Direct Primary Care Coalition

Direct Primary Care (DPC) is an innovative alternative payment model improving access to high functioning healthcare with a simple, flat, affordable membership fee. No fee-for-service payments. No third party billing. The defining element of DPC is an enduring and trusting relationship between a patient and his or her primary care provider.

https://www.dpcare.org

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Feedback on New Direction Request for Information (RFI) Released, CMS Innovation Center’s Market-Driven Reforms to Focus on Patient-Centered Care

CMS.gov, April 23, 2018

Today, the Centers for Medicare & Medicaid Services (CMS) announced that it has released the comments submitted by patients, clinicians, innovators, and others in response to the CMS Innovation Center’s New Direction Request for Information (RFI). Last fall, CMS released the RFI to collect ideas on a new direction for the agency’s Innovation Center to promote patient-centered care and test market driven reforms that: empower beneficiaries as consumers, provide price transparency, increase choices and competition to drive quality, reduce costs, and improve outcomes. The Innovation Center is a central focus of the Administration’s efforts to accelerate the move from a healthcare system that pays for volume to one that pays for value and encourages provider innovation.

CMS is sharing the feedback received to promote transparency and facilitate further discussion of how to move the Innovation Center in a new direction.

Today, CMS is also taking a next step to develop a potential model in the area of direct provider contracting, informed in part by the RFI. A direct provider contract model would allow providers to take further accountability for the cost and quality of a designated population in order to drive better beneficiary outcomes. Such a model would have the potential to enhance the doctor-patient relationship by eliminating administrative burden for clinicians and providing increased flexibility to provide the high-quality care that is most appropriate for their patients, thus improving quality while reducing expenditures.

As part of its process to gain further insight from the public in this area and ask more focused questions, CMS is issuing a follow up RFI. The information being requested is detailed in nature and is intended to provide CMS the data needed to potentially design and release a model in this area. CMS is excited to continue to evaluate the concept of direct provider contracting and is also focusing its attention on other areas guided by input and feedback from the New Direction RFI as well as the public.

https://www.cms.gov…

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Direct Provider Contracting Models – Request for Information

CMS.gov

The Centers for Medicare & Medicaid Services (CMS) is seeking broad input on direct provider contracting (DPC) between payers and primary care or multi-specialty groups to inform potential testing of a DPC model within the Medicare fee-for-service (FFS) program (Medicare Parts A and B), Medicare Advantage program (Medicare Part C), and Medicaid.

A DPC model would aim to enhance the beneficiary-physician relationship by providing a platform for physician group practices to provide flexible, accessible, and high quality care to beneficiaries that have actively chosen this type of care model.

The public is encouraged to provide feedback on their experiences with, and perspectives on, DPC and how CMS can use DPC models to reduce expenditures and preserve or enhance the quality of care for Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) beneficiaries.

Please submit your comments to the CMS Innovation Center at DPC@cms.hhs.gov through 11:59pm EDT May 25, 2018.

https://innovation.cms.gov…

Request for Information on Direct Provider Contracting Models (9 pages):
https://innovation.cms.gov…

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Comment:

By Don McCanne, M.D.

This CMS notice is important. CMS is requesting public input on factors that should be considered in including a direct primary care model (DPC) in traditional FFS Medicare, Medicare Advantage, Medicaid, and CHIP.

DPC is a model in which a retainer (membership fee) is paid by a patient to a primary care provider to cover all included primary care services. No insurer or third party payer is involved although it is usually recommended that the patient obtain catastrophic (high deductible) insurance for expensive, specialized care beyond what would be provided in a primary care practice.

From the physician’s perspective, DPC eliminates controls on fees, whether by a government program or commercial insurance. The physician does not contract with an insurer, does not bill an insurer, and does not accept any limitations demanded by an insurer. From the patient’s perspective, direct access to the primary care professional is supposedly much more readily available.

Keep in mind that today’s high deductible health plans are quite expensive; the premium added to a significant retainer fee would not be affordable for the majority. The RFI will be important for the government to design its portion of a retainer fee plus costs of catastrophic insurance that it will pay for with Medicare or with the other government programs.

Also note that the retainer is a form of capitation rather than fee-for-service. For individual physicians or small groups, capitation poses a risk should the practice attract a larger percentage of patients with chronic diseases.

In the request for information (RFI) on DPC, CMS states that the goal of DPC would be to reduce expenditures (presumably for the government) while maintaining quality. Since government programs already pay less than commercial insurance, the prospect of further reductions in payments (inadequate retainer fee) should raise alarms for health care professionals.

But what should be even more alarming is that CMS states that DPC incorporated into the public programs would eliminate the administrative burden and provide increased flexibility in the provision of care. Their RFI suggests that, under this model, a retainer could be provided in which the primary care professional will bear all upside and downside risk in an environment with greatly reduced regulatory oversight. In a program designed to reduce spending, you can be sure that patients with greater health care needs – downside risk – would be avoided, shifting those patients to what is left of the traditional, taxpayer-funded Medicare program. And reduced oversight? The temptation would be very great to market a comfy, patient-friendly practice environment while remaining silent on more costly primary care services that are not being provided.

This obviously represents an attempt of the administration to decrease the role of the government as a payer and a regulator. This program, driven by conservative ideology, poses a great hazard to our traditional government health programs, especially Medicare.

Everyone who cares should look at the nine page RFI (last link above) and consider submitting a response, or, even better, have your various professional or advocacy organizations submit a formal response. Deadline is May 28, 2018.

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By Dan Diamond
POLITICO Pulse, April 20, 2018

On Monday, the HHS secretary was discharged from the hospital with a common intestinal infection known as diverticulitis. By Wednesday, he was back — the most high-profile hospital readmission in some time.

More than a few PULSE readers noted the irony: HHS is actively working to curb readmissions, even as the agency’s leader needed one himself.

The Affordable Care Act created a program to penalize hospitals with high readmission rates, which Obama officials argued would boost quality and cut costs.

And readmission rates have fallen — but there’s evidence that it’s partly because hospitals changed how they document patients, not necessarily improved care quality.

“I’ve always found the focus on readmissions to miss the bigger point,” says Harvard’s Ashish Jha, arguing that the real issue is how the U.S. health care system encourages hospitals to quickly send patients home. That approach has positives (many patients would prefer to recover at home) and drawbacks (some patients’ illnesses inevitable get worse).

Diverticulitis is also a common condition with a relatively straightforward course of care, notes Jha, a practicing internist. When a patient gets readmitted, “it’s almost never a failure of care coordination or fragmentation,” he adds.

https://www.politico.com…

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Comment:

By Don McCanne, M.D.

People who have conditions that require hospitalization frequently develop related problems after they are discharged from the hospital and then require readmission. Most of these readmissions are unavoidable.

Occasionally readmission is avoidable if lapses in followup occur such as ensuring that patients receive medications that are required to control their medical conditions. But even in those instances it often is not the fault of the hospital. The patient can have many reasons for being non-compliant, and the hospital can do only so much to improve that compliance. Of course, some hospitals, especially those serving as safety nets, have a greater population of patients who are less likely to be compliant regardless.

Yet hospitals are being penalized when their 30 day rates of readmissions are above a modest threshold. Many of these penalties are unfair since they are based on mere chance of falling on the wrong side of the bell curve.

Patients who return may not be formally readmitted, often to avoid the risk of a penalty, even though they may be treated as if they were. This has potential financial consequences for the patient since coverage is based on outpatient rather than inpatient payment rules. It may also disqualify a patient for convalescent facility care should it be required.

Why don’t we just pay fair prices for care that patients need? That is what a well designed single payer system should do. HHS Secretary Alex Azar should contemplate whether or not it was fair to potentially penalize his hospital simply because his physician thought that he should be readmitted.

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By Sachin H. Jain
Forbes, April 17, 2018

For decades, many have been dreaming of a revolution in healthcare based on the premise that making patients more accountable for healthcare costs—making them “consumers”—will result in higher quality and lower costs. It’s a brilliant vision. And smart people believe it makes sense. Except for one little detail: For many patients, it’s not a dream, it’s a nightmare.

Misplaced Conventional Wisdom

There is a conventional wisdom about patients that is inconsistent with the reality that many patients live. It starts with the premise that patients want to shop for healthcare like they shop for other goods and services. We assume patients want to go on-line and manage their health and make all of their own healthcare decisions. We assume they want to use rating ranking sites to make decisions about where to get their primary care and medicines. We assume they want to shop like it’s Black Friday.

The conventional wisdom continues with assumptions about the literacy, engagement, capability, and wealth. For many healthcare entrepreneurs, the median patient is assumed to be an MBA graduate with significant disposable income. The imagined patient has a “Type A” personality and wants to be obsessively engaged in every aspect of their health or healthcare.

And, on a related note, the conventional wisdom assumes high levels of digital literacy. The average patient has a sophisticated smartphone and multiple paired Bluetooth devices and knows how to use them. And would be able to improve their health if they just had the right tools to do so.

The implementation of this view is the proliferation of point solutions that aim to solve problems that we assume that patients prioritize: transparency of lab data, access to on-line medical records and easy access to appointment scheduling. While these are wonderful convenience features that we should undoubtedly adopt, they do very little to fundamentally change the healthcare cost or quality for consumers.

And they’re oddly implemented as an endless maze of disconnected portals, tools, and apps—few of which speak to each other and few of which delivers anything close to the value that we believe that they will. Either because patients don’t use them as intended, or they fail to capture the complexity of the broader ecosystem in which our patients live.

Masked Incrementalism

And there are many companies and startups that excite the people that are built on this vision of consumerism with clever tag lines that mask the incrementalism that underlies them. These are healthcare solutions that are really good for the 80% of patients who account for 20% of our healthcare costs. But the question is whether this perspective on the empowered consumer works for the 20% of patients who account for 80% of the costs.

Because if you are really trying to change the cost or quality equation in healthcare—you need to imagine a different consumer profile. One where the patient doesn’t want to be engaged in the traditional sense of the term—but where everything just works right for the patient. Where needs are anticipated and addressed before the patient or family can articulate them. One where we push beyond the superficial causes for problems—and dig far deeper into their root causes.

A Different View of Consumerism

CareMore, the company I lead, espouses a very different vision of consumerism. By way of introduction CareMore is a $1.4B Medicare and Medicaid delivery system that focuses on the care of more than 150,000 high-cost, high-need and vulnerable patients in 10 states. Our mission is to make health care more accessible, affordable and simple for the patients we are privileged to serve.

CareMore’s View

CareMore’s view of consumerism is grounded in the following simple ideas: 1) Healthcare should anticipate and deliver on consumers’ needs proactively. 2) Sick people should not have to shop for the care they need. 3) Consumers should not pay out of pocket for the things that they need.

Sick Patients Shouldn’t Have to Shop

Probably most controversial notion is the idea that sick people shouldn’t shop. But think about it. You’ve just been diagnosed with breast cancer. Multiple sclerosis. Diabetes. Do you want to be flipping through directories to find a doctor? Or do you want the appointment to be set up for you urgently with exactly the right specialists for your condition? Do you want the right durable medical equipment needed for your delivery to just show up or do you want to look through a website to pick your equipment? While I recognize there are a number of consumers—who given the opportunity to make these choices, would want to be in the driver seat—I would argue that most would not. They would want, most simply to just be cared for.

There is poverty in thought and intellectual laziness when we simply say consumers want to make these decisions.

https://www.forbes.com…

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Comment:

By Don McCanne, M.D.

In this article, Sachin Jain presents the fallacy of consumer-directed health care, that somehow the patient has the desire to use their own expertise and control of their own funds to shop for the best care available and in doing so will improve the quality and reduce the costs of health care. Jain explains that, instead, patients do not want to shop for their health care but would prefer that beneficial care be offered proactively without financial barriers that impair access to that care.

In other words, patients want the health care they need when they need it without having to shop in a complex health care environment in which they have little or no expertise. This is an argument for supporting a robust and efficient primary care infrastructure. Such a system should provide easy entry to appropriate technological and specialized services for patients with medical needs, not to mention being a source of preventive services.

It should be noted that the conclusion presented by the author, but not included in the excerpts above, is quite biased. Sachin Jain, MD, MBA is President and CEO of CareMore Health, a subsidiary of Anthem that provides Medicare Advantage and Medicaid managed care plans. Rather than framing the solution as primary care, in the rest of the article he essentially is marketing their private Medicare and Medicaid plans.

Although many of us at PNHP support integrating health care through a primary care infrastructure, we remain opposed to private Medicare Advantage and Medicaid managed care plans, especially those offered through a for-profit Wall Street corporation. The primary care professionals collectively, loosely arranged within a community and interacting with the specialized services and facilities available, or a community health center, or an integrated delivery system such as Kaiser Permanente, would be examples of the type of primary care infrastructure that would serve us well.

This comment clearly is not an endorsement of privatized Medicare or Medicaid, but it is a recognition that an individual representing the medical-industrial complex can still have the wisdom to recognize what a con the consumer-directed movement in health care has been. So we should to listen to everyone but reject the bad while implementing the good.

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By Chris Smyth
The Times, April 16, 2018

Hundreds of thousands of people will receive personal allowances of NHS cash to organise their own care as ministers seek to “put power back into the hands of patients”.

Far more people with mental health problems, dementia and physical and learning disabilities will have the right to select and pay for treatments they want. The money will be paid directly to them and can be spent on whatever that they think best helps to manage their condition, as long as a doctor agrees.

Veterans leaving the army and wheelchair users have also been promised the “personal health budgets” after complaints that care provided to these groups by the NHS is not good enough. Some such budgets run to tens of thousands of pounds.

The reforms will allow recipients to employ relatives or neighbours as carers, buy specific pieces of equipment, enrol in exercise classes or hire a personal assistant. The policy has been controversial in the past because such budgets have been spent on holidays, horse-riding lessons and aromatherapy.

At present 23,000 people have personal budgets in the NHS through a little-known initiative called NHS Continuing Healthcare, designed for those who need both social care and nursing. Now ministers want an “exponential” expansion of the right to have personal health budgets, taking the number up to 350,000.

Giving patients the personal responsibility for their healthcare on such a scale is compared by some to Margaret Thatcher’s decision to allow tenants to buy their council homes. The reform is also significant for combining money from the health and social care budgets, a wider goal for health reformers.

Caroline Dinenage, the care minister, said: “If you have complex needs our current health and social care system can be confusing, so it’s right people should be involved in the important decisions about how their care is delivered. These changes will put the power back into the hands of patients and their families.”

Some on the left fear that personal budgets will lead to privatisation of the NHS, as money is diverted from existing services based on consumer choice. Right-wing critics fear that the money could be spent frivolously.

The budgets have the backing of Jeremy Hunt, the health secretary, and Simon Stevens, the head of the NHS. Mr Hunt is preparing to lay out plans later this year to reform social care.

Ms Dinenage insisted that personal budgets for patients would “not only improve quality of life and the care they receive, they will offer good value for money for the taxpayer and reduce pressure on emergency care by joining up health and social care services at a local level.”

Ministers see the policy as a way to let individuals tailor their own care, circumventing cumbersome attempts to make fragmented health services work more closely together. They point to evidence that people’s health improves if they can spend NHS money on what matters to them, while cutting costs by 17 per cent on average by stopping expenditure on unhelpful treatment.

Supporters have defended purchases of computer equipment or football tickets, saying that such items can be crucial in helping people with complex conditions to thrive, with all spending signed off by doctors. Money for personal assistants and iPads can be justified if doctors think that this will help people to organise treatment or live independently, they say. The budgets cannot be spent on alcohol, tobacco, gambling, debt repayment and illegal activities.

Nigel Edwards, chief executive of the Nuffield Trust think tank, said that for people with suitable long-term conditions that were too complex for existing services there was good evidence that personal budgets worked. “It appears that giving people flexibility and choice over the care they require produces better outcomes for them [and does] produce some relatively modest savings,” he said. He added that concerns about “what happens if I take a personal budget and spend the whole lot on a world cruise” had so far turned out to be groundless. “There’s a danger of being closed-minded and saying ‘that’s not a real health need’ and not taking the wider view,” he said. “There will be examples of football season tickets, which get people upset, but I don’t think it’s systemic. Most of the money goes on direct care and is often justifiable.” Uptake of personal health budgets had been hampered by resistance from doctors, saying: “There is a slight suspicion of handing over control.”

However, Caroline Abrahams, of Age UK, said: “Older people in declining health with social care needs generally tell us they are not very interested in getting involved in organising the services they receive, they just want them to be effective and joined up, and delivered by kind and skilful professionals.”

John O’Connell, chief executive of the TaxPayers’ Alliance, said that “the NHS has been run in the interests of staff, not patients, so it’s very encouraging to see personal health budgets being expanded”, but cautioned: “The government can’t allow patients . . . to spend taxpayers’ money on ineffective treatments.”

https://www.thetimes.co.uk…

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Comment:

By Don McCanne, M.D.

The British National Health Service has established “personal health budgets” – personal allowances of NHS cash to “put power back into the hands of patients.” Their conservative government now intends to greatly expand the use of these accounts. Some fear that this represents an effort to further privatize the NHS – moving cash into the hands of patients while reducing funds for the already underfunded NHS.

These personal budgets have in common with our health savings accounts the concept that somehow patients will be better health care shoppers if they are using cash, but the improvement in the targeting of spending is largely negligible and only at the margin. Patients do not have the ability to judge the best value in most health care purchasing, not because they are not intelligent but because they are relatively uninformed (and, no, price lists do not provide patients the information that they would need).

NHS is a prepaid health care program that does not require payments associated with care received, and thus financial barriers to access are removed. That does mean that the government needs to be sure that adequate funding of the program is maintained and that services are upgraded (or downgraded) as appropriate. Services that are truly appropriate for health care should be funded by the program and not by relatively unrestricted cash accounts that can be diverted to worthless care or to pleasures that stretch the definition of therapeutic, especially when that cash is either a disbursement of government funds or represents a tax expenditure as with our HSAs.

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By Evan, S. Cole, Cassandra Leighton, and Yuting Zhang
Medical Care, May 2018

Accountable care organizations (ACOs) are groups of health care providers who agree to be collectively accountable for the overall care and costs of a prespecified group of patients. Medicare ACOs were initiated in 2012 as part of the Affordable Care Act. Since then, over 10.5 million Medicare beneficiaries have been served by 562 ACOs participating in Medicare ACO initiatives. The largest Medicare ACO program is the Medicare Shared Savings Program (MSSP): as of January 2017, there are 480 MSSP ACOs serving 9 million assigned beneficiaries nationwide. In a shared savings arrangement, providers are encouraged to manage the health care needs of a defined patient population in the most cost-effective manner.

Medicare beneficiaries are attributed to a MSSP ACO based on where they receive the majority of their primary care5; primary care is thus seen as a central component of the Medicare ACO model. Primary care has 4 main features: first contact for access to the health system, comprehensive care for most health needs, long-term focused care with an ongoing relationship, and coordinated care when needed elsewhere. It has been well-established that health systems that emphasize access to primary care have better outcomes and generally reduced costs compared with systems with poor access to primary care. A greater focus on primary care may occur within an ACO given their financial incentives. Research on Medicare’s ACO initiatives have found that ACOs with a strong primary care orientation and workforce achieved greater savings and better care in the beginning of the program, as measured by readmissions, quality of diabetes care, and provision of preventive services.

Although these preliminary findings are notable, research on the role of primary care within ACOs and how these organizations are strategically changing their practices to optimally use primary care providers (PCPs) is still emerging. ACOs may shift visits for chronic disease management to PCPs, who can manage these conditions concurrently with other comorbidities in a more accessible and less expensive manner than specialists. Hollingsworth et al analyzed data from the 2007 National Ambulatory Medical Care Survey on primary care and specialty providers and found that specialists provide routine management of 9 chronic conditions—care which could be reallocated to comprehensive primary care.

In this paper, we focus on 8 chronic conditions: asthma, chronic kidney disease (CKD), chronic obstructive pulmonary disease, diabetes, depression, hyperlipidemia, hypertension, and rheumatoid arthritis/osteoarthritis. We chose these conditions because these chronic conditions can be managed routinely and effectively by comprehensive primary care, but in practice both PCPs and specialists frequently manage the associated care. Specifically, we examine variation in the distribution of visits for 8 chronic conditions between primary and specialty care among MSSP ACOs and the factors affecting the variation. In addition, we descriptively compare this distribution of ambulatory care utilization within MSSP ACOs and a representative sample of non–ACO-attributed Medicare beneficiaries.

From the Conclusions

In this study, we sought to understand how visits for certain chronic conditions were distributed between PCPs and specialists within MSSP ACOs and the factors that were related to primary care management of chronic conditions within ACOs. Although in aggregate we did not find large differences between ACO and non–ACO-attributed beneficiaries, we did find notable variation across ACOs. Organizationally, ACOs with a higher proportion of contracted physicians who were PCPs had higher proportions of chronic condition visits that were delivered by PCPs. This relationship was consistent for 7 of the chronic conditions we included, with the one exception being depression. In addition, ACOs with more white beneficiaries, with higher prevalence of ≥3 comorbidities, in areas with larger proportions of college-educated individuals, and with greater numbers of specialists had a smaller share of chronic condition visits delivered by PCPs.

Our findings provide an indication of how MSSP ACOs have organized care for chronic conditions early in the program. As stated above, ACOs are incentivized to provide appropriate care in the least expensive setting possible; however, it does not appear that early in implementation ACOs have, at least as a group, transitioned chronic care into primary care compared with care for non-ACO Medicare beneficiaries.

The degree to which PCPs manage chronic conditions is related to both patient population, chronic condition, and organizational factors. Many ACOs may underutilize PCPs in this role, and thus could actively shift care to less expensive primary care for potential savings to payers. Barriers to that shift could include low numbers of PCPs contracted in the ACO, and existing referral patterns and patient relationships with specialists.

https://journals.lww.com…

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Comment:

By Don McCanne, M.D.

The concept of the accountable care organization is that a group of health care providers, working together, could provide more efficient, integrated care for which they are accountable, thus improving quality while reducing health care costs. For many fairly routine chronic conditions this seems like an ideal model to expand the use of primary care since previous studies have shown that “ACOs with a strong primary care orientation and workforce achieved greater savings and better care.”

Although “ACOs are incentivized to provide appropriate care in the least expensive setting possible,” according to this study, “it does not appear that early in implementation ACOs have, at least as a group, transitioned chronic care into primary care compared with care for non-ACO Medicare beneficiaries.”

An interesting finding is that ACOs with a greater number of white, college educated beneficiaries “had a smaller share of chronic condition visits delivered by primary care physicians.” This suggests that ACOS may be aligning themselves to provide two tiered health care. That is ironic since some studies have suggested that more specialized services for the better off increase health care costs yet may produce outcomes that are no better and perhaps even worse, perhaps because specialized services are sometimes more fragmented and less integrated.

The fact that we continue to perpetuate our highly fragmented, dysfunctional health care financing system may play some role in our inability to achieve higher performance at lower costs while including everyone, as all other wealthy nations have done. The system that seems ideal for the United States is a well designed single payer national health program – an improved Medicare for all. Isn’t it time that we take a serious look at a model that would actually work?

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The Office of U.S. Senator Cory A. Booker, April 9, 2018
 
In December 2017, President Trump and the Republican-led Congress enacted the Tax Cuts and Jobs Act, a $1.5 trillion bill that delivers massive tax cuts to the nation’s largest corporations and wealthiest families. The legislation cuts the corporate tax rate permanently from 35 percent to 21 percent, repeals the corporate alternative minimum tax, moves toward a territorial tax system that largely exempts future foreign profits from taxation, and sets a 15.5 percent repatriation rate for cash held overseas.

In anticipation of tax savings, companies have responded mainly by forecasting significant benefits for their shareholders. Over the course of three months, public companies announced more than $200 billion in stock buybacks, doubling the pace of the previous year. All told, companies are expected to spend some $450 billion of their tax savings on stock buybacks. A recent Morgan Stanley survey further projects that 43 percent of companies’ savings from the new tax law will be devoted to buying back stock and issuing dividends, actions that help companies and their predominantly wealthy shareholders.

The nation’s largest drug companies in particular are poised to reap tremendous gains from the new tax law, including through lower effective tax rates and through repatriation of billions of dollars stored overseas. The critical question that this report endeavors to answer is: how will pharmaceutical companies spend this tax windfall?

Findings: So Far, Drug Companies Are Passing Tax Savings Along to Shareholders, and Are Not Using That Money To Help Working Families Afford Medications

From January to March 2018, the office of Senator Booker reviewed the quarterly shareholder calls the first since the passage of the Tax Cuts and Jobs Act of each of the 10 largest pharmaceutical companies headquartered in the United States.

Finding 1: Shareholder Payouts

On the fourth-quarter 2017 earnings calls, the companies highlighted plans to increase the return of capital to shareholders through share repurchases and corporate dividends. Pfizer and Merck each announced $10 billion in buybacks shortly before the tax law was passed, and, in the wake of the law’s final passage, AbbVie and Amgen each announced their own $10 billion buyback plans. Those four programs, at $10 billion apiece, are among the largest new buyback plans across the entire U.S. economy. Only five other companies (Cisco, Wells Fargo, Home Depot, PepsiCo, and Oracle) have revealed larger new buyback authorizations during this period. Another pharmaceutical company, Celgene, has announced a $5 billion  buyback plan that is also among the largest so far across all industries. Other pharmaceutical companies suggested that more buyback plans were forthcoming.

The recent buyback announcements by these pharmaceutical companies total $45 billion — 21 percent of the more than $200 billion in buyback announcements made over the initial three months during and after final passage of the tax law. In other words: just five pharmaceutical companies were responsible for about one-fifth of the value of all the new buyback announcements made across the economy.

Finding 2: Drug Price Changes

None of the reviewed pharmaceutical companies announced or forecast lowering prescription drug  prices as a result of anticipated tax savings. Instead, some companies discussed pricing concerns at a general level during their earning calls, expressed caution about providing specific pricing guidance, or acknowledged that patients struggle with affordability. None indicated that the massive tax windfall would  prompt them to lower prices and ease the heavy cost burden on patients. In fact, many companies have actually instituted drug price increases for 2018.

Finding 3: Other Projects

On their most recent quarterly shareholder calls, many of the top pharmaceutical companies highlighted the substantial benefits they have received, and will receive, from the new tax legislation. They detailed their plans for spending those savings with varying degrees of specificity. Stock buybacks, as noted, were a major focus of many companies. But they also announced various other projects, including capital investments, research and development, one-time benefits to workers, charitable contributions, and  business development. Still, for many of the announcements, it is unclear how much of the outlays are actually attributable to the tax cuts, and how much would have been spent independent of the tax cuts.

From the Conclusion

Recent earnings calls provided top drug companies their first significant opportunity to demonstrate how they would spend their windfall from the Tax Cuts and Jobs Act. So far, the influx of tax benefits from the new law has been associated mainly with a slew of stock buyback announcements — with $45 billion in new buyback programs by just five pharmaceutical companies. They are some of the largest buyback plans announced during this initial period across all industries, amounting to approximately one-fifth of the cumulative economy-wide total. Aside from stock buybacks, which predominantly benefit executives and company shareholders, some pharmaceutical companies did announce other initiatives that could help  patients and workers, such as expansions of research and development, employee pay and benefit support, capital projects, and charitable contributions.

On the earnings calls, while some pharmaceutical companies did acknowledge that many patients struggle to afford the high prices of essential prescription medications, no company announced plans to specifically use its tax savings to reduce drug prices.

https://www.scribd.com…

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Comment:

By Don McCanne, M.D.

The tax reductions enacted last December went primarily to the wealthy and their corporations. Since there has been considerable concern about the increase in drug prices that have made them unaffordable for far too many patients, it was hoped that the pharmaceutical industry would pass some of their tax windfall down to patients in the form of lower drug prices.

No. They spent much of the windfall on buying back stocks and issuing dividends, benefiting their wealthy shareholders. “None indicated that the massive tax windfall would  prompt them to lower prices and ease the heavy cost burden on patients. In fact, many companies have actually instituted drug price increases for 2018.”

This should come as no surprise since Congress and the President, as an ideological goal, have been striving to reduce public funding of health care benefits. It seems that the politicians in control and their wealthy benefactors do not care about the health of the people nearly as much as they care about further increasing the wealth of those already wealthy.

It’s about policy, but we won’t get it right until we fix the politics.

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