We Are Better Than This

How Government Should Spend Our Money

By Edward D. Kleinbard

This book argues that the strand of contemporary American political thought that defines itself through its hatred of taxation is narcissistic self-pleading wrapped in a flimsy sheath of economic lingo. Personal economic liberty, of course, is one foundational principle of our country and our economy, but it is not the only principle that defines us; and the emaciated government that this philosophy demands is not the way to promote the happiness of society, if by that we actually mean the society composed of all of us who identify ourselves as Americans. Our fixation on taxation means that we have turned our thinking upside down: instead of focusing on what government might usefully do, and whether we can afford it, we obsess over the taxing side of things, and ignore the purposes to which those tax revenues are applied.

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We do not pursue the path of of our society’s happiness, including our collective prosperity, by pursuing abstractions like the sanctity of markets if by doing so we waste $1 trillion or so every year in healthcare spending, and further leave tens of millions of Americans without adequate healthcare coverage, thereby condemning them to worse long-term health outcomes and to risks of bankruptcy. To the contrary, the markets here are telling us something quite clearly, which is that healthcare for all members of a society is a load that private markets cannot lift alone. And what is true of healthcare of course is even more apt for broader forms of insurance against the vicissitudes of life.

The alternative – a national single-payer system – is so obvious, and so powerful in its logic, that it beggars belief that the Obama administration abandoned it in the debate leading up to the Affordable Care Act. There is a reason, after all, why virtually all other developed countries rely on this solution (whether in those words, or through combinations of policy instruments that have the same effect), and why the United States itself relies on it for all its seniors (through Medicare) and all its veterans (through the VA system, which actually is a single-provider system). At one stroke, the fundamental problem of adverse selection disappears, because all members of society participate. Premiums are easily collected through the existing tax administrative machinery. A patchwork of largely monopolistic local sellers now faces a monopsonistic buyer. Operating administrative costs are reduced, as we see today in Medicare administration. There is more than enough value on the table here to compensate the medical community fairly and still reap hundreds of billions of dollars of savings every year.

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This book has examined how we are doing in investing in ourselves, and in offering coherent social insurance programs. The answer is not very well. We starve ourselves of investment in infrastructure, and we underinsure ourselves in many respects. The result is a less happy society, to return to Adam Smith’s injunction to us, and also a less prosperous one. Well-designed social insurance programs increase our appetite for economic risk, rather than depress it, and public infrastructure investments yield positive economic returns, just as private investments do. These are the functions that our government is good at and to which this book has been addressed. Once one moves beyond police powers and the like, what we call government spending and taxing in many respects is really investing and insuring, with those investments and insurance premiums collected through the mechanism of taxation.

This book has further considered whether we have reached some natural limit in  our ability to finance collective investment and insurance through the intermediation of government. The answer is no. We face budget deficit issues today because we have chosen systematically to undertax ourselves since 2001, not because the engine of our economy cannot supply any more revenues than those we currently collect.

In short, for the last decade or more we have allowed the existence of deficits to determine the contours of our government spending – the uses to which we put our government. This is backward. What this book has urged is that the right way to think about things is to ask this question: What investment and insurance opportunities are there for all of us, acting together, to advance the happiness of our society? In answering this question, we need to be mindful of a great many dynamics – the frustration and unhappiness that comes with paying taxes, the deadweight loss of taxation, the estimated positive economic and social returns on that collective spending, the limited competencies of government agencies, and so on. But the starting point in every case should not be determined by establishing an arbitrarily small amount of tax to collect, and then treating the government like an institutional Procrustes, whose only responsibility is to amputate the welfare of our fellow citizens to suit that amount.

(Edward Kleinbard is the Johnson Professor of Law and Business at the University of Southern California’s Gould School of Law and a Fellow at the Century Foundation. He previously served as Chief of Staff of the U.S. Congress’s Joint Committee on Taxation, the nonpartisan tax resource to Congress.)

http://kleinbard.usc.edu/book/

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Comment:

By Don McCanne, M.D.

This book is a particularly valuable resource during this political season. As one of the nation’s most astute authorities on taxing and spending, Edward Kleinbard provides us with a solid basis for understanding what we intuitively find to be lacking in the tax and spending rhetoric being thrown around by the politicians.

By obtaining a good grasp on the complexities of taxing and spending we can better advocate for what is really a simple concept: we can have broad agreement on where the government should be spending our money, such as on public infrastructure and social insurance programs, and then decide on the most equitable methods of taxation to fund the programs.

A prime example of logically applying the complexities of tax and spending policies is the way that we should be paying for health care. As Kleinbard states, “a national single-payer system is so obvious, and so powerful in its logic, that it beggars belief that the Obama administration abandoned it in the debate leading up to the Affordable Care Act.”

Wyden-Grassley Sovaldi Investigation Finds Revenue-Driven Pricing Strategy Behind $84,000 Hepatitis Drug

18-Month Investigation Reveals a Pricing and Marketing Strategy Designed to Maximize Revenue with Little Concern for Access or Affordability

Senator Ron Wyden, Press Release, December 1, 2015

Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and senior committee member Chuck Grassley, R-Iowa, today released the results of an 18-month investigation into the pricing and marketing of Gilead Sciences’ Hepatitis C drug Sovaldi and its second-wave successor, Harvoni. Drawing from 20,000 pages of internal company documents, dozens of interviews with health care experts, and a trove of data from Medicaid programs in 50 states and the District of Columbia, the investigation found that the company pursued a marketing strategy and final wholesale price of Sovaldi – $1,000 per pill, or $84,000 for a single course of treatment – that it believed would maximize revenue. Building on that price, Harvoni was later introduced at $94,500. Fostering broad, affordable access was not a key consideration in the process of setting the wholesale prices.

“Gilead pursued a calculated scheme for pricing and marketing its Hepatitis C drug based on one primary goal, maximizing revenue, regardless of the human consequences. There was no concrete evidence in emails, meeting minutes or presentations that basic financial matters such as R&D costs or the multi-billion dollar acquisition of Pharmasset, the drug’s first developer, factored into how Gilead set the price. Gilead knew these prices would put treatment out of the reach of millions and cause extraordinary problems for Medicare and Medicaid, but still the company went ahead. If Gilead’s approach to pricing is the future of how blockbuster drugs are launched, it will cost billions and billions of dollars to treat just a fraction of patients,” Senator Wyden said.

“The Finance Committee has tremendous responsibility in overseeing the federal programs paying for prescription drug coverage,” Senator Grassley said.  “With that responsibility, the committee should know how the costs to the public programs and private insurance companies of a single innovative drug entering the market without competition can have major effects on which patients get the new drug and when.  This report sheds light on one example of the pricing decisions made by one company with a new prescription medicine that entered the market without competition in high demand.”

Additional major findings from the investigation include:

*  Gilead justified Sovaldi’s high price point based on price-per-cure

*  Gilead set a high price for Sovaldi with an eye toward ensuring a future high price for Harvoni

*  Gilead underestimated the degree of access restrictions that it expected would result from its pricing decision

*  Despite significant access restrictions, Gilead refused to significantly lower the net price

*  The burdens on Medicare, Medicaid, and the Bureau of Prisons were significant

The press release includes links to the Executive Summary and 144 page report:
https://www.wyden.senate.gov/news/press-releases/wyden-grassley-sovaldi-investigation-finds-revenue-driven-pricing-strategy-behind-84000-hepatitis-drug

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It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D Enrollees in 2016

By Jack Hoadley, Juliette Cubanski, and Tricia Neuman
Kaiser Family Foundation, December 2, 2015

Medicare Part D drug plans differ considerably in the drugs they list on their formularies, their use of formulary tiers, and the level and structure of cost sharing applied to those tiers. Plan premiums and the use of deductibles also vary widely. Plan decisions affect different beneficiaries in different ways, depending on the drugs they use. The financial consequences for Part D plan enrollees can be substantial. In this brief, we focus on out-of-pocket drug costs for Part D enrollees in 2016 for specialty, brand, and generic drugs.

Part D enrollees can expect to pay thousands of dollars out of pocket for a single specialty drug in 2016, even after their drug costs exceed the catastrophic coverage threshold

From Figure 1:

Median on-formulary out-of-pocket costs in 2016:

Sovaldi  $6,608

Harvoni  $7,153

Part D enrollees’ out-of-pocket costs for many specialty drugs are substantial at the start of the year, and continue even after spending exceeds the catastrophic coverage threshold

Out-of-pocket costs are substantially higher—often ten times higher or more—for specialty drugs when they are not listed on formulary by a Part D plan

http://kff.org/medicare/issue-brief/it-pays-to-shop-variation-in-out-of-pocket-costs-for-medicare-part-d-enrollees-in-2016/

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Comment:

By Don McCanne, M.D.

Gilead’s heartless strategy in deciding to price their hepatitis C drugs well above what any reasonable market would tolerate demonstrates yet another detrimental consequence of our health care financing model, perpetuated and expanded by the Affordable Care Act. Gilead assumed that they could get away with it since they figured that most of the costs would be covered by the drug plans in the various public and private insurance programs. Well, they pushed too hard.

The extensive investigation by the staffs of the Senator Ron Wyden and Senator Charles Grassley confirmed that the pricing of Sovaldi and Harvoni was based on pure greed, ignoring completely the human consequences.

The other report released today by the Kaiser Family Foundation demonstrates the consequences that these egregious pricing behaviors have on Medicare beneficiaries enrolled in the Part D drug program — a program supposedly designed to improve value by leveraging market forces. Even when the preferred drug — Harvoni — is included in the Part D formulary, the median out-of-pocket cost for the Medicare beneficiary is $7,153! There goes the food and the rent and a whole lot more.

The Kaiser Foundation report is particularly helpful in demonstrating how deficient the Medicare Part D program is. They suggest shopping, but who knows what outrageously priced drugs will be prescribed next year? How can you shop drug formularies for drugs you have not yet been prescribed?

Single payer advocates understand that none of this would be tolerated in a well designed national health program. You would simply receive the drugs you need, when you needed them. Gilead would be compensated fairly for their products. It’s just too bad that their current executives will not end up in jail, where they belong.

STAT-Harvard poll: Dismayed by drug prices, public supports Democrats’ ideas

By David Nather
STAT, December 1, 2015

Most Americans believe that the prices of brand-name prescription drugs have become unreasonable, and their dismay is leading to wide support for government action to keep costs down, including letting Medicare negotiate prices with drug companies, according to a new poll by STAT and the Harvard T.H. Chan School of Public Health.

About 7 out of 10 Americans, including two-thirds of Republicans, said Medicare, the federal health insurance program for older and disabled Americans, should be able to negotiate lower prices for all prescription drugs.

The poll found that the pharmaceutical industry’s reputation has suffered substantial damage. Barely half of all Americans now say drug companies are doing a good job for their customers, compared with the nearly 8 out of 10 who expressed that kind of confidence in a 1997 Harris Poll.

And they soundly rejected the industry’s argument that government action against rising drug costs would slow the development of new drugs. Sixty-four percent said they did not believe that would happen if Medicare negotiated lower prices, while 26 percent said they believed it could.

It also matters how potential government action on drug costs is framed. When it’s described as “price controls” under Medicare rather than “negotiating prices,” there’s a sharp drop-off in support among Republicans and senior citizens.

When given a choice of different options for dealing with extreme price hikes and the most expensive new drugs, Americans were divided between letting the government negotiate lower prices and approaches intended to promote competition.

Government negotiations was the most popular option and importing drugs came in second. Reducing regulations was the least preferred option, with the support of 1 out of 5 Americans.

In follow-up interviews, people who participated in the poll expressed a common theme: They’re not sure what the best solution is — they just want the government to do something.

The fact that the support for Medicare negotiations is so high, even though few people are personally experiencing high drug costs, suggests that their reactions are being driven by the perception that drug prices have become “just unreasonable” for others, according to Robert Blendon, a professor of health policy and political analysis at Harvard who directed the poll.

“It’s not people’s experience. It’s people’s outrage,” said Blendon.

http://www.statnews.com/2015/12/01/stat-harvard-drug-prices-poll/

Poll results:
https://cdn1.sph.harvard.edu/wp-content/uploads/sites/94/2015/11/STAT-Harvard-Poll-Nov-2015-Controversy-Over-Rising-Drug-Prices.pdf

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Comment:

By Don McCanne, M.D.

There is an important lesson here for single payer advocates. The public now wants the government to do something about the large increases in drug prices. It is not because of personal experience with these high prices but rather it is due to the OUTRAGE over the injustice of patients in need unnecessarily facing egregiously high drug pricing.

Much worse than the drug pricing crisis is the financial hardship, outrageous physical suffering and even loss of life that is due to our highly dysfunctional method of financing health care, even though we are spending about twice as much per capita as the average of other wealthy nations.

Our nation needs to understand that merely switching to a single payer system would correct the injustices of the financing system that the Affordable Care Act failed to rectify. With a well designed single payer system we would not only get the pricing of pharmaceuticals right, we would price correctly the rest of the system as well while improving access and free choice of health care – all without spending any more than we do already, yet spending it more equitably so as to eliminate for everyone the prospect of financial hardship due to health care.

If it takes outrage to create a demand for government action, then let’s work on our framing so that people understand that they should be outraged by the profound but remediable injustices that characterize our health care financing system. Start with intensified efforts to educate the media, since it has been the media that aroused the nation on outrageous drug pricing.

Instability in Marketplaces Draws Concern on Both Sides of Health Law

By Robert Pear and Abby Goodnough
The New York Times, November 27, 2015

The latest turmoil in health insurance marketplaces created by the Affordable Care Act has emboldened advocates on both sides of the political spectrum, providing ammunition to conservatives who want to shrink the federal role and liberals who want to expand it.

UnitedHealth Group rattled federal officials when it announced last week that it was losing money in the insurance exchanges, saw no reason to expect improvements in 2016 and might pull out in 2017. Those concerns followed the collapse of 12 of the 23 nonprofit insurance cooperatives created with federal loans under the health law.

In addition, insurance markets in many states are unstable. Premiums are volatile. Insurers say their new customers have been sicker than expected. And the law is as divisive as ever.

Whether the problems in the marketplaces are just temporary setbacks for the law, as the White House contends, or signs of fundamental problems, as Republicans say, is not clear.

Arguments once made by Republicans as polemical debating points are now echoed by consumers who say they cannot afford to use insurance because of high out-of-pocket costs.

In applying for rate increases in 2016, many insurers filed data showing that they had lost money on their exchange business in 2014. To stop the losses and control costs, many have increased premiums and deductibles and other out-of-pocket costs, while reducing the number of doctors and hospitals available to consumers through their provider networks.

Conservatives want to let consumers buy policies with fewer mandated benefits, on the theory that such coverage would be more affordable. Some lawmakers say that insurers should be allowed to sell cheaper “copper” plans alongside the bronze, silver, gold and platinum plans available in the marketplaces.

Harvey J. Rosenfield, the founder of Consumer Watchdog, an advocacy group based in California, suggested that “maybe the government should step in and run the system as Medicare for all.”

“People are sticking their heads in the sand if they say there are not serious problems with the Affordable Care Act,” Mr. Rosenfield said, adding: “People who were previously uninsured are indisputably better off, but many people in the middle class are struggling. They are entitled to buy health insurance, but that is an empty promise if the number of doctors and hospitals in your network has shrunk and deductibles have soared.”

http://www.nytimes.com/2015/11/28/us/politics/instability-in-marketplaces-draws-concern-on-both-sides-of-health-law.html

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Comment:

By Don McCanne, M.D.

Instability. Shrinking networks. Soaring deductibles. These are characteristics of plans offered in the Obamacare insurance exchanges – features that are now contaminating employer-sponsored health benefit programs. What can be done?

We can stabilize choice in physicians and hospitals by eliminating the networks, providing patients with free choice of their health care professionals and institutions. We can eliminate instability in access caused by financial barriers to care by eliminating deductibles, copays and coinsurance. We can stabilize insurance coverage by mandating it while making premiums truly affordable for everyone.

The problem is that under the current model of financing care, the insurers cannot offer plans with affordable premiums without reducing patient access to care – precisely what networks and deductibles are designed to do.

As it turns out, even with these perverse measures most insurers are still losing money. Mounting losses only perpetuate and intensify instability since the insurers must make additional changes to ensure the success of their business model. Quite clearly, additional changes based on business decisions will benefit only the insurers while serving to the further detriment of patients.

Suppose we did reverse course and eliminated networks, excessive cost sharing, tiering of benefits, and other detrimental features of today’s health plans. The variable that would have to give is affordability of the insurance premiums. They would skyrocket. If we really want people to have affordable access to decent health care by correcting these problems, that means that the government subsidies would have to be greatly expanded  – both in the amount and in the size of the population that would be eligible. Basically, the government would be covering much of our care, except for the wealthy.

If we were to spend that much in taxes to support such a system, why would we perpetuate this very wasteful and dysfunctional model that we have? If we had any sense, we would demand an efficient, effective system that would ensure access for everyone – a single payer national health program (an improved Medicare for all). Until we do, learn to enjoy the torment of increasing instability in our health care.

In U.S., 51% Say Government Should Ensure Healthcare Coverage

By Justin McCarthy
Gallup, November 23, 2015

U.S. adults are slightly more likely to say it is the responsibility of the federal government to ensure all Americans have health insurance coverage (51%) than to say it is not the government’s responsibility (47%). The percentage who believe the government has that obligation is up six percentage points from 2014. This year marks the first time since 2008 that a majority of Americans say the government is responsible for making sure all citizens have health insurance.

From 2000 to 2008, between 54% and 69% of Americans said ensuring healthcare coverage for all citizens was the responsibility of the federal government. But the issue grew more divisive in 2009, as President Barack Obama worked to enact the Affordable Care Act, which Congress passed in 2010. Between 2009 and 2011, Americans were split nearly evenly on the matter. Then from 2012 to 2014, public opinion shifted, with slight majorities saying healthcare coverage was not the government’s responsibility.

Do you think it is the responsibility of the federal government to make sure all Americans have healthcare coverage, or is that not the responsibility of the federal government?

Percent saying, Yes, government responsibility:

2005  58
2006  69
2007  64
2008  54
2009  47
2010  47
2011  50
2012  44
2013  42
2014  45
2015  51

Which of the following approaches for providing healthcare in the United States would you prefer – a government-run healthcare system, or a system based mostly on private health insurance?

Percent saying, System based on private insurance:

2010  61
2011  56
2012  57
2013  61
2014  61
2015  55

http://www.gallup.com/poll/186782/say-gov-ensure-healthcare-coverage.aspx

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Comment:

By Don McCanne, M.D.

Regarding views toward health care reform, there is a suggestion in these polling results from Gallup that the American public may be influenced more by politics than by policy, but that might be changing.

After experiencing unsustainable rises in health care costs along with the abuses inflicted upon us by the managed care industry, there was considerable support for having the government assume responsibility for health care coverage, peaking in 2006 at 69%.

The support persisted as a majority of the nation gathered around the candidacy of the man offering us HOPE – Barack Obama. Although a few Republicans were ready to work with President Obama and the Democrats on health reform, the Republican leadership decided that it was more important to make Obama a one-term president. Thus began one of the most politically polarized times in the history of the United States.

Although initially distracted by the financial crisis, the battle over health care reform quickly commanded the nation’s attention. Without regard to a consideration of beneficial health care policies, the Republicans demonized Obamacare, and their constituents joined in with a vengeance. Much of the bashing included intense anti-government rhetoric. By 2013, when reform was largely implemented, support for a government role had dropped to 42%. At the same time, support for private insurance plans, which formed the basis not only of Obamacare but also of the models proposed by the Republicans, was at 61%.

It is important to note that the Republican versions of private insurance were much less comprehensive than plans available today, but there was never a serious discussion of the policy implications of these plans which would leave patients with fewer benefits and exposed to even greater out-of-pocket costs than we have with today’s high-deductible plans.

Now that Obamacare has been implemented and patients are experiencing high premium costs, intolerable cost sharing, skyrocketing drug costs, and loss of choice of their health care providers, people are beginning to realize that private plans are failing on their promise to bring us higher quality at lower costs. There is a suggestion in the polls that people are beginning to lose faith in private insurance.

A bare majority – 51% – now say that it is the responsibility of the federal government to make sure that we all have health care coverage. A majority – 55% – say that the system should be based on private insurance, but that is declining from last year’s high of 61%. It is possible that support for private insurance may plummet as more individuals discover that they gave up their choices of physicians and hospitals in exchange for an insurance program that failed to protect them against financial hardship – what most believe to be the primary function of insurance.

As others make the some discovery, we may finally reach the critical threshold of support that we need to convince Congress to enact a single payer national health program – an improved Medicare for all. Can hardly wait.

Drug makers and insurers, longtime rivals, eye an alliance on prices

By Dylan Scott
STAT, November 24, 2015

With rising drug prices such a hot topic here, drug makers and health insurers are both coming under heavy fire.

So much fire that they’re considering a radical response: working together.

After years of relentlessly attacking one another, leaders of the pharmaceutical industry and the health insurance lobby are considering — warily — cooperating to shape any federal legislation that emerges from the public outrage at the high cost of medications.

The two powerful lobbies remain fundamentally at odds in their agendas: In the most basic terms, drug makers want to make as much money as they can for their medicines, and insurance companies want to pay as little as possible.

But both lobbies have new leaders, who recently met for breakfast at a French bistro in what could turn out to be a tentative step toward an alliance. And both are under a lot of pressure from Congress and the Obama administration to figure out a unified response to high drug prices.

Health insurers

Marilyn Tavenner, a reserved, unflappable former hospital executive, took over at America’s Health Insurance Plans, the prominent health insurance lobby, in August. Six months earlier, she had resigned as the head of the federal Centers for Medicare and Medicaid Services, which made her one of the top federal officials overseeing the implementation of the Affordable Care Act.

In an interview with STAT, Tavenner described her goals this way: Stop the public relations battle with the drug lobbying group Pharmaceutical Research and Manufacturers of America over who deserves the blame for drug prices. And start a constructive dialogue about how to fix it.

Shortly after Stephen Ubl was named new head of the PhRMA lobby in September, Tavenner reached out to him, offering a sit-down to get acquainted. This month, they met for breakfast at Poste, an upscale French bistro in downtown Washington.

In terms of approaching lawmakers with a plan on pricing, she said, “I would want to go to PhRMA first and see if there’s something that we can take together as an initial solution. That would be my preference.”

Tavenner’s stance is simple: The insurance industry took a bigger hit under President Barack Obama’s health care law. Its market was significantly overhauled. So this time, it’s pharma’s turn.

“I would argue that [insurance] plans have definitely undergone a fundamental change,” Tavenner said, “and I’m not sure PhRMA’s there yet.”

She pointed to the health care law’s requirement that health plans disclose how much of their premiums are spent on actual health care, as opposed to administrative costs or profits. “Why wouldn’t that apply to PhRMA?” she asked.

Drug makers

Ubl, who started his career in Washington working for Republican Senator Chuck Grassley of Iowa, assumed his post at the beginning of November.

Drug makers… have one of the most experienced and influential lobbies, with big expectations about getting their way. The independent research firm APCO Insight recently ranked PhRMA, and its $200 million annual budget, as the most effective lobbying group in the nation’s capitol.

PhRMA officials in interviews emphasized their interest in working with insurers to find workable policies. But they also spent a lot of time reiterating how much health plans have changed under the Affordable Care Act, leading to consumers paying more of their own money for drugs.

“They are paying more, but not all of that is in relation to us and our products,” said Lori Reilly, PhRMA’s executive vice president for policy and research. “That’s in relation to how the system is changing and how the insurance benefit design has changed in a way that doesn’t always help patients.”

Drug makers want to turn the conversation to one of value — in particular, the value that they say their medicines provide by preventing people from getting sicker. That not only helps the patient but could save money for society in the long run, they argue.

If a breakthrough new drug comes to market, Reilly said, “will it have a big price tag? It might. If we really are moving toward a value-based health care system, then medicines that truly represent value should merit a larger price, and we’re comfortable with saying that should be the case.”

So what now?

Nobody is expecting any major legislation before a new Congress and president are sworn in in 2017. So for now, both sides are publicly posturing, trying to position themselves for backroom negotiations if and when the nitty-gritty work of drafting a bill gets underway.

Political momentum might force the groups into the alliance that Tavenner and PhRMA are weighing. Recent polling has found that drug affordability is Americans’ number-one health care concern, and politicians are responding accordingly.

The Department of Health and Human Services convened a forum on drug prices last week that included top officials from both industries. The star panel featured Merck chief executive officer Kenneth Frazier, who also happens to chair the PhRMA lobby, and Kaiser Permanente chief executive Bernard Tyson, who sits on AHIP’s board.

Their differences were on full display.

Frazier stressed the drug industry’s commitment to value, while cautioning that it’s hard to define that. Tyson argued that the drug market must be overhauled because, in the end, a drug company can price a medication however it wants.

“To me, that says we’re not on a level playing field yet. That’s what the government should be looking at,” Tyson said. “There’s something wrong with the whole ecosystem.”

http://www.statnews.com/2015/11/24/drug-prices-health-insurers/

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In new ad, Hillary Clinton puts insurance industry on notice

By David Nather
STAT, November 21, 2015

Democratic presidential candidate Hillary Clinton is featuring her proposal to rein in rising prescription drug prices in a new ad — with a populist twist that turns health insurance companies into the bad guys.

In the ad, released Saturday and being aired in New Hampshire and Iowa, Clinton highlights her history of work on health care issues and promises that one of her next fights will be about about “taking on insurance companies to bring down drug prices.”

http://www.statnews.com/2015/11/21/hillary-clinton-drug-prices/

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Hillary Clinton’s Plan for Lowering Prescription Drug Costs

Hillary for America, The Briefing

Hillary Clinton believes we need to promote competition and leverage our nation’s bargaining power to lower drug costs on behalf of Americans.

Clinton’s plan will ensure that new drugs coming on the market provide value and high quality to consumers, rather than adding to cost without improving treatments and outcomes. Clinton recognizes that new drugs can constitute incredible breakthroughs in treating diseases from Hepatitis C to cancer to heart disease – and we need to ensure that there are proper incentives for real innovations that bring effective products to market. Clinton believes that Americans should not face extreme costs, or pay too much for drugs that do not in actuality improve on available treatments. She has a long and strong record of supporting the evaluation of the value, quality, and comparative effectiveness of new drugs. That’s why she’ll build on provisions in the Affordable Care Act that invest in private research, and other private efforts, to use the results of private-sector analyses to hold drug companies accountable for justifying their costs and ensure Americans pay drug prices that reflect the improved value new treatments provide.

https://www.hillaryclinton.com/p/briefing/factsheets/2015/09/21/hillary-clinton-plan-for-lowering-prescription-drug-costs/

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Comment:

By Don McCanne, M.D.

Although what we needed was a single payer national health program, Congress and the Obama administration elected to protect the interests of the insurance and pharmaceutical industries by allowing their powerful lobby organizations, AHIP and PhRMA, to craft health care reform by merely expanding our fragmented, dysfunctional model that placed their interests first while falling far short of goals that were important for patients – universality, affordability, and health care choices.

By merely expanding our fragmented, dysfunctional financing system controlled largely by the private sector, perpetuation of existing problems plus the introduction of new problems by private sector innovations were inevitable. Of course, we’ve seen the expansions in the use of high deductibles which are causing financial hardship, and the increased use of narrow networks which are taking away patients’ choices in health care. As if these weren’t bad enough, the change that has caused the greatest distress, according to polls, has been the skyrocketing prices of drugs.

In decades past, physicians and hospitals were able to raise prices because patients were insulated from the escalating costs by their insurers. But health care spending increased to levels that threatened the affordability of insurance products because of the high premiums that were required to cover health care costs. That led to the managed care revolution, which, though tempered, left insurers in control of health care pricing through provider contracting.

Now that drug plans have become a standard, the pharmaceutical firms are insulated against the potential decline in their market that could occur with patient resistance to escalating drug prices. Although the insurers and pharmacy benefit managers do negotiate some discounts, they have not been able to prevent pricing of treatment regimens in the tens or hundreds of thousands of dollars.

The insurers need the support of their clients in fighting these prices that make their insurance premiums even less affordable. To do this they have created drug tiers which shift outrageous portions of the costs onto the patients. Thus the insurers have enlisted patients in their quest to make drugs once again affordable, while shifting the blame onto the pharmaceutical firms.

So now AHIP and PhRMA are joining forces to forge a compromise between keeping drug prices as high as possible while keeping insurance premiums low enough to maintain their market presence. Who is being left out of the negotiations? The patient.

Just as the Affordable Care Act increased administrative complexity for the benefit of the insurers and drug firms, the current negotiations will introduce more innovations that serve their industries well regardless of the impact on patients.

The likely outcome is that there will be some moderation in pharmaceutical pricing, just as there was with physicians and hospitals, along with an expansion of the principle that the patients must bear an income-depleting portion of the cost so that they don’t use highly expensive drugs that they don’t really need, or so the consumer empowerment theory goes.

People want the government to do something about these outrageous prices. AHIP and PhRMA would like to keep the government out it it. So what is the prospect that we may see truly effective government intervention, beginning with genuine price controls?

This year of presidential politics, nothing will happen. After the election, the Republican approach will be to reduce government involvement and allow the marketplace to work its magic. The problem with that is we already have the most expensive health care system in the world  precisely because we depend too heavily on the markets.

What would the Democrats offer? The leading candidate for president, Hillary Clinton, would “build on provisions in the Affordable Care Act that invest in private research, and other private efforts, to use the results of private-sector analyses to hold drug companies accountable for justifying their costs and ensure Americans pay drug prices that reflect the improved value new treatments provide.” She would rely on the private market!

We have a recipe for expensive, innovative drugs exclusively for the wealthy and whatever cheap generics that can be made available for the rest of us. As stated above, what we need instead is a single payer national health program for all of us.

Cost-effectiveness of Early Treatment of Hepatitis C Virus Genotype 1 by Stage of Liver Fibrosis in a US Treatment-Naive Population

By Harinder S. Chahal, PharmD, MSc; Elliot A. Marseille, PhD; Jeffrey A. Tice, MD; Steve D. Pearson, MD, MSc; Daniel A. Ollendorf, PhD; Rena K. Fox, MD; James G. Kahn, MD, MPH
JAMA Internal Medicine, November 23, 2015 (online first)

In the United States, prevalence of chronic hepatitis C virus (HCV) infection is estimated to be 3.2 million and is the leading cause of liver-related deaths, hepatocellular carcinoma, and liver transplant.

With the introduction of HCV nucleotide analogue nonstructural protein 5A and B inhibitors, such as ledipasvir, ombitasvir, dasabuvir, and sofosbuvir, treatment duration has decreased for most patients to 12 weeks or less, with reduced toxic effects by the exclusion of interferon and often with the exclusion of ribavirin. The cure rate with the new therapies generally exceeds 90% and reaches 100% in some subgroups in clinical trials. The new drugs cost $1000 per day or more based on the wholesale acquisition price. Such costs are prohibitive for many patients and health care systems.

From the Discussion

The new HCV interferon-free therapies offer potentially huge individual and societal benefits but at a large cost. Health plans and health systems concerned about costs frequently require evidence of advanced liver fibrosis before authorizing the new therapies. We herein examined the health impact, cost, and cost-effectiveness of earlier treatment.

Although early treatment with sofosbuvir-ledipasvir is expensive, the net cost is substantially lower owing to savings in medical care and the likelihood of later treatment with a delayed treatment policy. Furthermore, we found substantial short- and long-term health gains. Thus, for sofosbuvir-ledipasvir treatment, treating patients at all fibrosis stages compared with waiting for advanced fibrosis is cost-effective (<$50 000 per QALY [quality-adjusted life-years] gained). A detailed analysis of timing of therapy by fibrosis stage shows that treating the disease at as early as stage F1 is cost-effective (ICERs [incremental cost-effectiveness ratios] of $50 000-$150 000 per QALY gained) and less than $50 000 per QALY gained when treatment is initiated at stage F2 vs stage F3. The ICER is lower when treatment is initiated at stage F3 compared with waiting for cirrhosis (stage F4).

Although the new therapies promise a high SVR [sustained virologic response], their long-term effects on clinical outcomes are not yet known. Sustained virologic response, a surrogate marker, may not lead to better long-term health outcomes with new treatments. Past studies with older regimens, however, have shown that achieving SVR can result in positive, long-term clinical benefits for patients. A 2011 systematic review61 found that achieving SVR can reduce liver-related mortality, incidence of hepatocellular carcinoma, and decompensation and foster regression of fibrosis and cirrhosis.

For budgetary considerations, if only 50% of eligible patients with HCV genotype 1 were to be treated with sofosbuvir-ledipasvir during the next 5 years, the cost of drugs in the United States would be $53 billion at current prices. Many payers negotiate prices, as has been seen with exclusivity deals with drug manufacturers. If a mean 46% reduction in drug prices occurred, the cost of treating 50% of patients with HCV genotype 1 during the next 5 years could be as high as $29 billion, partly offset by $3 billion in savings in the management of chronic HCV and advanced liver disease.

Conclusions

This analysis suggests that treatment with new HCV drugs is cost-effective when started with any evidence of fibrosis (stage F1). Because of the investment required for these drugs, budgetary constraints on health systems typically restrict access to insured patients until they experience higher levels of liver damage or failure of older treatments, and uninsured patients would be unable to receive treatment without patient assistance programs. A reduction in the price will improve cost-effectiveness and increase affordability and access.

http://archinte.jamanetwork.com/article.aspx?articleid=2471608

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Treatment of Hepatitis C Virus Infection in Real Life

By Hal F. Yee Jr, MD, PhD
JAMA Internal Medicine, Invited Commentary, November 23, 2015 (online first)

The US Food and Drug Administration approved the first daily oral antiviral for the treatment of hepatitis C virus (HCV) infection in November 2013. This and subsequent antivirals represented a marked improvement compared with the prior regimen of ribavirin and injectable interferon. However, the extraordinary costs of the medications have resulted in controversy as to which patients can and should be offered therapy.

In their joint HCV treatment recommendations, the American Association for the Study of Liver Diseases and the Infectious Disease Society of America (AASLD-IDSA) have recommended treatment “for all patients with chronic HCV infection, except those with limited life expectancy due to nonhepatic causes.”

The AASLD-IDSA panel tacitly acknowledges one of these obstacles in its recommendation that, “if resources limit the ability to treat all infected patients immediately as recommended, then it is most appropriate to treat those at greatest risk of disease complications before treating those with less advanced disease.” How might we reconcile the recommendation to treat all patients with HCV with the real-world constraints facing our patients, physicians, and health care systems?

The most prominent practical challenge faced in treating everyone infected with HCV is, as Chahal and colleagues write, the aggregate costs of the new antivirals. The retail cost of the antivirals for a single course of the most common treatment regimen approaches $100 000. In 2014, the first full year after approval of the initial oral antiviral treatment for HCV, total spending on medications for the treatment of HCV exceeded $12 billion. This amount represented more than 3% of the nation’s total prescription drug expenditures. Moreover, 70% of the increase in spending on prescription drugs during the initial year (ie, 2014) of Medicare expansion related to the Affordable Care Act was owing to spending on anti-HCV agents. Given an estimated 3 million US patients with HCV, funding to treat every infected person immediately appears problematic. Hence, those at the greatest and most urgent risk for clinical complications of their infection should be treated first as recommended by the AASLD-IDSA panel.

Less noticed than medication costs, but equally important to patients with HCV, is the difficulty of gaining access to a physician who can initiate treatment promptly. Many explanations for this difficulty exist. Notably, patients with liver diseases, including HCV, are represented disproportionally in populations with health disparity that have poorer access to clinical care, especially high-cost specialty care. In addition, these populations have cultural, environmental, and social determinants that negatively affect their health outcomes. Such patients face challenges such as being uninsured or underinsured, residing in locations far from specialty care or lacking transportation, not speaking or reading English, or lacking the ability to navigate a complex health care environment. Approaches for treating HCV that are equitable, so that every patient has fair access to treatment, and efficient, so that as many patients as possible can be offered therapy with the resources that are available, must be established.

Robust debate continues about which individuals to treat for HCV. Targeting those individuals at the greatest and most urgent risk for complications of HCV makes sense but only accomplishes a kind of triage. Policy and market initiatives to reduce the cost of HCV medications would enable treatment of many more people. Finally, individuals with HCV are overrepresented in health-disparity populations, and we must put in place mechanisms to reduce barriers to equitable care.

http://archinte.jamanetwork.com/article.aspx?articleid=2471603

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Expensive Drugs That Cure Hepatitis C Are Worth The Cost, Even At Early Stages Of Liver Fibrosis

By Laura Kurtzman
UCSF, November 23, 2015

It is worthwhile to give patients expensive new drugs that can cure their hepatitis C much earlier than some insurers are now willing to pay for them, according to a UC San Francisco study that models the effects of treating the disease early versus late in its development.

Researchers said they were surprised by the findings, since the drugs can cost up to $100,000 for a full course of treatment. But when they factored in the long-term medical cost of delaying treatment for hepatitis C, they found the savings, in combination with improvements in the quality of patients’ lives, were enough under current standards to justify using them even at early stages of liver fibrosis. Researchers said the drugs were therefore cost effective.

“The budgetary implications of widespread treatment are quite large at current drug prices,” said James G. Kahn, MD, MPH, a professor in the UCSF department of epidemiology and biostatics, as well as medicine. “However, these costs are time-limited, and they are lower than some other treatments that are less effective. In the U.S., we spend more than $140 billion a year treating cancer, often with less health benefit than is provided by the new hepatitis C treatments.”

The researchers said it was important to broaden the discussion beyond cost-effectiveness, to include the price of drugs.

“The benefits of early therapy are significant, since it increases the number of healthy life years for patients and decreases their chances of getting serious liver diseases, like liver failure and liver cancer,” said Harinder Chahal, PharmD, MSc, an assistant adjunct professor in the UCSF department of clinical pharmacy. “But the current prices are keeping early treatment out of reach for many patients, and this needs to be addressed.”

https://www.ucsf.edu/news/2015/11/287551/expensive-drugs-cure-hepatitis-c-are-worth-cost-even-early-stages-liver-fibrosis

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Comment:

By Don McCanne, M.D.

This important study shows that the new hepatitis C drugs, such as Harvoni, are cost effective for early disease as well as late disease. The problem is that about 3.2 million people have hepatitis C infections, and, at a per-patient cost of close to $100,000, the implications are huge for public and private health care budgets.

Not only is money an issue, but the populations disproportionately affected have health disparities with poorer access to clinical care, and are often uninsured or underinsured. As Hal Yee states in his commentary, “Approaches for treating HCV that are equitable, so that every patient has fair access to treatment, and efficient, so that as many patients as possible can be offered therapy with the resources that are available, must be established.”

One of the more important measures that we could adopt to address this disparity would be a single payer national health program. Not only would everyone be fully covered, but also a well designed single payer system improves resource allocation, thereby improving access.

As far as the high prices paid for these new drugs, a single payer system would use administered pricing to obtain the best value, much as we already do with our Medicaid and VA drug programs.

Also, once the people of our nation have accepted the reality that public funding and public administration of our health care financing system create much greater value for us, they may also accept the principle that our government should play a greater role in guiding pharmaceutical research and development in the direction of providing us with even greater value for our drugs and biologics while directing the industry away from drug development policies designed primarily to further enrich the billionaires.

Oh, and generously fund the needle exchange programs since that is now the primary source of hepatitis C transmission. You can fund an awful lot of needles and syringes with the $100,000 that it costs to treat just one hepatitis C patient.