FEHBlog

Although the Senate got through its appropriations work last week, it turns out the Senate remains in session this week. According to the Washington Times that the Senate Majority Leader Mitch McConnell will keep the Senate open this week to consider 110 pending Presidential nominations. Senators in tight races are bound to hit the trail regardless and the entire Senate will be in town this weekend for Senator McCain’s funeral on Saturday.

On the prescription drug front —

• Health Affairs blog reports to no one’s surprise that

from January 1, 2011 through December 31, 2016, of total health care spending and per-member-per-month (PMPM) spending on prescription medications for Harvard Pilgrim Health Care (HPHC), a commercial insurer of about one million members in four New England states. Between 2011 and 2016, spending net of rebates by this commercial health plan on outpatient prescription medications, including those administered in physicians’ offices, has increased to a quarter of all health care spending, largely due to increasing prices of specialty medications. 

•  The Wall Street Journal on Saturday offered an thought provoking interview with the FDA Commissioner, Dr. Scott Gottlieb – to wit

“It used to be that the model was to develop a drug that was going to be administered chronically over the life of a patient,” Dr. Gottlieb says in a recent interview at the FDA’s headquarters. “It was basically an annuity. And now, the model is to try to develop curative therapy,” usually a short course or a one-time treatment [e.g. the Hepatitis C cure Harvoni]. “It’s a completely different therapeutic model. It’s a completely different payment model, and our payment system isn’t adapted to that.”

• Forbes observes that the opioid litigation against drug manufacturers may be leading to a big dollar settlement similar to the tobacco litigation settlement negotiated by state governments against the tobacco manufacturers twenty years ago.  

Fitch said credit implications should be “minimal for large diversified firms” like Johnson & Johnson, McKesson, AmerisourceBergen, Cardinal Health and retail chains such as Walgreens Boots Alliance and CVS Health because they “offer a wide array of products and generate significant cash flow,” Fitch said. “Conversely, the effect on cash flow and liquidity could be significant for smaller manufacturers with material exposure to pain killers; such as, oxycodone, hydrocodone, and meperidine under brand names OxyContin, Vicodin, and Demerol.”

Also last week the Labor Department which enforces ERISA offered informal guidance on the new Association Health Plan rules. No relevance to the FEHBP but interesting for the private employer market.

The Wall Street Journal reports that both the Cigna and the Express Script shareholders approved by wide margins their merger deal in votes announced earlier today.

The deal received the backing of about 90% of Cigna shareholders, the health insurer said Friday, citing a preliminary vote tally. Of the Express Scripts ESRX 0.21% shareholders who voted Friday, 99% approved the deal. 

The Senate made significant progress on its FY 2019 appropriations work yesterday which allowed the body to leave town today.  Roughly one third of the Senators need to hit the campaign trail. Both the Senate and the House seem on track to wrap up their FY 2019 appropriations work before the September 30 end of the government’s fiscal year, which would be quite miraculous.

The Hill reports that yesterday the Senate approved Health and Human Services funding as part of a minibus bill that must be reconciled with a House measure. That Senate bill includes a provision that would require prescription drug manufacturers to disclose their product pricing in direct to consumer advertising. Healthcare Finance tells us that AHIP supports this measure.

FedSmith reports on an OPM benefit administration letter (“BAL”) issued this week that implements a recent OPM rule explaining how an enrollee may remove an otherwise eligible family member from a self and family enrollment. “A separate BAL will provide specific guidance to agencies on the situations that allow for removal of ineligible family members and the removal process.”

The Hill reports that the President is urging the Senate to follow the House of Representative’s lead by passing an opioid crisis bill.  The Hill further reports that a group of eight health benefit organization lobbying groups, including AHIP and the Blue Cross Blue Shield Association, is pleading with the Senate leadership not to adopt the House opioid bill provision that would extend private sector primary coverage liability over Medicare from 30 to 33 months effective January 1, 2020.

Also on the opioid crisis front —

• Opioid Watch offers this interesting perspective on tackling the opioid crisis. 
• The Centers for Disease Control’s cheerfully named Morbidity and Mortality Weekly Report offers statistics on the extent to which the opioid crisis is affecting pregnant women, which is an OPM priority. 

Hospitals have been closing at a rate of about 30 a year, according to the American Hospital Association, and patients living far from major cities may be left with even fewer hospital choices as insurers push them toward online providers like Teladoc and clinics. * * * 

There are already a lot of hospitals with high negative margins, consultancy Veda Partners healthcare policy analyst Spencer Perlman says, and that’s going to become unsustainable. Rural hospitals with a smaller footprint may have less room to negotiate rates with managed care companies and are often hobbled by more older and poorer patients.

Finally, the FEHBlog’s pharmacist friend from Connecticut pointed out  this Reuters report dated August 14  —

[Prescription benefits manager] Express Scripts has built a specialty pharmaceutical business in which it gets paid to help drug companies dispense a new generation of high-priced drugs. The company is now holding discussions with biotechnology companies Biomarin Pharmaceutical, Spark Therapeutics, and Bluebird Bio to exclusively distribute their new hemophilia therapies when they are expected to become available in 2019 and 2020. Analysts project those drugs could top $1 million to $1.5 million in price. Express Scripts Chief Medical Officer Steve Miller says the potentially curative therapies will likely be worth the high cost if they supplant the hundreds of thousands of dollars in annual medical costs to treat ailments such as hemophilia. “Even if they charge $1 million, that’s a great deal,” says Miller. “So there are going to be some gene therapies where it is very clear that everyone who has that disease should get it.” To manage any potential conflicts of interest, Miller notes Express Scripts separates its benefits management and specialty pharmacy businesses.

The FEHBlog is back inside the Beltway. While up in the Nutmeg state, the FEHBlog learned from a good pharmacist friend that the FEHBlog’s font needed a larger font to help vision impaired readers. The FEHBlog consulted Google and upped the FEHBlog’s font size to 20 px and changed the font from Arial to Merriwether is supposed to be an easier read font when larger px fonts are used. You can learn something new everyday.

While driving back to DC, the FEHBlog and spouse passed through New Haven, CT. The New Haven Register reports that the K2 overdose crisis on the New Haven Green (discussed in last Friday’s post) waned after arrests were made.

While driving through New Jersey, the FEHBlog and spouse listened to the latest Econtalk podcast.  Stanford econ professor Russ Roberts interviewed Dr. David Melter, who is an MD and holds a Ph.D in economics from the University of Chicago. Dr. Meltzer runs the hospitalist program at the University of Chicago hospital. The FEHBlog has mentioned that his own internist told him that due to the common use of hospitalists, he may not even know when one of his patients is hospitalized.  With funding from the Center for Medicare and Medicaid Innovation, Dr. Meltzer conducted a study involving a cohort of 2,000 patients with Medicare. Half of the group were assigned new primary care providers from the University of Chicago who coordinated their inpatient and outpatient care. The other half was a control group although the study helped the control group members find a primary care provider to monitor outpatient care if necessary. The study was conducted over a four year period from 2012-2016. The test subgroup had higher satisfaction with their coordinating doctors, better mental health, and materially lower hospitalization rates than the control group. The study points again to the importance of primary care providers who oversee all aspects to patient care to lowering health care costs. Check out the podcast.

The Senate remains in session on Capitol Hill this coming week. The Washington Examiner reports that the Senate is making progress in passing FY 2019 appropriations measures.

Here are some tidbits from last week:

• Arstechnica reports that the Food and Drug Administration approved Teva Pharmaceuticals application to market generic adult and pediatric versions of the EpiPen self injection device for treating severe allergic reactions. 
• U.S. News and World Report came out with its 2018 list of best hospitals. 
• Modern Healthcare came out with its annual list of the 100 Americans who have the most impact on our healthcare policy. This group is lead by President Trump and twelve disrupters all ranked no. 2. 

Leaving Block Island today. Lovely weather. Yesterday, a woman working at a restaurant suggested that I try to stay cool. I replied that the weather on Block Island is much cooler and pleasant than Washington, DC, in August. Perspective is everything.

In any event, the federal government preliminary reported earlier this week that drug overdose deaths in our country reached a new high of roughly 72,000 in 2017, compared to 66,000 in 2016.

Among the more than 72,000 drug overdose deaths estimated in 2017, the sharpest increase occurred among deaths related to fentanyl and fentanyl analogs (synthetic opioids) with nearly 30,000 overdose deaths.

Illustrative of the nationwide public health problem, the New Haven (Connecticut) Register reports that more than 80 people have collapsed (but not died) on the New Haven Green due to smoking a synthetic marijuana laced with fentanyl, a very strong opioid.  The Hartford Courant adds

Two men were arraigned in state court Thursday afternoon on charges related to Wednesday and Thursday’s mass overdose of the synthetic marijuana drug known as “K2,” as stricken people continued to drop in and around New Haven’s downtown green. By Thursday afternoon, more than 85 overdose cases had been treated, according to officials.

New Haven police Chief Anthony Campbell said one of two men suspected of distributing the K2 was handing it out to build demand and clientele. Another suspect was charging money for the drugs. The chief said investigators believe more of the batch is still out in the community.

The Wall Street Journal reports that President Trump in a cabinet meeting suggested that the federal government bring its own lawsuit against the opioid manufacturers and investigate and seek to stop foreign suppliers of fentanyl and synthetic opioids.  The Journal adds that

the [new federal government] data also show a slight decline in deaths in the last month of 2017 and January 2018, suggesting that efforts to prevent opioid use and treat addiction may be starting to have an effect.

On the FEHBP front, retirement consultant Tammy Flanagan offers her perspective in govexec.com on whether what annuitants with FEHBP should do when they reach Medicare eligibility.  The FEHBlog wishes to point out that pursuant to 5 CFR Sec. 890.304(p):

(p) On becoming eligible for Medicare. An annuitant may change the enrollment from one plan or option to another at any time beginning on the 30th day before becoming eligible for coverage under title XVIII of the Social Security Act (Medicare). A change of enrollment based on becoming eligible for Medicare may be made only once.

The FEHBlog and spouse are vacationing this week on Block Island which is off the southern coast of Rhode Island (and is part of that state). It’s lovely here.

As the FEHBlog predicted and CNBC reports, Carl Icahn has waved the white flag on this effort to block Cigna’s acquisition of Express Scripts.

Speaking with CNBC about the decision, Icahn took a conciliatory note, saying: “The crossover was too big and given what the advisory firms said we realized there was no way we could win. Sometimes you have to be flexible. There’s no point in fighting just to fight. We won three proxy fights in a row which is really hard to do, so you lose one. It’s the way of life.”

Following up on another Weekend Update post, New Mexico Health Connections on Monday did bring another lawsuit seeking a preliminary injunction against CMS’s ACA risk adjustment rule. The New Mexico co-op which would owe CMS $5.6 million in risk adjustment contributions under this rule, is challenging the final rule for 2017 benefit year, issued on July 30, not the proposed rule for the 2018 benefit year, which was issued last week. The New Mexico co-op’s press release explains that

“We contend that the emergency regulation continues a risk adjustment formula that disadvantages small, new, and lower-priced health plans in favor of their larger, more expensive competitors,” Marlene C. Baca, Health Connections CEO, said in a written statement.

In other ACA litigation news, the federal district court for the Northern District of Texas has set September 10 as the date for a hearing on the preliminary injunction motion by a group of states lead by Texas to strike down the ACA in the wake of Congress’s decision to zero out the ACA’s individual mandate penalty beginning next year. Another group of states has intervened as defendants to support the ACA and the Justice Department has filed a brief partially support both sides.

Finally, the Hill reports that the CVS Health’s PBM arm “Caremark will allow its clients to exclude coverage of drugs with extremely high launch prices under a new program the company said is aimed at pressuring manufacturers to lower drug costs.”

The new program will use specific methods of comparing the cost and effectiveness of certain medications. CVS said such analyses for the effectiveness of drugs are common in Europe, but don’t exist in America. 

“No one but manufacturers have, until now, had any control over the launch price of newly patented drugs. This new approach, harnessing the power of the market, could change manufacturer behavior,” CVS said in an announcement. 

CVS said the program will focus on expensive drugs that aren’t cost-effective, so medications that are deemed “breakthrough” therapies by the Food and Drug Administration will be excluded from this program.

The Senate returns to Capitol Hill this week while the House of Representatives are in their home districts. This Week in Congress has returned to the internet after being off the air for four months. While the first line of their report is incorrect, the FEHBlog finds the one pager to be useful.

On the mergers and acquisitions front, Bloomberg reports that both of the major shareholder proxy advisory companies have come out in favor of the Cigna / Express Scripts merger.  The Wall Street Journal explains in an editorial about the failed Rite-Aid / Albertson’s merger that

[T]he objections by Glass Lewis and ISS carry substantial weight since the Securities and Exchange Commission allows institutional shareholders to fulfill their fiduciary obligations by relying on the advice of third-party proxy advisers. Flouting their advice can invite investor lawsuits. Glass Lewis and ISS control 97% of the advisory market, which encourages herd voting among investors.  Proxy firms also don’t have to demonstrate that their recommendations are in the best interest of shareholders, which can cause conflicts of interest.

Just as the Glass Lexis and ISS objections to the Rite-Aid / Albertson’s merger killed the deal last week, it’s likely that their support for the Cigna / Express Scripts merger will carry the date, notwithstanding Carl Icahn’s opposition.

Healthcare Dive reports that

Employers feel they’ve squeezed out all of the savings that can come from high-deductible health plans and are seeking new ways to manage rising healthcare costs and improve employee health, according to a new report by Duke’s Margolis Center for Health Policy. 

The FEHBP hasn’t come close to squeezing all of the savings that can come from high deductible plans. Except at the very beginning in 2004, OPM has not been keen on them.

Finally, to close the loop on an ACA issue, the FEHBlog noted last month that the Centers for Medicare and Medicaid Services had suspended making payments to insurers in the ACA’s fully funded risk adjustment program due to a court ruling in New Mexico. Late last week, CMS issued a final rule intended to address the court’s concerns about the prior rule. The risk adjustment payments will resume in September with no change to distribution approach unless the court issues a preliminary injunction.

Let’s kick of this post with some healthcare related mergers and acquisitions updates —

• Forbes offers a useful update on the status of the CVS Health acquisition of Aetna.  Cautious optimism abounds. “CVS narrowed the window of time when executives believe the deal will close. CVS now says  the Aetna transaction will close in the later part of the third quarter or the “early part” of the fourth quarter . The company previously said the deal would close in the second half of this year.”  Also Becker’s Hospital Review briefs us on CVS Health’s second quarter 2018 earnings report. 

• The Wall Street Journal reports that earlier this week, “in a surprise move, Rite Aid Corp. and Albertsons Cos. called off their planned $24 billion merger on the eve of a shareholder vote in the face of mounting protests from investors.”  Rite Aid, of course, is a drug store chain while Albertsons is a grocery chain. In a follow up article the Journal observed that

It was Rite Aid’s second failed merger attempt in roughly a year. Federal regulators in 2017 shot down a planned tie-up with rival Walgreens Boots Alliance Inc. Rite Aid, now down to around 2,600 pharmacies, has a market-capitalization of under $2 billion. “There is no easy recipe for Rite Aid,” said Kurt Jetta, executive chairman of the Tabs Analytics consultancy, who previously advised Albertsons.

Speaking of pharmacies, Healthcare Dive reports that CVS Health is the latest pharmacy chain to begin offering telehealth services at their in-store clinics which usually are staffed by physicians assistants, in the FEHBlog’s limited experience.

Tibits —

• Health Data Management reports that the Centers for Medicare and Medicaid Services yesterday announced a proposed rule to overhaul Medicare’s accountable care organization program, which is six years old, in order to require the providers to offer some skin in the game.  The FEHBlog is a much greater fan of commercial ACOs which are based on contracts rather than much less flexible laws and regulations. 
• The New  York Times Upshot column discusses the difficulties confronted in studying the efficacy of workplace wellness programs. 
• HHS’s Office for Civil Rights, which enforces the HIPAA Privacy and Security Rules, released a July newsletter with guidance on proper disposal of electronic data storage devices that contain protected health information.
• The Wall Street Journal humorously reports on inexpensive “chatbot” apps that provide folks with talk therapy. Treat yourself.  

The FEHBlog in interested in the President’s Postal Service Reform Committee because the Postal Reform bills in Congress (e.g., HR 756) would create a Postal Service Health Benefits Program within the FEHBP. OPM Director Pon sits on the Committee which Treasury Secretary Mnuchin chairs.

Congress has paused work on its bill pending consideration of this report, which is scheduled to be submitted to the President on Friday August 10. Govexec.com reports this morning that

While the report is completed and expected at the White House by Friday’s deadline, multiple individuals engaged in discussions with the task force told Government Executive the administration will not make it public immediately. The report is already being circulated within the administration, those individuals said, but the White House will not widely release it for at least a couple of weeks.

Of course, that makes sense.

Healthcare Dive reports that Carl Icahn has gone public with this campaign to defeat the proposed merger of Cigna and Express Scripts.  The Wall Street Journal adds that

[Mr. Icahn] suggests that Cigna instead strike a multiyear partnership with a pharmacy-benefit manager—potentially Express Scripts—and buy back stock.

Cigna said in a statement Tuesday that Mr. Icahn appears to be making a financial bet against the transaction. His comments demonstrate a “lack of understanding of the dynamics of the health-care industry,” Cigna said.

Cigna’s shareholders of record on July 10 will vote on the transaction on August 24. The Express Scripts shareholders will vote on the same day. Both votes requires majority support for the merger agreements to close, assuming no federal government objection.

Health Payer Intelligence helpfully suggests some ways that health plans can adjust cost sharing in order to improve the health of people with chronic ailments. One size does not fit all.

The Centers for Medicare and Medicaid Services announced today that its giving Medicare Advantage and Part D plans significantly more latitude in managing prescription drug benefit costs. Specifically Medicare Advantage plans will be permitted to negotiate prices for drugs, typically injectables, that are covered under Part B and Medicare Advantage and Part D plans will be able to implement step therapy arrangements under which patients try out more cost effective drugs before using the more expensive substitute.

On the government reorganization front, Nextgov reports that

The government’s head of background investigations is fully in favor of moving his office, staff and workload under the Defense Department, a shift that is expected to become official under an impending presidential executive order.

Congress passed legislation last year requiring the National Background Investigations Bureau—part of the Office of Personnel Management—to transfer investigations of Defense personnel and contractors to that department. NBIB would retain only the civilian government portion, but that partial shift would ultimately be untenable, according to administration officials.

“The truth is that that split would have been debilitating, distracting and, frankly, counterproductive,” NBIB Director Charles Phalen said during an Aug. 7 Nextgov event on insider threats. “Good news is, after further review … the administration had determined that bifurcation is probably not a good idea.”