Congress is in session again this coming week. Here is a link to the actions taken on the Hill last week.

The OPM’s Inspector General’s latest semiannual report to Congress (period ended September 30, 2014) and the agency’s response can be found at this link.

The weekend issue of the Wall Street Journal featured a lengthy interview with CVS Health’s chief executive officer. Mr. Merlo notes that American have most of their health provider contact with local pharmacists.  Health plans should take more advantage of these connections as Mr. Merlo suggests. He also notes that CVS now has 906 MinuteClinics in their retail pharmacies.

A recent internal study of CVS workers who used its walk-in clinics suggested their overall health costs are 8% lower than those with the same age and health status who don’t. A shelf of academic research shows the quality of care at such clinics is the same or sometimes better than the emergency room.

a Mr. Merlo also notes that silver tsunami of 10,000 Baby Boomers  becoming eligible for Medicare every day.

Finally, the Wall Street Journal reports on an amazing new Duke University study.

The scientists involved say that they have created the first lab-grown human skeletal muscles that contract in response to electrical and other stimuli. In other words, the tissue works like regular muscles—but in a dish. Skeletal muscles, such as the biceps, are the ones most of us think of when we use the word “muscle.”

Eventually, doctors could take cells from a patient, create functioning muscles in the lab and test various drugs to determine which one—and how much of it—would work best for that individual. The research might also help scientists to reduce their reliance on animal testing

Federal News Radio reports that for the second fiscal year in a row the Office of Management and Budget has concluded that no additional sequestration-required budget cuts will occur in FY 2015 which ends on September 30, 2015.  “‘OMB estimates that discretionary appropriations are at the defense cap, while non-Defense appropriations are nearly $3.7 billion below the budget authorizations set in the [Budget Control Act],’ OMB wrote in the report.”  The President’s FY 2016 budget is expected to proposed to bust these caps by 7%.

The FEHBlog has analogized the relationship between health care providers and  health plans to the feuding Hatfields and McCoys.  Modern Healthcare reports that “value based case” likely will not end these “financial spats.”

Experts largely agree that value-based contracting will not be a panacea for healthcare payment spats, and these types of disagreements will persist in a value-based reimbursement setting. What will change will be the sticking points between insurers and providers—issues such as per-member per-month fees and performance measures, for example.

Shocker!

Following up on a couple of items that have interested the FEHBlog —

• The Des Moines Register reports that the State of Iowa will be liquidating the ACA created consumer owned health care cooperative serving Iowa and Nebraska known as CoOppotunity Health.  
• The ProPublica and the New York Times report that CMS’s Open Payments website is error riddled.  

“Amid much anticipation and after a lengthy delay, the government in September unveiled its Open Payments database, saying it would bring transparency to relationships between physicians and the drug and medical device industries. But this openness has been clouded by numerous errors that detract from its usefulness.”

The government and industry expect that the errors will get cleaned up over time. ProPublica discovered the errors in the course of preparing its own database that allows consumers to find out whether their health care professionals received drug company money. Mine didn’t. 

Now that we are past the State of the Union address, the next toll gate in the legislative year is the submission of the President’s FY 2016 budget proposal.  The Hill reports that for the first time since 2010 the President will submit his budget proposal on time — the first Monday in February, which this year is February 2.  From an FEHBP perspective, we also are waiting for two important Congressional actions — resolution of the Homeland Security Department’s appropriations for the current fiscal year (the last remaining FY 2015 appropriations issue, deadline February 28) and resolution of the Medicare Part B physician reimbursement formula (deadline March 31). 

The Washington Post reports on a Blue Cross Blue Shield Association report on prices for hip and knee replacement surgeries. Presumably to no one’s surprise, the report concludes that high prices do not correlate with high quality.  Because the article uses the terms “price” and “cost” rather interchangeably, it is important to understand that price and cost are independent variables.   Prices do not necessarily reflect cost. Prices reflect what the market will bear.

In a similar vein, the Wall Street Journal’s Pharmalot blog reports on a National Bureau of Economic Research study about the high cost of cancer treatment drugs.  The report attributes the high cost of these drugs to several factors, including the facts that health coverage acts as a price support, doctors are used to rising prices and

the effect of the growing 340B Drug Discount program in which drug
makers must offer discounts of up to 50% on all outpatient drugs to
hospitals and clinics that serve indigent populations. Drug makers, they
speculate, may offset the growth in this program by setting higher
prices elsewhere.

“We argue that, under these conditions, manufacturers are able to set
the prices of new products at or slightly above the prices of existing
therapies, giving rise to an upward trend in launch prices,” write the
authors, one of which is Peter Bach,
a physician at Memorial Sloan Kettering Cancer Center in New York, who
has been outspoken about the rising prices for cancer treatments.

Also with respect to medical advances, the New York Times reports that  “A patient who received an artificial heart in August has recovered
sufficiently to return home, the French company that makes the device
said on Monday, signaling a milestone toward the possible
commercialization of the device.”  The patient who received the device was suffering from congestive heart failure.

Happy Martin Luther King Day Weekend! Congress is taking a holiday today but it will be back in session tomorrow to hear the State of the Union address. The Week in Congress reviews last week’s legislative actions up on the Hill.  Govexec.com updates us on the status of postal service reform in the new Congress.

The FEHBlog has written quite a bit about expensive Hepatitis C drugs.  Last month the Food and Drug Administration approved an Abbvie drug to compete with Gilead’s drugs thereby breaking Gilead’s monopoly. Express Scripts quickly announced an agreement with Abbvie and CVS struck a deal with Gilead. Barron’s reports that several large insurers, Anthem, Aetna, and Humana, have followed CVS’s lead which make sense because at this point Gilead’s drugs have a broader scope of treatment. The good thing is that thanks to Abbvie and Express Scripts, Gilead finally has agreed to price discounts in the U.S.  The latest Gilead drug, Harvoni, is priced at $94,000 per treatment. The timing is perfect too because as of January 1, 2015, FEHB plans and other health plans generally must cover Hepatitis C testing in network without enrollee cost sharing. A cure for Hepatitis C is a tremendous advance in health care, but there’s no such thing as a free lunch.

In the same vein, the Washington Post reported in depth yesterday about ongoing efforts to bring less expensive biogeneric or biosimilar drugs to market. It will be several years before these Hepatitis C drug patents expire thereby opening the door to biosimilars. Nevertheless there are many biologic drugs that are eligible for biogeneric treatment (the EU has been approving biogenerics for over a decade). The FDA needs a biosimilarity protocol so pharmacists routinely can switch brand name biologics to biogenerics.

Well, it’s been an interesting news day. According to this Federal News Radio report, Marilyn Tavenner, who has been the administrator of the Centers for Medicare and Medicaid, a very powerful position in U.S. healthcare, announced that she will step down from that position at the end of February. Here principal deputy administrator, Andy Slavitt, will serve as acting administrator beginning in March.  Mr. Slavitt spent many years at UHC’s technology subsidiary Optum.

The CMS administrator position requires Senate approval which should be interesting.  In the same vein, the Wall Street Journal reports on HHS Secretary Sylvia Burwell’s list of legislative initiatives upon which the Administration and the Republican controlled Congress may find common ground.

Speaking of technology, earlier this week the Food and Drug Administration approved Enteromedic’s implantable device called the Maestro Rechargeable System to treat obesity. This AP report explains that the device “uses electrodes implanted in the abdomen to stimulate the vagus nerve, which signals to the brain that the stomach is empty or full. Patients and doctors can adjust the device settings using external controllers.”  Enteromedic’s stock price promptly jumped.

Also on the technology front, Modern Healthcare reports on whether 3-D mammography is cost effective? Evidently it is for younger women with denser breast tissue. It avoids unnecessary call backs for another test.

Reliable Drug Channels reports on the newest benchmarking numbers on retail and specialty pharmacy reimbursement. “[R]etail pharmacies received the highest reimbursements, even as the gap with mail pharmacies has narrowed. The retail reimbursement rate, as measured by the percentage discount from Average Wholesale Price (AWP), has remained surprisingly steady in recent years.”

Finally, Robert Moffitt from the Heritage Foundation and a colleague wrote a study on OPM’s multi state plan program (“MSPP”). The study is interesting reading particularly with respect its analysis of OPM’s key role. The conclusion must have been written before OPM surprisingly announced late last year that it was adding healthcare co-cops to the multi-state program. The failed Iowa co-op was not included in the MSPP.  

Govexec.com offers an interesting interview with the incoming chairman of the House Oversight and Government Reform subcommittee on Government Operations, Rep. Mark Meadows, a Republican from North Carolina. The Committee evidently jostled around its subcommittee structure. Government Operations now has a wide ranging portfolio that includes the federal civil service / FEHB and the Postal Service. The Committee, which is chaired by Rep. Jason Chaffetz (R Utah) also created Health Care, Benefits, and Administrative Rules subcommittee which is chaired by Rep. Jim Jordan, a Republican from Ohio. That subcommittee will focus on Medicare, Medicaid, and Social Security / HHS.

The FEHBlog also ran across a couple of upbeat stories —

• For the past forty years, health care providers in Franklin County, Maine, a rural area, have undertaken a proactive effort to encourage better heart health, e.g., smoking cessation, weight control, blood pressure control, exercise, etc., and by golly a study indicates that the effort paid off in materially lower levels of heart disease and longer lives according to the Medpage report. 
• Fierce Healthcare reports that Massachusetts hospitals, doctors, and health plans are successfully collaborating to lower administrative costs. This is similar to the work that CAQH does on a nationwide basis. Cooperation is good. 

Congress is in session this week. Here’s a link to report on Congress’s work last week.

OPM has been encouraging FEHB plans to cover obesity treatment drugs. Kaiser Health New reports that the FDA approved a new obesity treatment drug last month – the fourth since 2012 — and it describes the lay of the land in terms of health insurance coverage for this drugs generally. The effectiveness jury remains out.

Susan Pisano, a spokesperson for America’s Health Insurance Plans, a trade group, says the variability of insurer coverage of anti-obesity drugs “relates to issues of evidence of effectiveness and evidence of safety.”
In 2012, the U.S. Preventive Services Task Force, a non-partisan group of medical experts who make recommendations about preventive care, declined to recommend prescription drugs for weight loss, noting a lack of long-term safety data, among other things. But its analysis was based on the older drugs orlistat, which is sold over the counter as Alli or in prescription form as Xenical, and metformin, a diabetes drug that has not been approved for weight loss but is sometimes prescribed for that by doctors.
The task force did recommend obesity screening for all adults and children over age 6, however, and recommended patients be referred to intensive diet and behavioral modification interventions.

As a result of this task force recommendation, FEHB and other health plans last year began covering obesity screening in-network without enrollee cost sharing.

Believe it or not the Washington Post offers to send subscribers an email with good news. One of the good news entries today is a story about a new class of antibiotic developed from Maine dirt.

Teixobactin works by targeting the building blocks of the bacterial cell wall. Most antibiotics target proteins inside the cell to disrupt it, but Teixobactin binds to two different lipids that are necessary in cell wall production. So even if one developed resistance, the other could still be targeted. In traditional tests to coax bacteria into mutating resistance to a drug, the researchers just kept being able to kill the bacteria.

The new drug is not likely to be prescribed to patients for four more years but it is hopeful development.

Health Data Management reported on a surgical risk calculator that can be used to chill out anxious patients.  Here is a link to the calculator which is designed for use by doctors.

Govexec.com reports that federal agencies shed nearly 20,0000 jobs in 2014 compared to a loss of 83,000 jobs on 2013. “Non-postal agencies employed at total of 2.12 million people at the end of 2014, while the Postal Service employed just less than 600,000. USPS has begun each year with fewer employees than in the one immediately prior for 15 consecutive years, according to agency figures, but BLS data show the agency actually netted 3,000 jobs in 2014.”

Yippee! Modern Healthcare reports that on Wednesday an Food and Drug Administration Advisory Panel recommended that the agency approve a bio-similar drug for marketing. This was a first in the good old USA.   Amgen’s “Neupogen can run more than $3,000 for 10 injections, and RAND Corp. researcher Andrew Mulcahy estimates [Novartis’s bio-similar] Zarxio could be sold at a 35% discount.”  However, even if the bio-similar drug is approved for marketing, the FDA also must figure out the process for determining whether a pharmacist can interchange the drugs without a physician’s approval as is the case with small molecule generic drugs.

In this regard, Drug Channels has an interesting report estimating how PBM’s profit from the wars between the manufacturers of biologic drugs to treat Hepatitis C — Gilead Sciences and AbbVie. This blogger estimate that these formulary moves, combined with specialty pharmacy dispensing, will allow the PBMs [specifically Express Scripts which is backing AbbVie and CVS which is backing Gilead} to earn as much as $2,600 to $3,100 per patient. The blogger backs up his estimates in the report.

The Health Care Incentives Improvement Institute released its 2014 report on the transparency of healthcare provider quality and the results are not good. The press release concludes “Consumers are flying blind when it comes to selecting hospitals and physicians, and public and private sector purchasers cannot hope to improve the overall quality and affordability of American health care if they don’t find a way to solve this problem. Some states {Washington, Minnesota, and Maine] have and every other state in the Union should follow suit.”

OPM published three proposed FEHBP rules in today’s Federal Register.

The most significant proposed rule pertains to the plan discontinuance process. Currently when a plan drops out of the FEHBP, its enrollees are given an opportunity to switch to a replacement plan. If an annuitant enrollee fails to make an election, the annuitant is auto enrolled in the Blue Cross Standard Option, the plan with the most members.  If an employed enrollee fails to make an election, the employee is out of the FEHBP until the next Open Season. Today’s proposed rule would extend the auto-enrollment protection to all enrollees and it would switch the default plan to the lowest cost nationwide plan selected annually by OPM. The default plan cannot be a high deductible plan or charge membership or association dues. As it stands today, the default plan would be GEHA Standard Option.

The other two rules address FEHBA preemption of state anti-subrogation laws and refining the pricing rules for community rated comprehensive medical rules or HMOs.  The preemption rule seeks to bring closure to an issue that has contested in court.  State anti-subrogation laws in the FEHBlog’s view (and the FEHBlog’s law firm runs a subrogation business) inequitably allow injured persons a double recovery from the health plan and the liable party’s auto insurer.  The FEHBlog is pleased that OPM agrees.

The third rule further rationalizes the pricing methodology used by community rated plans.  The change likely will make FEHBA participation more appealing to plans in states that mandate the use of traditional community rating.

The public comment period on the preemption rule expires on February 6, 2015. The public comment period on the other two rules ends on March 9, 2015.

On a separate note, Govexec.com has a first look on FEHBP related bills being introduced in the 114th Congress which opened for business yesterday.

Per Seeking Alpha

CVS Health (CVS -1.3%) bestows Preferred Status to Gilead Sciences’ (GILD +2.3%) Sovaldi (sofosbuvir) and Harvoni (ledipasvir/sofosbuvir) for the treatment of HCV infection. The pills will be the exclusive treatment option for beneficiaries on CVS’s Medicare, Medicaid and other drug benefit plans. AbbVie’s (ABBV -2.9%) Viekira Pak will be available only via a medical exception or prior authorization. Recently, AbbVie announced a similar deal with Express Scripts.

In any event, Gilead’s loss of its monopoly status is leading to lower pricing on its Hepatitis C drugs, which is good news.