On July 17, the FEHBlog noted Robert Pear’s article in the New York Times warning that the Centers for Medicare and Medicaid Services’ proposed Medicare diagnostic related group (DRG) reforms would whack Medicare reimbursements to hospitals by 20 to 30%. Modern Healthcare.com reports that CMS Administrator Mark McClellan stated at a press conference today that CMS now is planning to phase in the reforms over a three year period and that only 2% of hospitals would experience Medicare reimbursement reductions as a result of the reforms.

On Friday July 28, the Treasury Department and the Internal Revenue Service (IRS) issued final rules governing the required comparability of employer contributions to employees’ health savings accounts. The proposed rule was published in August 2005.

The Treaury Department’s press release explains that

Comparability rules provide that an employer contributing to one employee’s HSA must contribute comparable amounts to all employees who have HSAs. The final regulations expand the flexibility of the proposed rules issued in August 2005.In particular, the final regulations include the following features:

• An exception from the comparability requirement for groups of collectively bargained employees;
• The ability to make different comparable contributions based on different variations of family coverage;
• Further clarification of the exclusion from the comparability requirement for employer contributions made through a cafeteria plan.Generally, under the final rules if employees are allowed to contribute to an HSA by salary reduction through a cafeteria plan, all employer contributions to the employee’s HSA will be treated as being made through a cafeteria plan (and thus excluded from the comparability rules).

The new rules apply to employer contributions made on or after January 1, 2007.

The Wall Street Journal yesterday featured an article about the 83 year old philanthropist David Murdock who owns Dole Foods, among other companies. Mr. Murdock is building the California Wellbeing Institute outside Los Angeles. The Journal describes the Institute as ” a combination Four Seasons luxury resort, conference center and nutrition-counseling school.”

It was most interesting to me that the health insurer Wellpoint has assumed a 15% ownership interest in the Institute. The Jurnal article further explains that in 2004, “Mr. Murdock convinced [then Wellpoint CEO Leonard] Schaeffer that WellPoint should team up with him. Mr. Schaeffer saw wellness as a promising business area, with good boomer demographics and the potential to attract cash-paying customers, free from the constraints of medical insurance.” The Institute is scheduled to open in November 2006.

Last month, as noted in the FEHBlog, the House Ways and Means Committee and the House Energy and Commerce Committee passed their own versions of HR 4157, the Health Information Technology Improvement Act. Yesterday, the House Rules Committee passed a resolution (H. Res. 952) reconciling the two measures and permitting various amendments to be considered on the floor of the House. This afternoon, the House considered and passed the bill by a 270-138 vote. The White House issued a statement of support for the House bill.Of greatest importance to health plans, the House bill would require implementation of the ICD-10 diagnosis and inpatient procedure codes in October 2010 (rather than October 2009 as provided in the Ways and Means Committee report and October 2012 as urged by AHIP).

The House and the Senate now will hold a conference committee to reconcile HR 4157 and S. 1418 which the Senate passed last November.

Recently, I noted in the FEHBlog that the CVS pharmacy chain had purchased MinuteClinic, a much smaller chain of walk-in clinics staffed by nurse practitioners and physician’s assistants. Laura Landro reports in yesterday’s Wall Street Journal that CVS plans to incorporate MinuteClinics in 1000 of its pharmacies over the next three years.

Even more interestingly, Ms. Landro reports that regional healthcare systems such as Atlanticare in New Jersey are establishing their own walk-in clinics on a divide and conquer theory. The walk-in clinics will treat the mildly ill at low prices but feed the more seriously ill to the system’s doctor network.

In a similar arrangement, the TakeCare chain of walk-in clinics has arranged for support and cross-referrals from Advocate Health Partners in Chicagoland. She cites to several other examples.

According to Ms. Landro, Blue Cross and Blue Shield of Minnesota “which analyzed 22,956 visits by its members to MinuteClinics from June 2004 to June 2005, found the clinics cost about half an office visit — or $43 versus $87 — and less than half for other related costs such as lab services.”

The AMA News in its July 24/31 issue reports on a “pay for quality” pilot conducted by Healthspring‘s Medicare Advantage plan and the Sumner Medical Group, a 15 doctor group in Tennessee. (I was in Nashville this week and greatly enjoyed a Tuesday performance of the Grand Ole Opry.)

In this program, Healthspring retained Healthways, a local disease management company, to provide Sumner Medical with free nursing support to track patients with chronic illnesses between visits, among other services. Healthspring also offered the Sumner Group doctors a 20% pay bonus for hitting quality targets.

Sumner Medical informed the AMA News that the program resulted in an improvement in their patients’ health outcomes. The doctors appreciated that the health plan assumed the cost of the disease management nurses and did not impose a financial penalty on the doctors. The health plan enjoyed the medical underwriting gain from the program. Healthspring is planning to extend the program to 12 other markets. Other health plans are evaluating Healthspring’s model.

The Centers for Medicare and Medicaid Services (CMS) announced last Friday its six month long project to determine the feasibility of integrating Medicare claims information into a personal health record for Medicare beneficiaries. “’By using emerging technologies and tools, people with Medicare will be better able to manage their health care, resulting in improved quality in the care they receive and ensuring that care is provided more efficiently,’” said CMS Administrator Mark B. McClellan, M.D., Ph.D. ‘The steps we are taking today will test whether Medicare’s current data will help to populate useful personal health records for Medicare beneficiaries.’” The work will be performed by ViPS and Capstone Government Solutions under CMS contracts, and the total cost of the project is $500,000.

OPM has posted information about the upcoming initial Supplemental Dental and Vision Benefits Open Season on its web site.

In 2001, Harvard Professor David Himmelstein created a stir with a paper concluding that unpaid medical bills are leading cause of bankruptcy filings. Since then several academics have debunked that conclusion. The latest is Aparna Mathur, a reseach fellow with the American Enterprise Institute, who released a paper on Medical Bills and Bankruptcy Filings last week.

The report explains that

Studies based on surveys of bankruptcy filers, such as Himmelstein et al. (2005) using data from the Consumer Bankruptcy Project, claim that families with medical problems and medical debts account for nearly half of all bankruptcy filings.4 However, their classification of a medical bankruptcy is too broad.5 A big drawback of the study is that it does not include non-filers in the sample. This is a problem because there may be non-filers who experienced similar problems but did not
file for bankruptcy. Thus the sample lacks an effective control group.

The AEI study “finds that while medical debts are significantly related to bankruptcy filings, the magnitude is not as high as is claimed by other authors” such as Professor Himmelstein.

Last Thursday July 20, the Senate Special Committee on Aging held a hearing on “The Generic Drug Maze: Speeding Access to Affordable, Life Saving Drugs.” One of the witnesses, the FDA’s Director of Generic Drugs explained that

Prior to the passage of the Drug Price Competition and Patent Term Restoration Act (Hatch-Waxman Amendments) of 1984, FDA’s primary statute, the Federal Food, Drug, and Cosmetic (FD&C) Act, did not provide for the approval of generic drugs. The Hatch-Waxman Amendments established the ANDA approval process, which permits FDA to approve generic versions of previously approved innovator drugs without the submission of clinical studies and other kinds of data that are required in a full new drug application (NDA). An ANDA refers to the previously approved NDA of the innovator drug and relies upon the Agency’s finding of safety and effectiveness for that drug. Also, with respect to each unexpired patent submitted to FDA by the owner of the innovator drug and published by FDA in the Orange Book1, an ANDA contains a certification that the ANDA applicant either will wait for the patent to expire before marketing the drug or that the applicant challenges thepatent as invalid or not infringed.

The first company to obtain such FDA receives the exclusive right to offer the generic product for 180 days after patent expiration subject to one exception.

The FDA representative urged Congress to provide more funding for his office which has a backlog of ANDAs. Sen. Herb Kohl (D Wisc.) reportedly has arranged for an additional $10 million of funding.

A brand name drug manufacturer with the expiring patent can offer its own “authorized generic” during this otherwise exclusive sales period. At the hearing, a generic drug manufacturer representative opposed this practice as undercutting the Hatch Waxman amendments, and the Pharmaceutical Research and Manufacturers of America’s (PhRMA) president supported the practice’s conttibution to a competitive market. Following the hearing, Sen. Jay Rockefeller (D Ark) introduced a bill (S. 3695) that would prohibit the marketing of “authorized generics.”

Also at the hearing a Federal Trade Commission representative explained to lawmakers that

there have been, and continue to be, competitive problems in pharmaceutical markets. Although many drug manufacturers – including both brand-name and generic companies – have settled their patent suits in a manner that does not harm competition, others have entered anticompetitive settlements without providing a corresponding benefit to consumers. Responding to some of these abuses, in 2003 Congress included provisions in the Medicare Modernization Act (“MMA”) that amended the Hatch-Waxman Act to require notice of settlement between brand and generic firms to the FTC and Department of Justice.

However, according to the FTC testimony, two federal courts of appeals rulings (Schering-Plough Corp. v. F.T.C., 403 F.3d 1056 (11th Cir. 2005); In re Tamoxifen Citrate Antitrust Litig., 429 F.3d 370 (2d Cir. 2005))have rejected FTC objections to patent litigation settlements in favor of “a lenient view of exclusion payment settlements, essentially holding that such settlements are legal unless the patent was obtained by fraud or that the infringement suit itself was a sham.” The Supreme Court declined to review the 11th Circuit ruling last month.

According to the FTC representative, “The economic implications of the courts of appeals’ rulings, which seem to invite collusive arrangements between brand-name drug companies and generic challengers, are staggering.” The FTC representative expressed the Commission’s “strong support [for] the intent behind S. 3582, the ‘Preserve Access to Affordable
Generics Act’ – bipartisan legislation introduced by Senators Kohl, Leahy, Grassley, and Schumer” on June 27, 2006.

Congress is only scheduled to be in session for one more week before its August recess begins on July 31.