• The President released his Fiscal Year 2009 budget on Monday. Govexec.com offers a series of special reports on the budget. The budget contains no new FEHB Program proposals. It drops last year’s proposal to weight an annuitant’s FEHBP government contribution on his or her years of government service.
• The agenda for the March 19-20 FEHBP carrier conference has been posted online.
• URAC is seeking public comment on its new Specialty Pharmacy, Mail Service Pharmacy and Pharmacy Benefit Management (PBM) for Workers Compensation and Property and Casualty accreditation programs.
• Merck agreed to pay the government $650 million to settle False Claims Act charges based on its marketing practices for the arthritis drug Vioxx and the cholesterol drug Zocor. The settlement derives from alleged Medicaid best pricing law violations and therefore will not benefit the FEHB Program.
• In other pharma litigation developments, four health insurers were awarded a $69 million antitrust judgment against Mylan Laboratories for using its market domination over two anti-anxiety drugs, lorazepam and clorazepate, to inflate the prices charged for those drugs. Interestingly, the health insurers had opted out of a class action against Mylan Labs for the same practice. Mylan Labs has announced that it will appeal to the U.S. Court of Appeals for the D.C. Circuit.

I was pleased to read in the 1/30 BNA Health Plan and Provider Newsletter, that on January 22, Judge Patti Saris of the U.S. District Court for the District of Massachusetts rejected the First Databank class action settlement that if approved would have caused First Databank to prospectively reduce its markup factor used to calculate the Average Wholesale Price for prescription drugs and set the wheels in motion to replace the AWP with another standard. In my opinion, the settlement would have disrupted the PBM market.

The judge allowed the parties two weeks to present an alternate settlement proposal. According to the report, the Judge refocused the parties on a settlement that provided monetary relief to consumers who had been overcharged by the erroneous markup. According to the National Community Pharmacists Association’s general counsel who attended the 1/22 hearing, the judge took the phase out of AWP off the negotiating table.

Here’s the link to the National Association of Chain Drug Store’s press release —

Here’s the blurb from the National Community Pharmacists Association’s web site

AWP Rollback BlockedA federal judge has rejected key elements of a proposed settlement of
the First DataBank/Medi-Span antitrust case that would have required a 4%
rollback of published Average Wholesale Price (AWP) figures, a move that would
have cost the average independent community pharmacy about $105,000. NCPA
vigorously opposed the proposed settlement. U.S. District Court Judge Patti B.
Saris told lawyers in the case to “go back to the drawing table.”The lawsuit was
brought by union health plans that alleged the two publishers conspired with
McKesson to increase AWPs, resulting in higher copayments for patients under the
plans’ AWP-based system. McKesson was not involved in the proposed
settlement.The parties involved are supposed to come back with a new proposed
settlement in early February. NCPA was not a party, but intervened when it
became apparent that independent community pharmacies would suffer greatly under the proposed settlement. NCPA filed a vigorous, detailed response lead by a
report from Ed Heckman, RPh, president PAAS National, and affidavits from nearly
two dozen independent community pharmacies.The judge mentioned the Heckman
report and NCPA favorably several times during the two-hour fairness hearing
Jan. 22 in Boston. “I heard very little that wasn’t positive to our interests,”
reported John Rector, Esq., NCPA general counsel. NCPA also was represented by
David Balto, Esq., an expert antitrust counsel.“We will continue to be active
and to keep you posted with further developments in this case,” Bruce Roberts,
RPh, NCPA executive vice president and CEO, told community pharmacists.

• What an exciting Super Bowl! President Bush releases his FY 2009 budget tomorrow. The Washington Post reports that the budget will seek to freeze domestic discretionary spending and cut billions from federal healthcare programs in order to achieve a balanced budget by 2012. The budget likely will not be well received on Capitol Hill.
• Speaking of Capitol Hill, Rep. Tom Davis (R Va) who chaired the House committee with FEHB Program oversight authority until the 2006 elections announced last week that he will not run for re-election this year. Rep. Davis remains the ranking Republican on the House Oversight and Government Reform Committee.
• The Bridges to Excellence Coalition announced a medical home incentive program. According to Modern Healthcare.com,
  

  A definitive picture of a medical home has yet to develop, but its principles—as formulated by the ACP, American Academy of Family Physicians, American Academy of Pediatrics and American Osteopathic Association—involve patients having a personal physician who leads an integrated team of healthcare professionals providing coordinated acute, chronic, preventive and end-of-life care facilitated by information technology tools and based on a foundation of safety and quality improvement. Also, patients would have “enhanced” access—meaning extended hours and a secure electronic communication options—and primary-care physicians would be recognized and adequately reimbursed for the care management and coordination services they provide.

  Bridges for Excellence explains in its press release that

  Through participation in the BTE Medical Home recognition, doctors can receive an annual bonus payment of $125 for each patient covered by a participating employer, with a suggested maximum yearly incentive of $100,000. “Our research shows that patients who are well taken care of cost less,” said Francois de Brantes, BTE CEO. “The average potential savings per covered life would be approximately $250 a year.”

• The hospitals located in State of Washington has joined the hospitals in the States of Massachusetts, Vermont, and Minnesota by agreeing not to bill patients or health plans for the cost of caring for the consequences of their own errors, so-called never events. Modern Healthcare.com reports that
  

  The agreement applies to 28 of the most egregious adverse events such as operating on the wrong part of the body, or the serious injury or death of a patient from a fall. Out of a total of 600,000 hospital admissions in the state from June 2006 to July 2007, only about 180 such adverse events were reported to the state. The CMS and most major insurers have announced they will no longer pay for many of these so-called “never events.”

• OPM has posted its management response to its Inspector General’s latest semi-annual report to Congress.

• The AMA News hit the roof over a web site hosted by a Blue Cross Blue Shield of Minnesota affiliate that allows people to post their reports about their personal health care experiences.

• The major consulting firm Towers Perrin has released its 2008 health care cost survey which is available for download.

• Today’s Baltimore Sun features an interview with Shannon Brownlee, a journalist who last year authored the book “Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer.” Ms. Brownlee suggests that the root of the Nation’s health care problems is the fee for service reimbursement system. She also recommends the creation of an institute for the study of effective treatments and separating drug manufacturers from clinical research. She points to the recent Vytorin study which finds that this combination drug works no better than the generic version of Zocor which is one of its components.
• In a post last week, I mentioned that Wal-mart is planning to get more involved with health care. The Wall Street Journal reports that the big news is that Wal-mart is considering entering the prescription benefit management business. CNNMoney.com reports that the announcement is not raising alarms in the PBM industry yet, but in an interesting twist, NCPA, the retail pharmacy trade association, is hopeful about the announcement.
• According to an HHS press release, HHS Secretary Michael Leavitt announced at a meeting of the American Health Information Community (AHIC) on January 22, 2008, that LMI, teaming with the Brookings Institution, will lead the effort to design and establish the public-private partnership based in the private sector, known as AHIC 2.0. This award will consist of two phases with a full transition expected by late 2008. The Democratic leadership health information technology bills pending in Congress would block this initiative.
• GAO released a government improper payments report for fiscal year 2007 which ended on September 30, 2007. The U.S. Office of Personnel Management estimates that FEHB Program overpayments totalled $169.7 million for an error rate of 0.5%.
• The Centers for Disease Control released the latest National Immunization Survey which finds adult immunization rates unreasonably low. Time Magazine recommends that adults “check out the CDC’s immunization schedule, and the next time you visit your doctor, ask about routine vaccinations.”
• The Blue Cross Blue Shield Association released a proposal for covering the uninsured, titled “The Pathway to Covering America.”
• OPM published a proposed regulation governing the manner in which federal agencies can use employees’ Social Security numbers.

CMS announced today “no later than May 24, 2008, all covered entities are expected to be using the [HIPAA National Provider Identifier] NPI in a compliant manner, and all contingency plans should be lifted.”

In other news, the Institute of Medicine released a report recommending that “Congress direct the U.S. Department of Health and Human Services to establish a program with the authority, expertise and resources necessary to set priorities for evaluating clinical services and to conduct systematic reviews of the evidence. The program would also develop and promote rigorous standards for creating clinical practice guidelines, which could help minimize use of questionable services and target services to the patients most likely to benefit. ” AHIP, the health plan trade association, endorsed the IOM recommendation.

According to Healthcare IT News, Wal-Mart’s CEO announced yesterday that “We will partner with doctors and other providers to increase the number of electronic prescriptions in the U.S. And, we will provide electronic health records to United States associates and their family members – including retirees – by the end of 2010.” Wal-Mart’s Vice Chairman is a member of the American Health Information Community, an HHS advisory body.

• The Centers for Medicare and Medicaid Services (“CMS”) is ending its HIPAA National Provider Identifier (“NPI”) contingency plan effective May 23, 2008. Here are the looming deadlines for providers that submit electronic claims to Medicare. CMS is urging providers to test claims now.

March 3, 2008 – Medicare fee-for-service 837P and CMS-1500 claims must include an NPI in the primary fields on the claim (i.e., the billing, pay-to, and rendering fields). You may continue to submit NPI/legacy pairs in these fields or submit only your NPI on the claim. You may not submit claims containing only a legacy identifier in the primary fields. Failure to submit an NPI in the primary fields will result in your claim being rejected or returned as unprocessable beginning March 1, 2008. Until further notice, you may continue to include legacy identifiers only for the secondary fields. May 23, 2008 –In keeping with the Contingency Guidance issued on April 3, 2007, CMS will lift its NPI contingency plan, meaning that only the NPI will be accepted on all HIPAA electronic transactions (837I, 837P, NCPDP, 276/277, 270/271 and 835), paper claims and SPR remittance advice. This also includes all secondary provider fields on the 837P and 837I. The reporting of legacy identifiers will result in the rejection of the transaction. CMS will also stop sending legacy identifiers on COB crossover claims at this time.

• NCQA in cooperation with various medical associations has created standards that primary care medical practices can use to assess whether or not they function as a “patient centered medical home.” According to NCQA, “[t]he Patient Centered Medical Home is a health care setting that facilitates partnerships between individual patients, and their personal physicians, and when appropriate, the patient’s family. Care is facilitated by registries, information technology, health information exchange and other means to assure that patients get the indicated care when and where they need and want it in a culturally and linguistically appropriate manner.” Heath plans are beginning to recognize medical homes in their provider directories.

• The Leapfrog Group for Patient Safety has updated its compendium of pay for performance programs. Any organization may includes its P4P program in the compendium which is searchable for free.

• Business Week features a lengthy article questioning the health value of statins, the blockbuster class anti-cholesterol drugs. From the headline, “Research suggests that, except among high-risk heart patients, the benefits of statins such as Lipitor are overstated.”
• Modern Healthcare.com reports on Senator Ted Kennedy’s efforts to get the Health and Human Services Department to implement a federal patient safety law enacted in 2005.
• Govexec.com reports on a dispute between the White House and a Senate committee over an Inspector General reform bill. (OPM’s Office of Inspector General audits FEHB plans.)
• The daily Kaiser Health Care Report informs us that efforts are underway on Capitol Hill to extend the Medicare payment fix for doctors enacted last months for a brief six month time period. The Senate Finance Committee again is taking the lead. The President may offer his own proposal in the FY 2009 budget that will be released next month.
• Finally, the AP reports on a genetic research breakthrough:
  

  Scientists have found that a combination of five gene variants sharply raises the risk of getting prostate cancer. Added to family history, the genes accounted for nearly half of all cases in a study of Swedish men. The discovery is remarkable not just for the big portion of cases it might explain, but also because looking at combinations rather than single genes might help solve the mystery of many complex diseases such as cancer and diabetes that are thought to involve multiple genes or interactions between them.

On November 7, 2007, the House Judiciary Committee favorably reported by voice vote HR 971, the Community Pharmacy Fairness Act which would create an antitrust law exemption that would allow independent pharmacies to create a “union” similar to employees for the purpose of negotiating with health plans (including FEHB plans and Medicare Part C and D plans) and prescription benefit managers. The PBM trade association, PCMA, issued a press release today about a Congressional Budget Office report on HR 971. According to the PCMA,

“CBO found that HR 971 would increase federal costs by $727 million over ten years and that increased drug costs to private health plans, employers, and consumers would result in ‘reductions in the scope or generosity of health insurance benefits, such as increased deductibles or higher copayments.’ CBO’s analysis also contends that cost increases resulting from the legislation would be passed along to workers, reducing both their taxable compensation and other fringe benefits.’

• Thanks to the Galen Institute, I ran across this interesting report on health care industry 2007 overview and 2008 trends projection prepared by Booz Allen Hamilton.
• The Centers for Medicare and Medicaid Services (CMS) published in the current Health Affairs journal a report on 2006 U.S. health care expenditures. The data is available here. The CMS press release advises in pertinent part that
  

  Health care spending growth in the United States accelerated slightly in 2006, increasing 6.7 percent compared to 6.5 percent in 2005, which was the slowest rate of growth since 1999. Health care spending, however, continues to outpace overall economic growth and general inflation, which grew 6.1 percent and 3.2 percent, respectively, in 2006.Out-of-pocket spending grew 3.8 percent in 2006, a deceleration from 5.2 percent growth in 2005. This slowdown is attributable to the negative growth in out-of-pocket payments for prescription drugs, mainly due to the introduction of the Medicare Part D benefit. Out-of-pocket spending accounted for 12 percent of national health spending in 2006; this share has steadily declined since 1998, when it accounted for 15 percent of health spending. Out-of-pocket spending relative to overall household spending, however, has remained fairly flat since 2003. The CMS found that overall private spending growth slowed in 2006. Private health insurance premiums grew 5.5 percent in 2006, which was the slowest rate of growth since 1997. Benefit payment growth also slowed, from 6.9 percent growth in 2005 to 6.0 percent in 2006. The slower growth reflects, in part, a decline in private health insurance spending on prescription drugs. The ratio of net cost of private health insurance (the difference between premiums and benefits) to total private health insurance premiums was 12.3 percent in 2006, slightly lower than 12.7 percent in 2005. At the aggregate level in 2006, businesses (25 percent), households (31 percent), other private sponsors (3 percent), and governments (40 percent) paid for about the same share of health services and supplies as they did in 2005. However, spending shifts did occur within major sponsor categories due to implementation of the Medicare Part D benefit. Medicare’s share of federal spending increased from 29 percent in 2005 to 34 percent in 2006, while Medicaid’s share decreased from 45 percent to 40 percent. For households, the share of Medicare spending attributable to payroll taxes and premiums increased slightly in response to first-time Medicare Part D premiums. Conversely, the out-of-pocket spending share decreased slightly due, in part, to the newly available prescription drug coverage through Medicare Part D. Total Medicaid spending declined for the first time since the program’s inception, falling 0.9 percent in 2006. The introduction of Medicare Part D, which shifted drug coverage for dual eligibles from Medicaid into Medicare, contributed to the decline in Medicaid spending growth. Other reasons for the decline include continued cost containment efforts by states and slower enrollment growth due to more restrictive eligibility criteria and a stronger economy. Spending growth for most personal health care services slowed in 2006. Hospital spending, which accounts for 31 percent of total health care spending, grew 7.0 percent in 2006, a decrease of 0.3 percentage points from 2005 and a continued deceleration from 2002 (when growth was 8.2 percent). The 2006 growth rate was partially driven by lower utilization of hospital services, especially within Medicare as fee-for-service inpatient hospital admissions declined. Spending for physician and clinical services also slowed, increasing 5.9 percent in 2006, which is 1.5 percentage points slower than in 2005 and the slowest rate of growth since 1999. The slowdown was driven by a deceleration in price growth, fueled by a near freeze on Medicare payments to physicians (whose fee schedule update was 0.2 percent in 2006) that influenced private payers as well. The implementation of the Medicare Part D prescription drug benefit affected a variety of indicators, including rates of growth of prescription drug spending and the share of drug spending accounted for by Medicare. The Medicare Part D benefit contributed to an increase in total Medicare spending, which grew 18.7 percent in 2006 compared to 9.3 percent in 2005. In addition, Medicare Advantage spending as a share of total Medicare spending increased from 14 percent in 2005 to 18 percent in 2006, in part due to a 25 percent increase in Medicare Advantage enrollment over the same period. At the same time, traditional fee-for-service enrollment declined 3.8 percent and its share of total Medicare spending fell from 86 to 82 percent. Prescription drug spending growth accelerated for the first time in six years—from a low of 5.8 percent in 2005 to 8.5 percent in 2006. Roughly half of this growth was due to increased use of prescription drugs, partly a result of coverage now available under Medicare Part D, as well as new indications for existing drugs, growth in therapeutic classes, and increased use of specialty drugs. However, a higher generic dispensing rate in 2006 helped to restrain prescription drug spending growth, which despite the acceleration still remained well below the average annual growth of 13.4 percent per year that occurred between the years 1995 and 2004. The higher rate of use of generic drugs was driven, in part, by the continued use of tiered co-payment structures, certain drugs going off patent, and the lack of new blockbuster drugs. Total prescription drug spending in 2006 was $216.7 billion, compared to $199.7 billion in 2005. Public funding sources, including Medicare and Medicaid, accounted for 34 percent of total drug spending, whereas in 2005 their share was approximately 28 percent. In addition to an increase in the share of prescription drug spending funded by public sources, the implementation of Medicare Part D also shifted Medicaid funding to Medicare for dually eligible individuals. Medicare’s share of total prescription drug spending increased from 2 percent in 2005 to 18 percent in 2006. Medicaid’s share of total drug spending fell from 19 percent in 2005 to 9 percent in 2006. Private funding for prescription drugs, including private health insurance and out-of-pocket spending, declined by 1.3 percent from 2005 to 2006; as a result, the private share fell from 72 percent in 2005 to 66 percent in 2006.

• Speaking of prescription drug expenses, the major pharmacy chain Walgreens announced last week that it does not plan to acquire a major prescription benefit manager, and CNNMoney.com reported that Express Script’s failed attempt to acquire the Caremark PBM has worked out OK for the company:
  

  If Express Scripts (NASDAQ:ESRX) was disappointed its bid for Caremark failed, it’s been crying all the way to the bank. Since March, when it lost out to drugstore chain CVS (NYSE:CVS) CVS for the rival pharmacy benefit manager, Express Scripts’ ESRX stock has nearly doubled in price.

• Finally, the Hartford Courant reported on a payment dispute between Aetna and out-of-network health care providers supported by the American Medical Association.