COBRA all the way until Medicare eligibility. This is a scary proposition for employers. However, this portion of COBRA reform is less likely to become law. It was included in the House portion of the stimulus package, but absent from the Senate package.

Do you find this kind of COBRA change "stimulating"? Or does it feel more like another unfunded burden for employers to administer? Speak now or complain later.

Posted by Derek Sloan at 11:21 AM | | Comments (0) | TrackBacks (0)

Could it be a Typo?

I recently came across a letter from a Vice President of the National Association of Manufacturers (NAM) to Speaker Nancy Pelosi and Chairman David Obey (Committee on Appropriations).  The subject of the letter was "comparative clinical effectiveness of medical treatments and services."  I quote, "While we support funding in the economic recovery package to conduct comparative clinical effectiveness research, we believe the current proposal can be improved.  We request that Congress clarify its intent by including clear language that the government will not use comparative effectiveness information to influence coverage or payment recommendations." (emphasis added) 

Is this possible?  Is this really the view of NAM's membership?  Or is it the view of pharmaceutical manufacturers? 

We view clinical effectiveness research to hold great promise and to be an important "public interest" function for the government.  It is certainly superior to the FDA's almost unbelievable use of a "lesser harm" standard in drug approval. This standard allows less effective drugs to be approved for market use as long as they aren't too much lesser.  Does that sound like the kind of drugs you want to buy?  Well, combine it with slick advertising, and that is what people do every day. 

We can't expect the average consumer to follow clinical effectiveness research.  They need the help of coverage sponsors to influence their purchase decisions through plan design and provider payment schedules.  The better, more independent data we have to do so, the better off we will all be.

Posted by Rick Chelko at 09:45 AM | | Comments (0) | TrackBacks (0)

February 05, 2009

What's Really Usual or Customary?

United Healthcare, Aetna and Health Net have all been on the New York AG's hot seat as of late.  It is about their administration of "usual and customary" fee limits for out-of-network health services.  One of United's subsidiaries, Ingenix, is also in the mix and was accused of manipulating the claims data and/or formula to intentionally cause underpayments to out-of-network providers and plan members who use them.  There was a legal settlement without any admission of guilt and an agreement to set up a new "independent" entity (probably a university) to calculate usual and customary.  Now, providers and plan members are lining up to obtain settlements for past underpayments. Today's Wall Street Journal described the problem from the perspective of the typical plan member: "insurers" reimbursements to out-of-network medical providers at the usual-and-customary rate are often lower than the actual fees providers charge.  Sounds a bit unfair doesn't it?  For some reason, neither the New York Attorney General nor the Wall Street Journal addresses the reasonableness of provider billing amounts. 

Why is it that providers are regularly willing to accept half or less of their billed charge amounts as payment in full for their services?  In our experience, negotiated discounts are sometimes as much as 85% off of billed charges.  Do PPO networks really have so much negotiating clout that physicians are willing to provide their services at half price or less?  Or, is it that physicians have inflated their billed charge levels so much since the advent of PPOs that now there is no realistic relationship between billed and negotiated charge levels?  Isn't this really just a billing war between providers, PPO networks and health plan sponsors - and the plan members who go out of network are subject to collateral damage?  Providers get to say "we gave in to negotiations and deeply discounted our fees." Networks get to say, "We are great negotiators and are delivering discount value to our customers." Employers are able to say, "We are smart buyers and are saving our company and employees lots of money off of provider charges."  In the meantime, employees who venture out-of-network (intentionally or un-intentionally) are often left with big bills to pay.

Unfortunately, unless we want governmental price controls, there isn't a lot we can do about this.  Employers can change the payment level for out-of-network services to a percent of Medicare's fee level (i.e. 120% of Medicare).  This avoids the whole debate about what is usual and customary.  However, this will still leave employees exposed to large balance due amounts for billed charges less the Medicare-pegged allowable amounts.  As always, and easier said than done, consumers need to first ask providers if they will accept the plans eligible charge amount as payment in full.

 

 

Posted by Rick Chelko at 12:16 PM | | Comments (2) | TrackBacks (0)

December 01, 2008

Trimming our Nation's Healthcare Expense

On November 24, the Wall Street Journal published excerpts of a CEO Council Q&A session.  The CEOs were asked to list their top five recommendations on healthcare reform.  Number one may surprise you.  It was to fight obesity.  The CEOs suggested reducing the obesity epidemic should be the top priority of the surgeon general and the CDC.  It is probably time for employers to do the same.  CEOs - heal thyselves!

Posted by Rick Chelko at 12:21 PM | | Comments (0) | TrackBacks (0)

November 20, 2008

Great Resources

For more feedback regarding the accuracy, balance and completeness of news stories of medical treatments, tests, products and procedures, I encourage you to check out this great resource:  www.healthnewsreview.org.  This service is provided via funding from the Foundation for Informed Medical Decision Making which has its own valuable website:  www.informedmedicaldecisions.org.  Both of these sites are valuable staples for health care consumers.  Can you lead your horses to the water?

Posted by Rick Chelko at 09:38 AM | | Comments (0) | TrackBacks (0)

November 17, 2008

50% Better Marketing?


I wish I could afford AstraZeneca’s public relations firm.  They had the media hook, line and sinker last week with the release of its Crestor study results.  Even the Wall Street Journal gave AstraZeneca top billing on page B1 with what appeared to be a replay of AstraZeneca’s press release.  “Crestor sharply lowered risk of heart attacks among apparently healthy patients in a major study that challenges long-standing heart-disease prevention strategies," the WSJ reported in its first paragraph.  It wasn’t until the end of the article (on page B4) that the WSJ revealed that AstraZenece was the sponsor of the study and that Crestor users demonstrated a 25% increase in the incidence of diabetes. 

Yes, much has been reported on the Crestor group experiencing 54% fewer heart attacks than the placebo subjects, as well as 48% fewer strokes, and 20% fewer deaths.  But what do all these percentages really mean? There were 83 cardiac events of all types in the Crestor group, an 0.9% actual risk, compared with 157, or 1.8%, in the placebo group.  The study actually showed that physicians would have to treat 180 people for two years to prevent one death.

Is this big news?  Will this study “reshape cholesterol-treatment guidelines used for more than a decade to fight cardiovascular disease, the world’s leading killer”? (from the second paragraph of the same WSJ article)  I hope not.  This study calls to mind the cautions of Dr. Norton Hadler of the University of North Carolina.  Dr. Hadler has proposed that Medicare and other plan sponsors consider adopting a simple “number needed to treat” rule (NNT) in determining the eligibility of new medicines and procedures.  For a hard outcome (death, heart attack, stroke, etc.), the NNT should be no larger than twenty (20), meaning for every twenty patients treated, at least one would avoid the event.  For a soft outcome (feel better, function better, etc.), the NNT should be no larger than five (5).  These seem like reasonable thresholds – and ones that AstraZeneca’s Crestor study results would easily fail. 

You can see Dr. Hadler’s own reaction to the Crestor study at ABCnews.com:
http://abcnews.go.com/Health/HeartDiseaseNews/story?id=6207285&page=1
By the way, Dr. Hadler’s thresholds would be measured by independent studies, not those funded by the manufacturers.  As pointed out in a New York Times editorial today, the lead investigator in the study also stands to benefit from a patent involving the use of C-reactive protein (or CRP) to evaluate the risk of cardiovascular disease.

So, let’s take a pass on more medication and focus our attention on better diets and more physical activity.

Posted by Rick Chelko at 11:34 PM | | Comments (0) | TrackBacks (0)