ACA exchanges and private insurance brokers struggle financially

Posted by on Monday, May 4, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Almost half of Obamacare exchanges face financial struggles in the future

By Lena H. Sun and Niraj Chokshi
The Washington Post, May 1, 2015

Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.

Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers.

Most exchanges are independent or quasi-independent entities. For most, the main source of income is fees imposed on insurers, which typically are passed on to consumers.…


Insurance Brokers in Calif., Other States Struggling Under ACA

California Healthline, May 4, 2015

Insurance brokers in California and other states have struggled financially since the passage of the Affordable Care Act.

In California, more than 12,600 insurance agents are certified to sell health plans through Covered California. Agents assisted 43% of individuals and families who signed up for coverage during the exchange’s second open enrollment period.

Susie Fabrocini — an insurance broker and owner of Reseda-based Great Life Financials — said selling health insurance is becoming a less sustainable business under the ACA, in part because customers seek significantly more assistance.…

The insurance exchanges established under the Affordable Care Act function much like an insurance broker, adding additional administrative costs beyond the administrative costs of the insurers and the costs of the administrative burden placed on the health care professionals and institutions. Private insurance brokers in many states also may sell exchange plans, and, of course, they have their own overhead expenses.

Experience is showing that these additional administrative costs are significant, and the exchanges and brokers are struggling with those costs. The costs are then passed on to the purchasers of the health plans in the form of higher premiums. When the the health care system of the United States was already an outlier with outrageous administrative costs, it seems disingenuous that the reform design selected would add to that administrative burden.

With a single payer, improved Medicare for all, state and federal insurance exchanges and private insurance brokers would not be involved at all. Just as with our current Medicare program, enrollment would be a simple, once-in-a-lifetime process, efficiently accomplished at negligible cost by a government bureaucrat.

For those opposed to government bureaucrats, how could you pass up that kind of a discount?

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The Florida House Speaker’s opposition to Medicaid

Posted by on Friday, May 1, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Florida House Goes Home Early Over Medicaid Impasse

By Lynn Hatter, WFSU
Kaiser Health News, April 29, 2015

The Florida House – at odds with the state Senate over the expansion of Medicaid – abruptly ended its session three days early on Tuesday, leaving hundreds of bills unrelated to health care unfinished.

The Republican-led state House is firmly against Medicaid expansion, while the Republican-led state Senate, which is still in session, supports it.…


Why I oppose the expansion of Medicaid

By Steve Crisafulli, Speaker of the Florida House of Representatives
Miami Herald, April 29, 2015

We oppose expanding Medicaid because it is a broken system with poor health outcomes, high inflation, unseverable federal strings and no incentive for personal responsibility for those who are able to provide for themselves.

The Florida Senate disagrees and, unfortunately, has partnered with the Obama administration to demand Medicaid expansion. They suggest existing safety-net funding (the Low Income Pool, or LIP) and our state budget are tied to federal healthcare policy goals.

If we lose the federal LIP funds, we can create a more limited, state-funded program or we can live without LIP by pursuing other policy options aimed at reducing costs and increasing access to quality healthcare.

Such options include ideas that the Florida House has championed for years. We support expanding the use of telemedicine and expanding the scope of practice for advance-practice nurses to treat patients. We support encouraging direct primary care, which restores the doctor/patient relationship so healthcare is available at dramatically lower costs. We support expanding medical malpractice reform to reduce frivolous lawsuits that increase healthcare costs and expanding choices for where patients get their healthcare by eliminating unnecessary government regulations. We support breaking geographic monopolies for hospitals. We support allowing consumers to buy health insurance across state lines.

Florida House Speaker Steve Crisafulli criticizes the Medicaid program, but for the wrong reasons, while failing to acknowledge that Medicaid does improve health care access and affordability for low-income individuals and families.

Where he really reveals his true character is in his support of the policy options he lists that he says would reduce costs and increase access to quality health care. Clearly, substituting these policy options for the Medicaid program constitutes an abandonment of any reasonable effort to meet the health care needs of this vulnerable population.

If he really cared, he would use the right reasons to criticize Medicaid and the other features of the Affordable Care Act, and then he would support reform that would make quality health care truly affordable and accessible for everyone – a single payer, improved Medicare for all. But obviously he doesn’t care.

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The BlueCross BlueShield Association is privatizing Medicare

Posted by on Thursday, Apr 30, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Blue Cross and Blue Shield Companies to Launch Retiree Health Insurance Exchange

BlueCross BlueShield Association, April 24, 2015

Blue Cross and Blue Shield (BCBS) companies will launch a health insurance exchange this summer that will support employers’ efforts to help retirees transition from group health benefits to individual Medicare coverage that starts Jan. 1, 2016.

BCBS Marketplace will offer Blue Cross and Blue Shield Medicare Supplement Insurance (Medigap), Medicare Advantage Plans and Medicare Part D prescription drug coverage in more than 45 states and Washington, D.C.…

The BlueCross BlueShield Association is a national federation of 37 independent, community-based and locally-operated Blue Cross and Blue Shield companies that collectively provide health care coverage for nearly 105 million members – one-in-three Americans. They now intend to establish a health insurance exchange that will promote transition of employer-sponsored plans to Blue Cross and Blue Shield Medicare Supplement Insurance (Medigap), Medicare Advantage Plans and Medicare Part D prescription drug coverage.

Some employers are already transitioning to private insurance exchanges (similar to but separate from ACA exchanges), converting their employer-sponsored plans into defined contribution plans. As employees retire and become eligible for Medicare coverage, the BlueCross BlueShield retiree health insurance exchange will simplify the transition from employer sponsored group plans to individual Medicare coverage, but doing it with private plans. Since employer-sponsored plans are the largest sector of health care coverage, this transition could cause a massive influx of plans into the private Medicare insurance market.

The retiree exchanges will offer Medigap plans, Medicare Advantage plans and Part D drug plans.

Medicare Advantage plans (Part C plans) are able to offer greater benefits with minimal or no premiums, and thus they continue to grow in popularity. Enrollees are not concerned that taxpayers are providing greater subsidies for these plans, even if CMS is using accounting gimmicks to do so. Plan beneficiaries will always place their own interests above the collective interests of us all.

As Medicare Advantage enrollment is increasing, enrollment in Medigap plans is declining. The Medigap premiums are relatively high considering the limited benefits. The decline in Medigap enrollment may accelerate even more once the Medigap plans are prohibited from covering Part B deductibles (a provision of the recently enacted Medicare SGR fix).

Medicare Advantage plans frequently include the Medicare Part D drug benefits, obviating the need to purchase a separate Part D plan as Medigap enrollees would have to do if they wanted drug coverage.

You can see where this is headed. Employers will be enabling BlueCross BlueShield to enroll retirees into the private BlueCross BlueShield Medicare plans wherein the Medicare Advantage plans (Part C) will experience preferential enrollment. Thus enrollment in the traditional Medicare program (Part A and Part B) will decline substantially. Once the private Medicare Advantage plans become the dominant player (and they are well on their way already), the traditional Medicare program will lose political support and will be converted to a chronically underfunded welfare program, if it survives at all.

Although the establishment of the BlueCross BlueShield Medicare exchanges will likely be lost in the fog of all of the innovative changes taking place under the Affordable Care Act, they are coming. They will be here in only eight months. As the political and policy communities continue to fiddle with other aspects of implementing the Affordable Care Act, the privatization of Medicare will have taken place right before our eyes, and they do not even need Paul Ryan’s premium support vouchers to do it. (In fact, the Republicans just struck premium support from the budget proposal they agreed to this week.)

Just try to stop this one.

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CMS passively rejects any government role in reducing Part D drug costs

Posted by on Wednesday, Apr 29, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Medicaid Rebates for Brand-Name Drugs Exceeded Part D Rebates by a Substantial Margin

Department of Health and Human Services, Office of Inspector General, April 2015


Drug rebates reduce the program costs of both Medicare Part D and Medicaid. Medicaid rebates are defined by statute and include additional rebates when prices for brand-name drugs increase faster than inflation. In contrast, Part D sponsors (or contractors acting on their behalf) negotiate rebates with drug manufacturers, and there are no statutory requirements regarding the amounts of these rebates. In fact, the law establishing the Part D program expressly prohibits the Government from instituting a price structure for the reimbursement of covered Part D drugs.

We found that Part D sponsors and State Medicaid agencies paid pharmacies similar amounts for most brand-name drugs under review. However, Medicaid rebates for brand-name drugs exceeded Part D rebates by a substantial margin. Additionally, Medicaid’s net unit costs (i.e., pharmacy reimbursement minus rebates) were much lower than net unit costs under Part D in 2012 for nearly all selected drugs. Also, more than half of Medicaid rebates owed by manufacturers for selected brand-name drugs were attributed to the inflation-based add-on rebates.

A major driver of the higher Medicaid rebates was the additional amount owed when prices for brand-name drugs increase faster than inflation. This rebate not only produces additional Medicaid rebates, but also helps protect the program from increased costs when manufacturers raise prices. The Part D program does not contain a similar provision.

This is the second OIG evaluation that demonstrates the substantial difference in rebates collected under Medicaid and Medicare Part D. While we recognize the statutory limitations surrounding rebate collection under Part D, we encourage CMS and Congress to explore the costs and benefits of obtaining additional rebates under Part D.



Agency Comments

To:  Daniel Levinson, Inspector General

From:  Marilyn Tavenner, Administrator, CMS

Subject:  Office of Inspector General (OIG) Draft Report: “Update: Higher Drug Rebates Result in Lower Costs for Medicaid Compared to Medicare Part D” (OEI-03-13-00650)

The Centers for Medicare and Medicaid Services appreciates the opportunity to review and comment on the OIG’s draft report. The Part D program has significantly outperformed cost estimates, resulting in lower than expected premium levels since the inception of the program. Additionally, starting in 2011, brand drug manufacturers provide a 50 percent discount for their products to beneficiaries in the Part D coverage gap phase o f the benefit.

As this report discussed, minimum drug manufacturer rebates under the Medicaid program are defined by statute whereas similar rebates under the Medicare Part D program are determined solely through negotiations between drug manufacturers and Part D sponsors. However, Section !8600-ll(i)(1) of the Social Security Act states that CMS “may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors.” Consequently, absent new legislative authority, CMS cannot interfere in the rebate negotiations between Part D sponsors and drug manufacturers to secure additional rebates.

The Part D program has significantly outperformed cost estimates, resulting in lower than expected premium levels since the inception of the program. Additionally, starting in 20 II, brand drug manufacturers provide a 50 percent discount for their products to beneficiaries in the Part D coverage gap phase of the benefit.

Thank you for the opportunity to review and comment on this draft OIG report.

Patient advocates were rightfully upset when Congress included a prohibition in the Medicare Part D drug program preventing the government from instituting a price structure for the reimbursement of covered drugs. The OIG has now released another report showing that the net cost of drugs under the Part D program, which relies on private sector negotiations, are much higher than the net cost of drugs under the government-administered Medicaid program.

CMS administrator Marilyn Tavenner has provided a response which is included in the appendix to this report. Whereas her comment appropriately concurs with the OIG observation that CMS cannot interfere in the rebate negotiations between Part D sponsors and drug manufacturers, her unsolicited comment praising the performance of the Part D program warrants concern. (The fact that the “cut and paste” error of including the comment twice shows the importance they place in including this diversionary concept in their response.)

Whenever CMS is challenged on the higher drug costs through the Part D program, their routine response is to report that “The Part D program has significantly outperformed cost estimates, resulting in lower than expected premium levels since the inception of the program.” They never suggest that CMS should be granted the authority to negotiate lower Part D costs, as they already do with Medicaid. Thus, passively, they continue to be supportive of the pharmaceutical industry and the private Part D insurers and pharmacy benefit managers.

This is part of the pattern of CMS supporting the private sector, which includes their devious innovations to increase payments to private Medicare Advantage plans when the unequivocal intent of the law was to reduce their overpayments.

It is clear that CMS, with the full support of President Obama, is providing extra financial support, directly or indirectly, to the private sector administrators of our health care dollars, when the evidence is overwhelming that the public sector would obtain for us much greater value in our health care purchasing. The Obama administration appears to be permeated with industry shills.

It is no wonder that they reject any consideration of single payer. That would ruin the corrupt relationship that they have with the private sector.

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Stuart Butler on Section 1332 waivers

Posted by on Tuesday, Apr 28, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Why Section 1332 Could Solve the Obamacare Impasse

By Stuart Butler, PhD
The JAMA Forum, April 28, 2015

Section 1332 of the ACA, known as “State Innovation Waivers,” allows states, starting in 2017, to apply to the federal government for 5-year renewable waivers from key provisions of the legislation. For instance, states could request changes to or exemptions from the individual and employers mandate, the market exchanges, the exchange subsidies, the Essential Health Benefits requirements, and other provisions. Moreover, states can combine waivers from ACA provisions with waivers from Medicaid provisions (so-called 1115 waivers), Medicare, the state Children’s Health Insurance Program, and waivers available through “any other Federal law relating to the provision of health care items or services.”

Section 1332, however, is not a blank check for states to ignore the whole intent of the ACA, even assuming the White House or the next administration were open to that. It has important fine print. To obtain a waiver, a state’s proposal must retain important protections, such as guaranteeing that health plans accept an applicant regardless of their health status or other factor. The proposal’s coverage must be “at least as comprehensive” and cover “at least a comparable number of its residents” as the ACA, and insurance must be as affordable. Any state plan must also be budget neutral for the federal government.

Even with these limitations on state plans, section 1332 could lead to state health plans in the future that change the ACA beyond recognition. A Republican state like Arkansas, Utah, or Texas, for instance, could use the section to take the federal money for Medicaid expansion as a block grant and turn it into subsidies for families to buy private coverage. These or other states could also end the mandates on individuals and employers, perhaps using government-encouraged auto-enrollment for insurance to meet the ACA’s coverage projections. Meanwhile, states like Vermont, Oregon, and Hawaii could design waivers to create a form of single-payer health system.

The political ramifications of this wide flexibility under section 1332 are immense. For instance, Republican opponents of the ACA, recognizing that the foreseeable congressional makeup means outright repeal of the ACA is not feasible even if Republicans win the White House in 2016, would have a strategy for states to exit much of the ACA. Meanwhile liberals in other states would have a tool to move closer to their dream of a single-payer system. And the White House could claim that even in the Republican states with sweeping waivers, the ACA had been fully implemented. Moreover, the 1332 waivers would allow many of the technical problems of the ACA to be fixed at the state level without going to Congress.…

Stuart Butler’s name may be familiar to you as he was the policy expert that described the Heritage Foundation’s model of health care reform that was a counter proposal to the Clinton effort, and later became the model that formed the basis of the Affordable Care Act. We should take heed of his words on the potential of the state innovation waivers authorized by Section 1332 of the Affordable Care Act.

After ultraconservative Sen. Jim DeMint became president of the Heritage Foundation, Stuart Butler moved to the Brookings Institution and was thus less handicapped than he had been with the extreme right-wing political polarization at Heritage. His recent messages have been directed toward solutions that supposedly defuse the politics so that we can move forward on policy.

Without repeating any of his points made above, obviously he believes that the states should move forward with their own concepts of reform that would comply with their respective political climates. However, most of the flexibility he suggests would appeal to conservatives, though he mentions single payer to appease those in liberal states.

The problem is that Section 1332 is quite amenable to piecemeal measures that would gradually move health care further in the direction of a system that places more of the responsibility on the individual, making health care less affordable and less accessible (as if it were not bad enough already). Yet Section 1332 waivers cannot lead to single payer without enabling comprehensive federal legislation. Section 1332 is a setup for conservative policies, yet hardly opens the door for single payer. Acting on a state level alone, liberals cannot expect much more than tweaks to the Affordable Care Act.

Stuart Butler is now even better positioned to drive the dialogue on reform. If the politicians continue to listen to him, forget the dream of a more egalitarian system.

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Pharmaceutical firms contribute to wealth inequity

Posted by on Monday, Apr 27, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Pharmaceutical Companies Buy Rivals’ Drugs, Then Jack Up the Prices

By Jonathan D. Rockoff and Ed Silverman
The Wall Street Journal, April 26, 2015

On Feb. 10, Valeant Pharmaceuticals International Inc. bought the rights to a pair of life-saving heart drugs. The same day, their list prices rose by 525% and 212%.

Neither of the drugs, Nitropress or Isuprel, was improved as a result of costly investment in lab work and human testing, Valeant said. Nor was manufacture of the medicines shifted to an expensive new plant. The big change: the drugs’ ownership.

“Our duty is to our shareholders and to maximize the value” of the products that Valeant sells, said Laurie Little, a company spokeswoman.

More pharmaceutical companies are buying drugs that they see as undervalued, then raising the prices. It is one of a number of industry tactics, along with companies regularly upping the prices of their own older medicines and launching new treatments at once unheard of sums, driving up the cost of drugs.

Since 2008, branded-drug prices have increased 127%, compared with an 11% rise in the consumer price index, according to drug-benefits manager Express Scripts Holding Co.

Early last year, Mallinckrodt PLC paid $1.4 billion for Cadence Pharmaceuticals, though the Ofirmev pain injections that were the crown jewel of the deal were projected to have just $110.5 million in 2013 revenue, according to a Mallinckrodt conference call with analysts discussing the deal. Three months later, the list price for a package of 24 Ofirmev vials jumped almost 2½ times to $1,019.52, according to health-care data firm Truven Health Analytics.

“It seemed like highway robbery,” said Erin Fox, who directs the drug-information service at University of Utah Health Care.

The price increases can be very lucrative for companies. Horizon Pharma PLC upped the price of Vimovo pain tablets after buying the rights from AstraZeneca in late 2013. On Jan. 1, 2014, its first day selling Vimovo, Horizon raised the list price for 60 tablets to $959.04, a 597% increase. Horizon raised the price again on Jan. 1 this year to $1,678.32 for the tablets.

After Valeant agreed to buy the drugs in early January, the company hired a consultant to look at their prices. The consultant found the prices didn’t reflect the benefits of the drugs to patients and the costs that hospitals save by using the medicines, the person said. Valeant decided to raise the price. The list price of a one-milliliter vial of Isuprel, a treatment for abnormal heart rhythms, jumped to $1,346.62, up from $215.46, according to Truven. Meantime, a two-milliliter vial of Nitropress, which combats dangerously high blood pressure and acute heart failure, increased from $257.80 to $805.61.…

It seems that everywhere you turn these days there are articles covering the skyrocketing prices of pharmaceuticals.

One factor used by the pharmaceutical firms to explain their price increases is the benefit patients receive from the drugs – benefits that the pharmaceutical firms claim are so valuable that the prices should be much higher than their costs of doing business. When you have a superior product, you sell it at a higher price, with the financial benefits accruing to the owners of the firm. That’s the way markets work.

This WSJ article describes an even more nefarious process of market manipulations of drug prices. Pharmaceutical firms are buying the rights to the products of other firms, often buying the firms themselves, paying very high prices for these rights. There are several examples in thus article, but an even more egregious example is the action of Gilead Sciences in buying up the rights to the newer, more effective Hepatitis C drugs, again paying outrageous prices for those rights. They are recovering this capital cost by charging $1,000 or more for each pill sold, when a course of treatment may be 84 pills.

Think about that. A massive amount of capital is paid out, requiring the purchasing firm to charge much higher prices for those drugs to recover the funds paid to acquire the drug rights. Who receives the capital paid out? The wealthiest tier – the tier that holds by far the largest percentage of shares in public and private corporations. Who is paying higher prices to compensate for the capital purchase of the drug rights at inflated prices? It is predominantly middle-income Americans in the form of direct drug purchases or indirectly through insurance premiums, taxes for public programs, or forgone wages to pay for employer-sponsored benefits.

Thus the pharmaceutical firms are compounding the inequitable shift of capital from the workers to the wealthy (described by Piketty, Saez and others). This is being done through financial constructs for which Wall Street is so infamous. As patients, we are powerless to impede this process. It is the responsibility of government to provide the appropriate oversight to correct these injustices. Yet what did they do? Through the Affordable Care Act they handed more power and control over to the insurers and the pharmaceutical firms, leaving us at their mercy, even though mercy is not a quality found in amoral corporations.

These injustices would not be tolerated in a single payer system.

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John McDonough on Vermont’s single payer lesson

Posted by on Monday, Apr 27, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

The Demise of Vermont’s Single-Payer Plan

By John E. McDonough, Dr.P.H., M.P.A.
The New England Journal of Medicine, April 23, 2015

On December 17, 2014, Vermont Governor Peter Shumlin publicly ended his administration’s 4-year initiative to develop, enact, and implement a single-payer health care system in his state.

In reality, the Vermont plan was abandoned because of legitimate political considerations.

In many states, legislators continue filing bills to establish state single-payer systems. Because of Vermont’s failure, their path is both clearer and more difficult. Any other state considering this path will find obstacles similar to Vermont’s.

In the early 1990s, I served as a Massachusetts legislator who took a turn as the state’s leading single-payer advocate. After years of failure, I reluctantly concluded that single payer is too heavy a political lift for a state. Though the economic case is compelling, our body politic cares about more than just economics. In 2011, many observers thought that Vermont, a small and progressive state, was the ideal locale in which to try single payer. No more.

At some point, perhaps 5 to 15 years from now, as the size and scope of Medicare, Medicaid, and the ACA subsidy structure balloon far beyond today’s larger-than-life levels, our political leaders may discover the inanity of running multiple complex systems to insure different classes of Americans. If advanced by the right leaders at the right time, the logic of consolidation may become glaringly evident and launch us on a new path. If such consolidation is to occur, like it or not, I believe it will happen federally and not in the states — and no time soon.


From the audio:

“People who like the state approach refer to how the Canadian health care system started with the adoption of universal coverage for hospital services in the province of Saskatchewan back in the 1940s, and that is the idealized model. I just am unclear, unsure, doubtful how relevant that model is in an advanced developed system like those in the United States and the fifty states at this point.”

John McDonough is a professor of public health practice and director of the Center for Executive and Continuing Professional Education at the Harvard T.H. Chan School of Public Health.

NEJM article and audio:

Professor John McDonough, as an academic and as a legislator, has long been in the trenches with single payer. He knows what he is talking about.

The problem with using Saskatchewan as a model for reform in the United States is that Canada began with a clean slate whereas we have complex federal and state financing systems that will need to be replaced. States alone cannot do it without federal action.

Though we need federal reform, it will not happen in the immediate future since the politics are not in alignment. We need to intensify our efforts with the basics: education, coalitions, and grassroots organizing.

Until we get the politics aligned, activists should continue advocating for whatever state reforms are possible that would move us closer to health care justice. But do not let up in the least on the drumbeat for a single payer national health program – an improved Medicare that would cover everyone.

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Are we seeing the end of low priced generics?

Posted by on Thursday, Apr 23, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Teva Offers to Buy Mylan in $40.1B Cash-and-Stock Deal

By Linda A. Johnson, AP
ABC News, April 21, 2015

Generic drug giant Teva formally offered to buy fellow drugmaker Mylan for about $40.1 billion in cash and stock on Tuesday, despite Mylan’s cold shoulder and the certainty the proposed acquisition will bring intense scrutiny by antitrust regulators.

If Israel-based Teva Pharmaceutical Industries Ltd. succeeded, the combination would dominate the global generic drug market, be a major contender in some other specialty drug categories — and have the leverage to try to raise generic drugs prices.

After years of stability, generic medicine prices recently have risen several percent a year on average. Some have skyrocketed by up to 1,000 percent, generally when competition vanishes due to consolidation or shortages caused by manufacturing quality problems.

A tie-up wouldn’t just increase Teva’s scale, allowing it to boost profitability by cutting jobs and other costs. It would increase its leverage in negotiating drug prices with insurers and other payers, noted Les Funtleyder, health care portfolio manager at E Squared Asset Management.

“That’s going to feed into regulators’ interest,” he said.

That’s particularly true in the U.S., where seven of eight prescriptions filled are for generics and employers, insurers and government health programs encourage their use to hold down costs.…

New pharmaceutical products usually enter the market at the maximum prices that the market would bear. So it was always a relief when the patents expired and patients could obtain much less expensive generic versions of these drugs.

Now that almost 90 percent of prescriptions have generic versions available, the industry is busy trying to find ways of increasing generic drug prices, and they have been successful with prices rising as much as tenfold. One of the methods has been to gain greater control of markets through consolidation. That explains Teva’s interest in purchasing Mylan. Drug shortages, whether or not contrived, have also been a method of boosting prices. In many instances, drug prices sharply increased after the line was purchased by another firm, partly to recover capital investments, but no doubt to simply increase profits.

Is that the way markets should work? Supposedly markets should bring prices down, but today’s market innovations have been raising prices – almost intolerably so in the drug markets. The greater dependency on pharmacy benefit managers has only added a new wasteful administrative layer on top of our already overpriced drugs.

This would not be tolerated under a single payer system. Our own public purchaser of health care products and services would demand appropriate pricing – just enough profit to keep the pharmaceutical firms interested in pursuing their fair portion of our national health expenditures. But PhRMA had a front seat when the Affordable Care Act was constructed. That lobbying investment is really paying off for them now.

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Why are the elderly reluctant to support health care for all?

Posted by on Wednesday, Apr 22, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Obamacare, Hands Off My Medicare

By Thomas B. Edsall
The New York Times, April 22, 2015

A number of factors underpin the anti-redistributionist shift in public opinion that I wrote about last week.

First, and perhaps most important, is the emergence of significant resistance to downward redistribution among the elderly, a major voting bloc.

The views of older voters deserve scrutiny. They “worry that redistribution will come at their expense, in particular via cuts to Medicare,” Vivekinan Ashok, a Ph.D. candidate in political science at Yale; Ilyana Kuziemko, a professor of economics at Princeton; and Ebonya Washington, a professor of economics at Yale, write in a March 2015 Brookings Institution essay, “Support for Redistribution in an Age of Rising Inequality”— an essay my Times colleague Neil Irwin also discussed in a recent column that asked why Americans don’t want to soak the rich.

In the end, Ashok, Kuziemko and Washington conclude that “the elderly have grown increasingly opposed to government provision of health insurance and that controlling for this tendency explains roughly half of their declining relative support of redistribution.”

What the Brookings essay neglects to explore are the material circumstances of over-65 voters that might affect their views on redistribution. Over a third of retirees depend on Social Security for 90 percent or more of their annual income, according to the Social Security Administration. In the zero-sum competition for federal dollars, the cost of major spending programs like the Affordable Care Act has to be made up by spending cuts elsewhere.

The Obama administration has reported that the Affordable Care Act will be financed in part by $716 billion in Medicare cuts over 10 years. Somewhat improbably, the administration also contends that cuts of this magnitude will not reduce services to Medicare beneficiaries.

The decline in support among the elderly in the United States for redistributive social spending stands in contrast to Britain, Germany, Sweden and Australia where Ashok, Kuziemko and Washington found that older people were more supportive of redistribution than those of working age. In most European countries, health care is guaranteed regardless of age, while in the United States, before the enactment of the Affordable Care Act in 2010, only the elderly were guaranteed health coverage through Medicare.

This lends support to the authors’ conclusion that “seniors, a group unique in having guaranteed health insurance during our sample period, may increasingly feel that expansions of redistributive programs could come at their expense.”

Further increasing anxiety among the aged in the United States is the shift from defined benefit pensions, which guarantee payments, to defined contribution pensions, which do not.

“Our best assessment is that retirees are falling short and will fall increasingly short over time,” Alicia H. Munnell, Matthew S. Rutledge and Anthony Webb, researchers at Boston College’s Center for Retirement Research, wrote in November 2014.

“The new demographic transition is a longevity transition: how will individuals and societies respond to mortality decline when almost all of the decline will occur late in life?” Karen N. Eggleston, director of the Stanford Asia Health Policy Program, and Victor R. Fuchs, professor emeritus of economics at Stanford write in a 2012 study. The combination of longer lives and unreliable pension benefits increases retirees’ dependence “on transfers from the working population for living expenses, including large consumption of medical care,” Eggleston and Fuchs note.

In his new book, “The Business of America Is Lobbying,” Lee Drutman, a senior fellow at the New America Foundation, provides insight into a crucial element of this power shift.

Beginning in the early 1970s, just as support for redistribution began to decline, “corporate America began to devote attention and meaningful resources to politics,” Drutman writes. “The 40-year trend has overwhelmingly moved in one direction: growth. Corporate lobbying expenditures now dwarf the comparable investments of unions” and public interest or citizen groups.

From 1998 to 2012, the ratio of corporate/trade association lobbying spending to union/public interest group spending went from 22 to one to 34 to one, Drutman found.

In a November 2014 article “The Ideological Asymmetry of the American Party System,” Yphtach Lelkes of the University of Amsterdam, and Paul Sniderman of Stanford, both political scientists, develop an intriguing argument on how Republicans have mobilized public opposition to Democratic social policies that initially carried strong popular support.

The conservative strategy, they write, is to portray “social welfare policies as benefiting particular interest groups rather than society as a whole.” The more the electorate sees a policy or program as “particularistic” — as opposed to universalist — the less backing the public will give the program.

On a broader scale, the political scientists Jacob Hacker and Paul Pierson, in their chapter of the 2013 book “Representation: Elections and Beyond,” have sought to understand the logic of working-class white “support for the G.O.P. in an era of runaway inequality.”

Hacker and Pierson argue that not only has business mobilized for over four decades now, but so, too, have conservative foundations, think tanks and the religious right.

“There was a common theme linking these disparate trends: all of them worked to diminish the presence of organized voices addressing the economic concerns of ordinary Americans in Washington,” Hacker and Pierson write. “G.O.P. electoral inroads among less affluent voters have occurred alongside declining public confidence in government and growing perceptions that politicians are excessively responsive to ‘special interests.’ ”

The authors add, “In this context, calls for limited government and self-reliance receive greater hearing, especially when there are few contrary organizational signals pushing voters the other way.”…

A half century ago, when the nation seemed ready to ensure health care for everyone, it was decided instead to establish programs for the two groups with the greatest needs: Medicare for retirees and Medicaid for the poor. It was intended that Medicare eventually would be expanded to include everyone.

As it turns out, these two programs have such strong political support that they not only survived the half century, they will be perpetuated indefinitely as a result of the decision to enact the the policies contained in the Affordable Care Act rather than to expand Medicare, as originally intended.

Thomas Edsall provides us with a background of understanding why our seniors so passionately support Medicare while demanding that we keep the government out of their Medicare. No matter how progressive a person’s views are, there is always an element of self-interest, and quite appropriately so. Edsall, in expanding on his anti-redistributionist article of last week, explains that seniors are concerned that further redistribution to others risks reduction of redistribution to themselves, though they might not think of it in those terms. It is this fear that has contributed to declining support by our seniors for health care for all.

Of course, conservatives, through massive lobbying efforts, have leveraged this view to convert it into policy. Those who would suffer the most through a reduction in redistribution have been particularly tenacious in clinging to the idea that greater benefits for others would reduce benefits for themselves. You know that’s true because it’s on Fox News.

In reality, a well designed system of redistribution would improve benefits for everyone. The cost would be borne disproportionately by those who are already spending massively to thwart programs of social justice.

Thomas Piketty and others have shown us that disproportionate taxation (progressive taxes) is precisely what we need, and the concentration of income and wealth at the top is so great that the lifestyles of the rich would not be impaired in the least. But just try to tell that to the elderly lady carrying the picket sign stating, “KEEP GOVERNMENT HANDS OFF MY MEDICARE!”

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Price gouging by drug manufacturers

Posted by on Tuesday, Apr 21, 2015

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

State questions rise in overdose drug price

By Brian MacQuarrie
The Boston Globe, April 20, 2015

Attorney General Maura Healey is demanding that companies selling naloxone in Massachusetts explain why the cost of the drug, which is used to reverse heroin overdoses, has skyrocketed since former governor Deval Patrick declared a public health emergency a year ago.

The drug, often marketed under the brand name Narcan, has become a critical tool for emergency workers who use it to revive overdose victims. Without Narcan, thousands of overdoses during the past few years would have resulted in deaths, authorities have said.

To help ensure that distributors are not taking advantage of a sudden surge in demand, Healey’s office last week asked the distributors to provide detailed records of all naloxone sales to public entities in Massachusetts since April 1, 2014, less than a week after Patrick’s declaration made the drug available to all first responders.

Since then, price increases “have strained access to this life-saving medication at exactly the moment when it is most needed,” the companies were told in certified letters. “Our office has heard regularly from local law enforcement and public health workers worried about their ability to maintain supplies.”

Healey’s office sent certified letters requesting answers by April 30 to Moore Medical of Farmington, Conn.; Bound Tree Medical of Dublin, Ohio; McKesson Corp. of San Francisco; and Southeastern Emergency Equipment of Wake Forest, N.C.

Kristin Hunter, a spokeswoman for McKesson Corp., told the Globe that the company “does not set wholesale prices or the retail drug prices paid by consumers or health plans.”

Those prices often are set by the manufacturer. Staff from Healey’s office identified Amphastar Pharmaceuticals of Rancho Cucamonga, Calif., as the producer of much of the naloxone used in Massachusetts, and said they have been in discussions with the company about pricing since February.

Amphastar officials did not return repeated phone calls from the Globe requesting comment.…

Drug manufacturers recently have been engaged in outrageous pricing practices for essential drugs that they produce – the hepatitis C drugs being an egregious example.

Narcan – a crucial life saving drug that reverses narcotic overdoses – now has much wider distribution since it has become available to first responders. The manufacturer – Amphastar Pharmaceuticals – in what has to be more than a mere coincidence, chose this time to sharply increase the price of this drug.

When the market is dysfunctional, it is the responsibility of government to intervene. The United States has shirked its responsibility. We need to revise our approach.

A single payer national health program functions as a monopsony – a single purchaser of products and services. In private markets, monopsonistic pricing can be as evil as monopolistic pricing like the example of Narcan. The difference with a government monopsony is that it gets pricing right – an adequate price to be sure that products and services remain available, yet at a price that does not gouge the taxpayers who fund the system.

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