Modern Healthcare.com is reporting that the White House has rejected the “key ideas” of the Congressionally mandated Citizens’ Health Care Working Group: “In written comments to Congress and to the group, administration officials said that ‘the working group chose an approach based on mandates and government intervention rather than an approach emphasizing consumer choice and options. In reviewing the working group’s report, we have major concerns with some of the recommendations.'”

The Wall Street Journal featured a fascinating article by Sarah Rubenstein yesterday on generic drug costs (freely accessible reprint from the Pueblo Chieftain). At last week’s FEHBP carrier conference, prescription benefit management company representatives explained how generic drug costs will not dip much below the brand name price during the 180 day period during which the generic manufacturer who won the race to challenge the patent has exclusive sales rights. Ms. Rubenstein’s article points out that pharmacies may be trying to maintain the relatively high generic price after the expiration of the exclusivity period (although I expect this is a high retail price not the price paid by the PBMs.) There is a lot more flexibility on pricing generics as compared to brand name drugs because generic drugs are not subject to the Medicaid best pricing requirement. In fact, I understand that generic drugs are more expensive in Canada than they are here. Medicaid’s best price rules are changing, however, and I am not certain how those changes will impact generic pricing for health plans and consumers.

This week, Rep. Patrick Kennedy (D R.I.), Rep. Jim Ramstad, and 254 co-sponsors introduced a mental health parity bill (H.R. 1367) that is stronger than the bill that his father’s (Sen. Ted Kennedy (D Mass.)) HELP committee cleared in the Senate. Although the text of the bill has not yet been posted, Business Insurance explains that

The House measure is different in at least two significant ways. While the Senate bill would pre-empt state laws mandating cost-sharing and treatment parity for mental health care services, the House bill would allow states to set stronger standards. Additionally, while the Senate bill would leave it to employers to decide on which mental disorders they will cover, the House bill mandates that employer plans would have to provide coverage for the same range of mental disorders and illnesses which are covered by federal health care plans available to members of Congress.

Infozine reports that “Congressman Patrick Kennedy (D-RI) told policymakers and mental health advocates [yesterday at the Bazelon Center for Mental Health law) that letting insurance companies define mental illness when setting limits on coverage is ‘bogus.'” However, provider and industry groups have coalesced around the Senate bill.

As you know, the HIPAA National Provider Identifier compliance date is May 23, 2007. At long last, HHS has submitted the critically important National Plan and Provider Enumeration System (NPPES) Data Dissemination policy to the Office of Management and Budget OMB) for final review before publication in the Federal Register. AGENCY: HHS-CMS RIN: 0938-AN71 TITLE: National Plan and Provider Enumeration System (NPPES) Data Dissemination (CMS-6060-NC) STAGE: Notice ECONOMICALLY SIGNIFICANT: No RECEIVED DATE: 02/26/2007 LEGAL DEADLINE: None
Hopefully OMB will complete its review quickly and health plans will see the policy this month.

At the FEHBP conference, I learned about a new legislative initiative that frankly was not on my radar screen — permitting the Food and Drug Administration to approve generic versions of expensive biological or specialty drugs. A biological drug is “a substance that is made from a living organism or its products and is used in the prevention, diagnosis, or treatment of cancer and other diseases. Biological drugs include antibodies, interleukins, and vaccines.” Biological drugs tend to be quite expensive.

In 1984 the Hatch Waxman Act “opened the pathway” for FDA approval of generic versions of drugs made from chemical compounds, but not biologicals. Rep. Waxman has introduced a bill (H.R. 1038) to open the same pathway for biologicals, nicknamed biogenerics. The Senate HELP committee held a hearing on the issue and a related Senate bill yesterday, and at the FEHBP carrier conference several speakers talked about the importance of this bill in reducing health care costs. The biological drug manufacturers contend that biogenerics will impair their development efforts and also that it is more difficult to prove that biogenerics are equivalent to the brand name generic which is the quid pro quo for generic status. Biogenerics are on my radar screen now.

OPM held its annual FEHB Program conference today. (I attended and it was an excellent program.) In recognition of this event, OPM released its “call letter” for 2008 benefit and rate proposals. I cannot recall an earlier date of call letter issuance.

This call letter kicks off the carriers’ process of preparing benefit and rate proposals that are due on May 31. OPM expects to complete negotiations by August 15, and then the Open Season will be held from early November to early December.

OPM announced in the call letter that for 2008 it will allow community rated HMO’s participating in the FEHBP to offer alternate benefit benefit packages subject to OPM approval. Currently those plans are restricted to offering the same community benefits package that the greatest number of non-Federal subscribers purchased in the prior year.

OPM also is encouraging hearing benefits for newborns and children, and the agency is prohibiting enhanced FEHBP dental benefits due to the new FEDVIP program.

Otherwise the call letter endorses the Administration’s health care initiatives, such as the Executive Order on HIT and health savings accounts.

Yesterday, the Delaware Chancery Court rejected Express Script’s appeal and is permitting the Caremark shareholders to vote on the CVS merger proposal on March 16. The CVS shareholders will vote on March 15. CVS has announced today that a best and final offer on the merger deal as follows

• CVS and Caremark have agreed to increase the special cash dividend payable to Caremark shareholders promptly following closing of the merger to $7.50 per share [from $6 per share].
• Consistent with (and in lieu of) the previously announced accelerated share repurchase program, promptly following closing of the merger CVS/Caremark will commence a cash tender offer for 150 million (or about 10%) of its outstanding shares at a fixed price of $35 per share.

According to the Wall Street Journal, CVS’s bid for Caremark is valued at $24.85 billion and Express Script’s bid is valued at $26 billion.

Express Scripts expects to receive today a second information request from the Federal Trade Commission about the anti-trust implications of its merger. CVS claims that this uncertainty calls Express Scripts’ bid into question. Express Scripts attempted to defuse this uncertainty by sweetening its offer yesterday.

It is possible that Caremark shareholders may turn down the CVS proposal, notwithstanding the FTC uncertainty, because the Caremark Board refused to negotiate with Express Scripts. On the other hand, the CVS merger would close almost immediately and produce the now $7.50 dividend, and a bird in the hand …

Express Scripts announced today that it is improving the cash portion of its offer for Caremark stock. The cash portion will accrue an additional 6% per annum beginning April 1.

Tomorrow is a big day in the Battle for Caremark as the Federal Trade Commission will announce whether it will undertake a second significant review of the Express Script proposal for anti-trust purposes. Medco CEO John Snow opined to Marketwatch that

If the FTC is favorable – meaning no second review or a minimal second review – I think Express has a very good opportunity here,” Snow told Marketwatch in an interview. But if the FTC has strong concerns about a merger between Medco’s wo biggest pharmaceutical benefits manager rivals, “…meaning there is a big risk factor associated with getting through the FTC process, then I think I’d tilt the scale to the CVS-Caremark merger,” Snow said.

The Wall Street Journal is reporting that the FTC is expected to give the Express Scripts / Caremark merger another look. Time is running out as the Caremark shareholders vote on the CVS merger proposal on March 16. Express Scripts lawyers also are hoping for an appellate victory in the Delaware courts that would stay that vote.

At the HIMSS conference on March 1, in an apparent effort to counter the February 1 GAO report criticizing HHS’s efforts to implement privacy controls in National Health Information Network (“NHIN”) and Mr. Feldman’s resignation from the AHIC workgroup, Dr. Rob Kolodner, the HHS interim HIT czar, announced that HHS plans to contract for a pilot “network of networks” that would allow health care consumers to control the flow their own electronic health information. Dr. Kolodner explained that the Government’s RFPs for a trial implementation of the NHIN will require bidders to include specific technical capabilities for enabling such consumer control. This information control should not affect health benefit plans and insurers which can always deny inadequately documented claims. Today’s Government Health Information Technology magazine reports generally favorable reactions to this initiative.

Evidencing the strength of the health information technology (HIT) market, 25,000 people attended the HIMSS conference in New Orleans last week. HIMSS is a leading HIT trade association. HHS Secretary Leavitt and acting HIT czar Dr. Robert Kolodner both spoke at the conference, as did Captain Kirk (seriously). I recommend reading the speech given by Tennessee Governor Phil Bredesen. The Governor made the following salient points:

What I ask you to take away from this and consider is not all these details and invention, but rather three principles:

–that we have to simplify, make concrete and make stable the standards that we build on—like the hugely successful example of the internet;

–that we should establish a beachhead somewhere and not try to win the whole war at once;

–that we can’t depend on experimenters and early adopters, we have to make it attractive to play and difficult to not play for everyone concerned.