For 79 Highly Rebated Drugs, Medicare Patients Are Paying More Than Their Health Plans

This is a pretty extraordinary report from the Government Accountability Office.

On its surface, it’s a wonderful and detailed look at rebating in Medicare Part D, with a lot of useful-if-not-surprising facts: rebates brought down overall spending by 23%, rebates are concentrated in a relatively small number of brand-name drugs, and the like.

But there were two pieces that blew me away.

One: for 79 of the 100 most-rebated medicines, beneficiaries were paying more for medicines than their health plans were. In other words, Medicare patients suffered through deductibles and coinsurance based on high list prices while the health plans paid peanuts because of rebates.

For those 79 medicines, beneficiaries forked over $21 billion. Plans, after rebates, paid only $5.3 billion. That’s a backassward result, given that rebates are generally offered to help boost accessibility.

Two: CMS pushed back on GAO’s assertion that this is something that CMS should care about. CMS’ argument is that they review health plan formularies from a solely clinical angle, and that rebates and costs shouldn’t play into that. GAO calls them out, noting that rebates “influence formulary design in ways that could affect beneficiary access for certain drugs.”

CMS’ “meh” attitude is important here: they’re the agency that is going to make sure that health plans don’t play games with formularies as the Inflation Reduction Act kicks in, and their laissez-faire attitude suggests they may not be up for the task.

All of this is incredibly critical, but staggering complex. But I’m hoping there is a reporter out there who is able to start digging here …

Larry Levitt from KFF wrote an op-ed on the IRA that ran this morning in the New York Times. It’s a must-read, not because the arguments are new or compelling, but because it’s Larry Levitt, and it’s the New York Times, and this is likely to be clipped and saved by just about everyone on that side of the debate.

Levitt structures the piece as a myth-busting exercise, highlighting four pharma arguments against the IRA and then dismantling them, one by one. He takes on the innovation argument, the price-controls-vs-negotiation argument, the patient access argument, and the constitutionality argument.

It’s a useful frame, because it defines four separate battlegrounds, none of which is settled, Levitt’s claims notwithstanding. It also makes clear where and how industry must work to clarify the debate here.

On innovation, the question is less and less “how many meds will we lose?” -- Levitt’s points are sooooo 2022 -- and more “what kind of screwy incentives/disincentives will the IRA create?” Levitt doesn’t touch on the pill penalty or post-marketing development, which is a tell.

On the question of what’s a “price control” and what’s a “negotiation,” well … that’s just a question of semantics, and that’s not a conversation worth having. Almost everyone who has thought hard about this — from PhRMA to The Nation — is OK calling this process “price controls."

On the access bit: this is certainly the most interesting element for me. There is no question there the IRA has some provisions that will absolutely make life easier for patients. The $2,000 out-of-pocket cap in Part D will be transformative. Popping the gross-to-net bubble for the 10 selected meds will have an impact. But as the GAO report I talked about above makes clear, there is a ton of room for policies that don’t maximize patient benefit.

But if we just shut that discussion down -- as Levitt seems to want -- and just “agree to disagree,” we’re going to make it more likely that health plans will play games in ways that harm patients.

On the constitutionality argument: that’s really an issue for the courts, not the court of public opinion (or the New York Times). If I were CMS (or Levitt), I’d be even more worried about the non-constitutional elements of the lawsuits, but my take on that doesn’t really matter, either.

• The folks at EntityRisk reassessed 20 medicines that went through reviews by the Institute for Clinical and Economic Review, subjecting the medicines assessment via GCEA -- “generalized cost-effectiveness analysis” -- and found that 17 of those 20 medicines were cost-effective by GCEA standard. ICER’s traditional metrics held that only 8 were cost-effective. The work was funded and promoted by No Patient Left Behind.

• While we’re on the subject of ICER, a new report out from Certara took a pretty dim view of ICER’s Unsupported Price Increases report, suggesting that it was “advocacy presented as research” and shouldn’t be used in policymaking. Janssen funded the work.

• The Information Technology and Innovation Foundation has a new publication out that is nominally a refutation of this BMJ piece from last winter but is also a fairly useful reference document on pharma profits and R&D spending.

• This is kind of fascinating: University of Colorado researchers looked at doctors who received real-time drug-pricing information when they wrote prescriptions, finding that access to cost information hardly ever changed decision-making. Here’s the Medscape story.

• The WaPo has a good look at what the market and marketing for OTC Narcan will look like.

• Bloomberg Law thinks that we’ll see some action in the IRA lawsuits. It’s likely that some complaints will be amended, given last week’s excitement, and that the Astellas case may go away (Astellas expected to have a drug on the list, but was spared). The piece also breaks a small piece of news in the PhRMA case that seemed to have been missed last week: the government asked the court to stop the briefing process and throw the whole case out for lack of standing.

• A JAMA Pediatrics “Viewpoint” suggests that high COVID vaccine prices may create “cost-related barriers” to access and calls for lower prices and better reimbursement. The word “value” does not appear in the piece.

• So what the heck is a big insurer doing getting into the biosimilars-manufacturing business? Adam Fein has some thoughts. Stay tuned: there is a quiet trend here of which CVS is just one example. (Adam also talks about Quallent, which is another example. Keep that name in mind.)

• Love the graphic in this NYT piece about the weird flatlining of Medicare growth.