Factors Driving High Drug Costs and Ideas to Change the Paradym

The Real Skinny on Why Your Drugs Are So Expensive

Americans are scolded they need to pay more for their prescription drugs, because of the inherent need for drug companies to invest in science to find cures. The real reason for the price gouging is American healthcare consumers are getting ripped off by Wall Street sharks who are profiting at the expense of the rest of us. First, there are differences in the market sector of the pharmaceutical industry, basically, the bio-pharmacological industry, which has invented the highly successful cancer treatments and other health enhancing drugs and the generic drug manufacturing business. For the former, these companies must wait years, often decades before they have a successful payoff, but the latter, is involved in the lucrative and predictable generic drug manufacturing business. This is the sector which creates drugs which are still highly effective, but for whom their patents have expired. In other words, this is where you, the consumer can obtain your medicine for a lot less money, at least, that used to be the case.

The pharmaceutical industry in the U.S. is theoretically subject to some market constraints based on patent laws. In other words, just because you invented penicillin (thanks France) doesn’t mean you get to collect royalties into eternity. Generally, drug patents are good for 20 years and expire after that, but exclusivity rights may only last 3 to 7 years. At that point, any drug company in the world can start to manufacture that drug and distribute it, causing market competition, which should result in lower prices. However, because the U.S. healthcare system is based on a cost-plus reimbursement system, with no cap, the incentive to retain artificially high drug prices has created a perverse incentive to stall the release of patents on drugs. Here is how companies restrict your access to less expensive medications:

Buying up the Patent Rights for Drugs which have Become Generic

Daraprim, a drug which is used to fight infections has become generic, but it isn’t profitable enough for most private companies to continue to manufacture. It has been around for 62 years and is used to treat pregnant women and people with AIDS. Thus, Turing Pharmaceuticals bought the rights and raised the price 5,000 % for this drug. In economic terms this is referred to as a monopoly and coincidentally, is prohibited for most businesses in the U.S. Essentially if there is no competition for something as critical as medicine, the rogue drug companies can and do take advantage of vulnerable consumers. Valeant is another company which jacked the price for generic heart medication formularies they acquired.

Extending Patents through the Courts

The drug companies have manipulated the 180-day-exclusivity and 30-month-stay provisions to their advantage, to prevent the release of generic drug formularies. Essentially these are loopholes which the pharmaceutical industry uses by tying up drug access through their lawyers via patent infringement lawsuits and extensions. The courts have found that generic applicants have prevailed 73% of the time in these challenges. This malingering allows the drug companies to continue to earn more money on medications whose patents have expired, because of the judicial process.

Lack of Meaningful Use for Patent Extensions

Pharmaceutical companies also try to extend patent rights by making minor changes to drug formularies and refiling the patent. This is purely about profit and not efficacy for the patient or health system. The FDA should have guidelines which prohibit this kind of shenanigans.

Generic Drugs Have Become a Lucrative Investment

The Hatch-Waxman Amendments to the FDA have contributed to a bloom of generic drugs from 19% of the U.S. pharmaceutical market to 47%. If generic drugs are such a bad deal, then why are so many companies interested in this business?  This change is also due to pressure from the insurance industry and consumers, to reduce the cost of medications. Unfortunately, what used to be a savings passed on to consumers is no longer the case.

Suggestions to Improve the Intolerable Drug Pricing

In 2008, the U.S. government bailed out many banks and of course, General Motors (which still hasn’t repaid its loans), so perhaps the nation should consider buying up some generic drug production rights and thereby controlling the price. The U.S. government could ultimately make money in the transaction by arranging for an exclusive manufacturer and distributing the medication throughout the health system. This would save Medicare, Medicaid, and the Veterans Administration a lot of money. And, since the private sector follows Medicare standards for services and reimbursement, this would drive the price down for all American healthcare consumers.  

The government should also require pricing transparency for pharmaceuticals, which should not be a charge-whatever-you-can environment without justification. Lots of companies invest for years and don’t get a return, why should a drug company expect to make all of their investment return in the first year of release for a new medication? Perhaps an amortization schedule can be agreed upon for this process, which is used in accounting vernacular.

Congress should remove the restriction from the Centers for Medicare and Medicaid, which prevents them from negotiating directly for drug prices for their enrollees. Since this is the largest single pharmaceutical customer base, this would have a huge impact.

The next time you think you are getting jacked for your prescription, you are probably right, so let’s reach out to our regulators and the executive branch for a fix.

References for more information

https://projects.propublica.org/bailout/list 

https://www.ftc.gov/reports/generic-drug-entry-prior-patent-expiration-ftc-study

https://www.ftc.gov/news-events/press-releases/2013/01/ftc-study-fy-2012-branded-drug-firms-significantly-increased
https://www.ftc.gov/news-events/press-releases/2011/10/ftc-study-finds-fy-2011-pharmaceutical-industry-continued-make 

Roberta E. Winter is a freelance healthcare writer who has published Straight Talk on Healthcare under the tradename, healthpolicymaven since 2007. She is the author of Unraveling U.S. Healthcare-A Personal Guide.
http://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972
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Reviewing Centers for Medicare and Medicaid Incentive Programs

As 2014 fades from view, I am barely making my monthly deadline for the Straight Talk column. but I would like to leave you with a couple of thoughts for the new year. There have been more than a few articles detailing the Centers for Medicare and Medicaid (CMS)grant awards as well as enforcement efforts impacting your health care. First, let's start with the positive, CMS provides grant awards for government agencies as well as multi-agency initiatives to study ideas for improvement of health care. In 2014, these states received grant awards for initiatives to better resource care for Medicare, Medicaid, and the Children's Health program: Arizona, California, Colorado, Connecticut, Georgia, Florida, Illinois, Iowa, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, Mexico, Ohio, Pennsylvania , South Dakota, Texas, Virginia, Washington, and Wisconsin. Washington State has received a 65 million dollar grant, starting February 2015, to work with government and private sector health care providers across the state to look at methods to reduce administrative redundancies, eliminate unnecessary costs, and strive to improve health care. So, congratulations to Washington for going after the grant, which is a multi-year laborious effort, and for winning it! The venerable Washington Health Care Authority will be in charge of the project, which is the same agency which has run the State Employees Health Plan for decades and also implemented the Health Insurance Exchange. For more information on the type and amount of the award follow this link to the CMS site: http://innovation.cms.gov/initiatives/Health-Care-Innovation-Awards/Round-2.html

Scale of these Government Funded Health Care Programs
To give you an idea of the scale of Medicare, it represents 12% of the entire federal budget. Medicaid and the Children's Health Program represent 8% of the nation's budget, but remember these programs are also funded by the states. According to the Center on Policy and Budget Priorities, the 2013 budget allocated 22% for these three programs, which is a significant increase over 2010, when the total was 20% for these three programs. For more information on this you can follow this link:
http://www.cbpp.org/cms/?fa=view&id=1258  Just to keep this in perspective, defense spending was 19% during the same time frame. CMS is the primary government authority charged with administering these programs, as well as performing investigations into health care innovations. And finally, a huge aspect of CMS's role is to police the payment system and stop abusive practices.

Accountable Care Organizations
Under the Affordable Care Act, the Centers for Medicare and Medicaid are charged with implementing the Accountable Care Act, which specifies performance indicators linked to government payments for health services. In a recent report, 2, 225 hospitals, which represent about one fourth of the nation's hospitals, are going to experience reductions in CMS payments because they didn't meet the standards. Now, in the private sector, this is referred to as a performance agreement and if a contractor doesn't hit his target, he gets dinged with a penalty. However, this is a new aspect of publicly funded health care. A 2% penalty is also huge, because as you have already observed, CMS provides anywhere from 20% to half of some of these hospital budgets. For example, trauma center and public hospitals, like Harborview Medical Center, in Seattle or Bellevue Hospital, in New York, serve a much greater population of low-income patients, so government funding provides most of their budgets. Though hospitals are concerned about the penalty assessments, the program appears to be working, because penalties are down nationally by 4% overall for 2013, compared to the previous year. And let's give credit where it is due because 1,154 hospitals, which represent about 10% of the nation's facilities, did not get fined. This means they met all of the Accountable Care Organization targets, including reducing re-admission rates. For more information on this program go to Kaiser Health News.org at: http://kaiserhealthnews.org/news/readmission-penalties-medicare-hospitals-year-two/

Concerns About Cost Punish Clinicians
One of the consequences of the cost reduction efforts, which are certainly needed, is that clinicians who treat these patients are not getting paid enough, especially for Medicaid. This worrisome trend has continued in a downward trajectory for years. Presently, only 46% of doctors will accept Medicaid patients nationwide.http://www.businessweek.com/articles/2014-04-10/doctors-shun-patients-who-pay-with-medicaid Further, by punishing safety-net hospitals, like Harborview, we are making it even harder for low-income folks to access health care. It seems to me if CMS decided to pay even a modest $10 more per patient visit for Medicaid, this would help offset the dearth of providers for Medicaid patients. At the end of the day, it doesn't matter how fantastic your grant program is if the people who are supposed to benefit are unable to see a doctor. Access to health care is really the issue. Meanwhile, the medical device companies are lobbying their way through Congress trying to get out of their lousy 3% assessment to fund their part of the Affordable Care Act, while they charge Americans 40% more for their equipment than they do other nations. Here's a thought, let's use all of that 3% to provide money for primary care clinicians to serve Medicaid patients. In fact, I suggest you contact your Congressman or Congresswoman and lobby for this provision.

This is the healthpolicymaven signing off, wishing you a healthy new year. For more information on my work, you can also follow me on TUMBLR or Twitter. In 2015, I will be offering some new services as well.

Why We Don't Want To Get Rid of Medicare-Our Best Tool for Health Care Reform

Why We Don’t Want To Get Rid of Medicare-Our Best Tool for Health Care Reform

The pressure is on for federal budget slashing and of course social programs (not defense) are top-of-the-list for cost reductions, including the malignant call for block granting the Medicare program. Having previously analyzed the Bush Administration’s Deficit Reduction Act of 2005, including the odious federal government, “claw back provision” for reducing federal contributions for state Medicaid programs, this article reviews some potential impacts of a block grant or per capita allowance for Medicare participants. Parallels are drawn between the Medicaid changes and what may happen to Medicare if it is schlepped to the states. Finally, Medicare’s impact on overall health care policy making in the United States is analyzed.

Would Block Granting Medicare Look like the Medicaid 1115 Waiver Plans?

As of 2005, half the states already had approved Medicaid 1115 plans including: Alabama, Arizona, Arkansas, California, Colorado, The District of Columbia, Florida, Georgia, Idaho, Illinois, Maine, Massachusetts, Michigan, Missouri, New Jersey, New Mexico, New York, Oregon, Puerto Rico, South Carolina, Tennessee, Texas, Utah, and Washington. Oregon is famous for its health care plan which assesses a clinical and cost/benefit value for treatments covered by its subsidized public health care program. Most of the other states with Medicare 1115 Plans have eliminated benefits under the programs or drastically cut enrollment for poor residents. By example, Missouri eliminated 500,000 people from its Medicaid program. Many of the states with Section 1115 waivers used the provision to charge co-payments and premiums to certain Medicaid eligible constituents.

Impact on Drug Costs-Zip

In addition to cutting back on benefits, one of the trends for state implementation of Medicaid 1115 Waiver Programs is to pass more of the prescription drug costs to their plan participants. This does nothing to contain costs and merely makes low-income people pay more for their medicines. Medicare is also doing this with its drug program, by allowing pharmaceutical companies to charge retail market prices (the highest-in-the-world) for drugs while offering “discounts” to Medicare participants. It doesn’t take a rocket scientist to figure out that the pharmaceutical companies just raise their prices to include the “discounts” to the Medicare set.

Side effects of Medicaid 1115 Waiver Programs

Deferring Health Care

One of the provisions that Medicaid 1115 Opt-Out Plans can make, is to transfer more plan costs to the poor who are enrolled on these plans, however, that may mean people avoid medical care. This is a conundrum, though Medicaid enrollees have health insurance, they may not have enough money to contribute to the co-payment requirement. The Journal of Health Affairs published an analysis of the Utah State Medicaid program which showed that cost sharing up to 10% did have a negative impact on the indigent patient’s ability to obtain health care (AKA they deferred treatment).[1]. 

Clinician Access

Patients enrolled on Medicaid plans have insurance, but may not have a primary care clinician who will see them. Merely having insurance does not mean there are clinicians willing to accept those patients.  Medicaid has notoriously been viewed as paying poorly for medical services, although some states have taken steps to alleviate that road block to care. This problem of access to clinical care, especially for wellness or primary care is also rampant for Medicare participants. If they don’t have private insurance, it is very difficult for a Medicare patient to find a clinician who will accept them into their patient mix. This phenomenon is reflective of the poor reimbursement CMS provides for its primary care clinicians.

Another one of the methods that states have used 1115-Waiver provisions to change their Medicaid plans is to offer private insurance coverage, but this is hardly more cost effective, since the administration costs are three times as high as what the Centers for Medicare and Medicaid (CMS) charge, with no cost containment. This could however increase access to doctors who are willing to treat Medicaid patients.

Medicare as the Policymaker for Health Care Treatment and Payment

CMS, which administers health care for Medicare and Medicaid, is by far the largest health care program in the United States. Administrative cost for CMS run about 6%, as opposed to 18% for the private insurance sector. In addition to administering health care programs for the elderly and the poor, two constituents whom the private insurance sector has historically had little interest in insuring, CMS also finances demonstration projects with clinics throughout the country to figure out how to improve health care. An example of such a project is the Advanced Primary Care Demonstration Initiative[2], which is looking at patient-clinician engagement to improve health outcomes and pay clinicians for coordinating well patient care. There are also similar projects for the Accountable Care mandates, which reward clinics that produce better clinical results than those who are more marginal. These efforts are possible with a large enough patient population and an integrated patient tracking system, which coincidentally, is representative of a national health care program.

Fraud Detection-The Government Has the Bigger Stick

Medicare is the number one detector of fraudulent billing for health services in the country and it is essential that this bully pulpit be preserved. In The Battle Over Health Care[3], big pharmacy is now cited as the number one defrauder of the government and hence the United States people, even ahead of the perennial defense industry. Do any of us really trust the drug companies to police themselves, or for that matter any of the medical suppliers? In a fragmented Medicare system fraud detection would be more difficult not less.

Patient Safety-Do You Want to Leave it up to the Private Sector?

 In Rosemary Gibson’s and Janardan Prasad Singh’s brilliant, The Battle Over Health Care, numerous frightening examples abound of drug company, medical device supplier, and hospitals actually harming patients. Perhaps most egregious are the methods some of these companies (most of the abusers are for-profits) use to avoid accountability when they harm patients. A bright spot on this tarnished map is the University of Michigan Health Systems, which has a protocol mandating that its clinicians/facilities which harm patients; take responsibility, offer transparent information on what occurred, offer a settlement to the patient/family(without litigation), apologize, and provider free ongoing health care.[4]It is this type of candor which would go a long way toward improving patient safety in American health care. Imagine clinicians and hospital administrators who fess up rather than lawyer-up.

Conclusion

Though Medicare certainly has its detractors and is not lithe when it comes to adopting changes, it is more economical than any private sector health insurance program, and it covers  high-risk populations like the elderly and those with end-stage renal disease. Medicare drives policy changes throughout the entire United States health care system by determining how it will pay for services. This is ultimately the way the country can start to reduce its health care costs, by negotiating with drug companies, eliminating fraud, and equally important, unnecessary procedures. Because Medicare changes also impact private sector insurance companies, it is an essential component of health reforms and well as other national health care initiatives. CMS, which administers both Medicare and Medicaid, provides the nationwide health care partnership to test and deploy health care program changes. Through this surveillance process we can learn what works for the disparate U.S. health care system and attempt to lower costs and improve not only primary health care, but also preventive care. Too much of the U.S. health care dollar is spent on late-stage disease treatment versus patient health maintenance. If we hope to be competitive in a world economy, we must bring the per capita cost of our health care in line with the rest of the world and turning it over to the private sector foxes is not the answer.

For more discussion on this health care article, feel free to comment below. This article was written by Roberta E. Winter, the healthpolicymaven, and may be reprinted with her permission. Feel free however to share it voraciously with your friends and family.

Also, for those who want to read more of The Battle Over Health Care go to the New York Journal of Books for my review, by following this link: http://www.nyjournalofbooks.com/review/battle-over-health-care-what-obama%E2%80%99s-reform-means-america%E2%80%99s-future

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[1] http://content.healthaffairs.org/content/25/2/532.full

Samantha Artiga, David Rosseau, Barbara Lyons, Stephen Smith, and Daniel Gaylin, Can States Stretch the Medicaid Dollar Without Passing the Buck? Lessons from Utah, Health Aff., March 26, 2006, vol. 25, no. 2. p. 532-540

[2] http://healthreform.gov/newsroom/factsheet/medicalhomes.html

[3]Rosemary Gibson and Janardan Prasad Singh, The Battle Over Health Care, chapter 2, page 24

[4]Rosemary Gibson and Janardan Prasad Singh, The Battle Over Health Care, chapter 13, page 163

Hospital Quality-Checks & Balances

Discerning Hospital Quality
The Center for Medicare and Medicaid Services(CMS) now requires health quality measures for specific clinical services, in order to recognize and encourage the best patient outcomes. Recognition will include greater financial reimbursement for those medical practices which conform to the CMS standards for clinical outcomes. This is yet another step in the right direction toward patient-centered-care as identified by the International Order of Medicine. This article highlights the primary hospital quality watchdogs in the United States and consumer tips on how to assess your hospital.
Organizations Measuring Hospital Quality
There are a number of ways to gauge your hospital’s quality, including accessing information from public sites, such as the Center for Disease Control, the Center for Medicare and Medicaid Services and the Health & Human Services Agency. There are also nonprofit organizations devoted to measuring hospital quality including; the Joint Commission for Hospital Accreditation Organization, National Quality Forum,Then LeapFrog Group and the Quality & Patient Safety Organization. Here are the crib notes for these organizations.
Private Sector Quality Watchdogs
Joint Commission
The Joint Commission for Hospital Accreditation is the pre-eminent organization for auditing and certifying hospital services in the United States. Obtaining its’ certification is an essential requirement for hospitals, which may lose reimbursement contracts and patients without the JCO recognition. The Joint Commission recognizes twenty-two hospital medical errors, which it has been tracking for patient safety purposes for 15 years.
National Quality Forum
The National Quality Forum is a non-profit group created by thirty-two health care organizations to develop consensus about hospital quality indicators and reporting. The NQF reviews twenty-seven patient safety metrics, but the information is not shared with the public.
Quality & Patient Safety Organization
The non-profit Quality and Patient Safety Organization or QuPS provides state-by-state analysis of patient safety initiatives by state governments. You can go to the site and see what your state has done to make your hospital safer.
Public Agency Quality Police
Agency for Health Research and Quality
The Agency of Health Research and Quality or AHRQ was created in 1999 to promote methods for improving health care quality in the United States. Though it doesn’t have any enforcement provisions, it does conduct research, award grants, and recognize health care groups with excellent performance.
Center for Disease Control
The federal Center for Disease Control established the National Health Safety Network in 2005. As of 2010, twenty-two states had adopted this method for reporting patient safety errors in hospitals and other inpatient facilities. Presently, 3,000 hospitals use this system, which make it the largest database for hospital errors in the United States. The data is collected for scientific review and specific facilities are not disclosed.
Center for Medicare & Medicaid Services
The Center for Medicare & Medicaid Services polices patient quality outcomes and publishes statistics, like patient mortality from pneumonia, heart failure, and acute myocardial infarction (AMI). However, mortality information alone is not a good measure of hospital quality or patient safety, because you would have to know the patient volumes as well as the morbidity or overall patient health. This information may be found at:
http://www.cms.gov/HospitalQualityInits/20_OutcomeMeasures.asp
One of the CMS sites that is helpful is the listing for certified organ transplant centers at: www.cms.gov/CertificationandComplianc/Downloads/ApprovedTransplantPrograms.pdf

Health & Human Services
The Health & Human Services Agency or HHS has a web site where you can find your hospital and compare clinical outcomes by diagnosis, to other facilities. This is a useful tool if you live in an urban area with multiple facilities, because you will literally be able to check their performance before your procedure. The link to this site is: www.hospitalcompare.hhs.gov

Other Public Sources for Hospital Certification Information
The American College of Surgeons publishes an on-line guide to Trauma Center Certification which is quite detailed because it explains the criteria for Level I Trauma Status. Also, university hospitals are teaching facilities and they typically have the highest status for trauma injuries. Information on your university hospital is available on its web site or through the State Department of Health.
Local Look
Washington State Hospitals which scored high in quality measures for 2009 data include: Virginia Mason, all of the Swedish Hospitals, University of Washington Medical Center, Harborview, Northwest Hospital, Seattle Children’s Hospital, Kadlec Hospital, St. Claire Hospital, and Mary Bridge Children’s Hospital. For information on how hospitals fared in your area, contact the healthpolicymaven by scrolling down to the comment tool or complete the form at: roberta@healthpolicymaven.com
Consumer Tips
The healthpolicymaven’s advice is to know-before-you-go for your surgical procedure and here are some helpful tips to figure out your hospital's quality score:
1.Look for public reporting of hospital medical errors as this is the highest degree of transparency and commitment to improve patient safety.
2.Hospitals which use a national model like the CDC’s National Health Safety Network are using a rigorously tested assessment model.
3.Find out if your state mandates public disclosure of patient safety errors and if it is available by facility.
4.The Center for Medicare & Medicaid publishes information on hospital performance, including infections, surgical errors, and discharge information.
5.Ask questions and do some research.

Closing Thoughts
This patient safety article may not seem that germane now that the country is in its third war and on its knees fiscally. However, the Chinese are paying our light bill, having mastered science and math and access to birth control. Meanwhile folks in the United States continue to debate teaching the science of evolution versus the dogma of religion in public schools. Is it any wonder the US doesn’t measure up to global standards for primary education?