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WSJ Editorial Wrong On FTC Lawsuit On PBMs

I agree more with the Wall Street Journal (WSJ) editorial page than not, but the newspaper was dead wrong in an editorial yesterday on the Federal Trade Commission (FTC) lawsuit against pharmacy benefits managers (PBMs).

On one hand, I understand the WSJ’s complaint that the FTC appears to be singling out the PBMs when rebates are legal in government-sponsored programs. I defend much of what PBMs do. The WSJ is right, too, that brand drug makers were effectively portrayed as victims.

The WSJ says the suit could lead to higher insurance costs and premiums, and notes that net insulin prices have come down over time. It also says PBMs should not be blamed if employer groups and health plans do not pass the rebate through to the consumer (some now do) and that rebates account for just a small share of profits. It then bemoans Obamacare for leading to vertical integration because it regulated profits via the minimum medical loss ratio (MLR) requirement.

I will have a blog soon that responds to the WSJ editorial, but quite simply WSJ has not thought out its free market position terribly well. In its rush to defend business, it misses the point that the drug channel and pricing system are anything but a free market. The opaqueness and perverse incentives in the channel raise prices and undermine competition in many ways. This leads to major costs for consumers and businesses (which pay a heavy load and need to compete in the global markets). Then there is the sheer dominance of the Big 3 PBMs. That certainly is not healthy for healthcare innovation.

At base, that is what the FTC is going after – admittedly a little clumsily. We can debate the fairness of the lawsuit on the PBMs, but change needs to occur. The WSJ should channel a little more of trustbuster Teddy Roosevelt. More soon.

#pbms #drugpricing #branddrugmakers #ftc #antitrust #consolidation #manda #mergers #acquisitions

https://www.wsj.com/opinion/federal-trade-commission-pharmacy-benefit-managers-insulin-43b0a974?st=XKDcP3&reflink=desktopwebshare_permalink

STAT Opinion Piece By MA Opponents Uses Misleading Statistics

A STAT opinion piece written by two well-known opponents of Medicare Advantage (MA), Paul Ginzburg and Steve Lieberman, again uses misleading statistics to attack the program and argues MA is exorbitantly overpaid.

The authors have some recommendations, such as a move to standardization and delinking MA rate setting from the traditional fee-for-service (FFS) program over time, that could be considered with a more dispassionate discourse on the program overall. But their misleading statistics on the overpayment issue makes it difficult to take their recommendations seriously.

They argue the MA overpayment is more than $80 billion or 22%, generated by “beneficial selection” and “upcoding.” I have argued there is some over-reimbursement and that some reforms need to be made on risk adjustment. And many others have dispelled what the critics here say and what MedPAC, the congressional policy arm, constantly reports. Another misleading statistic from the authors: they argue MA profits are more than double the employer-based market. We know this is just not the case right now given the publicly disclosed financials of MA plans.

It is ironic that, just as the STAT editorial was written, another study from management consulting firm BRG finds that the new risk model being phased in MA from 2024 to 2026 will actually lead to lower MA payments vs. FFS. I peg the risk model changes as worth about 7% of revenue once fully in. There are other reforms that should be made, such as ending diagnosis code submissions in risk adjustment tied only to health risk assessments and manual chart reviews. But all of this in toto is far less than the critics’ $80 million plus overpayment numbers. BRG also pokes holes in MedPAC’s calculations and approach, which are similar to the critics.

In essence, some of the MA overpayment is being programmed out already through the risk model change, yet critics of MA look past this in favor of political arguments. It is clear that the goal of critics is to undermine MA and augment benefits in and grow the tired, fraud-ridden, and inefficient FFS system. That would be a hugely costly mistake.

(Some articles may require a subscription.)

Additional articles: https://www.statnews.com/2024/09/25/medicare-advantage-reform-cms-election-trump-harris/ and https://insidehealthpolicy.com/daily-news/brg-analysis-ma-pay-declines-compared-ffs-when-accounting-ra-change

#medicareadvantage #riskadjustment #overpayments

https://ecommunication.thinkbrg.com/22/2684/uploads/comparing-ma-payments-to-ffs-spending-during-risk-model-transitions.pdf

Major News On GLP-1 Weight-Loss Drugs

Denmark-based Novo Nordisk CEO Lars Fruergaard Jørgensen appeared before the Senate HELP Committee today but refused to absolutely commit to reducing the price of his GLP-1 weight-loss drugs, Wegovy and Ozempic. In a usual tactic for brand drug makers, the CEO blamed pharmacy benefits managers (PBMs) for the high costs of such drugs as they do not largely pass-through rebates to consumers at the point of sale. But what the CEO did not mention is that net prices for his drugs in the U.S. would still be measurably higher than in other developed countries.

Brand drug makers are making money hand over fist on their drugs and could easily solve the issue by lowering their list prices to reasonable levels and getting rid of rebates altogether. The truth is the brand drug makers and PBMs both benefit from the opaque rebate scheme. The rebate protects brand drugs’ market share.  

The CEO argued that lower costs would not ensure that PBMs would keep providing coverage if prices went down and rebates went away. The astute and indefatigable Chairman, Sen. Berine Sanders, I-VT, pushed back and said that PBMs confirmed to him that they would not suddenly change their coverage of the drugs. The CEO was skeptical.

Sanders also attacked on the issue of price disparity with other developed nations. Sanders pointed out that Americans with diabetes pay as much as $969 per month for Ozempic. The same drug can be purchased for $155 in Canada, $122 in Denmark and $59 in Germany. The Wegovy price disparity is similar. “Treat the American people the same way that you treat people all over the world,” Sanders said. “Stop ripping us off.”  Well said. Go Bernie!

As I have argued, the solution may be to outlaw rebates altogether as kickbacks. Reform the system by having all drugs be net prices and then have drugs fight for formulary space based on clinical effectiveness over others.

In other news on the GLP-1 front:

• A group of House and Senate Democrats are backing drug pricing advocates’ idea to use a little-known patent-breaking law, which requires companies to allow the government to license drugs. The government would then allow generic drug makers to produce the drugs. A major generic maker told Sanders it could produce and sell a GLP-1 for under $100 a month.
• Generic drug makers are asking Congress to pass more protections for generic introduction, including reforming patent thickets.

Additional articles: https://www.modernhealthcare.com/politics-policy/ozempic-wegovy-novo-nordisk-pbm-pharmacy-benefit-managers-bernie-sanders and https://insidehealthpolicy.com/daily-news/lawmakers-push-1498-statute-cut-glp-1-drug-prices-generic-lobby-seeks-broader-reform and https://www.beckershospitalreview.com/pharmacy/novo-nordisk-ceo-open-to-glp-1-price-drop-5-takeaways.html and https://insidehealthpolicy.com/daily-news/aam-calls-action-boost-generics-market-hatch-waxman-anniversary

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#drugpricing #branddrugmakers #glp1s #weghtlossdrugs

https://thehill.com/policy/healthcare/4897283-sanders-novo-nordisk-ceo-clash-over-weight-loss-drug-prices/

Big Pharma Gets Partial Win in Medicare Drug Price Negotiations Case

The brand drug industry got a partial victory in a Medicare drug price negotiation lawsuit when a federal appellate court partially reversed a Texas federal district court’s decision to dismiss the brand drug lobby’s lawsuit. The higher court said the drug lobby and another entity had standing on a Fifth Amendment claim, but not on others. The district court will now have to hold a full summary judgment briefing on the merits of the plaintiffs’ Fifth Amendment due process claim. This is the only one of numerous claims that Big Pharma has won in its quest to overturn Medicare drug price negotiations.

Additional article: https://www.reuters.com/business/healthcare-pharmaceuticals/challenge-us-drug-price-negotiation-program-revived-by-appeals-court-2024-09-20/

(Article may require a subscription.)

#drugpricing #ira #branddrugmakers

https://insidehealthpolicy.com/daily-news/fifth-circuit-remands-phrma-infusion-provider-case-against-medicare-drug-price