At the Risk of Repetition: It Was Another Quarter of Record Profits for United's PBM Unit

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This is my quarterly opportunity to bang pots and pans together to draw attention to the earnings report of UnitedHealth Group, the ninth-largest company on the globe. 

United said they pulled in revenue of $400 billion last year, which is pretty jaw-dropping. But it’s the numbers at Optum Rx -- the piece of the company that includes United’s PBM services -- that always catches my eye. 

Last quarter, Optum Rx broke revenue and profit records, booking $1.6 billion in earnings from operations. Nice work if you can get it. 

To be fair, it’s not like health insurance would be solved if profits were just plowed into reducing out-of-pocket spend. I’m not that naive. 

But every quarter, I ask some variation of the question: Could some of that excess profit be used thoughtfully to improve the experience of health care (or even health insurance)? What are we getting for the $6 billion or so in Optum Rx profits delivered each year?

This is a fun lawsuit: Teva has jumped into the sue-the-government-over-the-IRA game, making some novel arguments that follow some familiar paths. 

Teva is in a unique position: it’s likely to have its Austedo medicine “negotiated” this year, but that’s not really what it’s mad about. As a leading generics company, Teva is in the tough spot of coming up with generic versions of some other medicines that will be getting price controls. And that’s where the issues arise. 

The lawsuit makes clear that the IRA is mucking with the introduction of generic meds in two ways. 

One has to do with different formulations. Oftentimes, one version of a medicine comes off patent before another does. In Teva’s suit, it talked about Xtandi (another med likely to be in the CMS crosshairs). The capsule version of Xtandi is about to come off patent, and -- normally -- Teva would launch its generic and compete on price against the (still-branded) tablet version. 

But because CMS doesn’t make a distinction between capsule Xtandi and tablet Xtandi when it comes to price controls, a Teva capsule is going to have to compete against a price-controlled tablet, which is a much harder row to hoe, commercially. 

The second has to do with what CMS considers the “bona fide marketing” of a generic drug. CMS won’t impose price controls on a medicine with generic competition, but how that competition is defined is super-narrow, opening the possibility that Teva might introduce a generic version but still be forced to compete with a price-controlled version. 

The underlying legal arguments about the definition of “drug” and the definition of “marketing” are not new, but Teva’s position as a generics company gives it a new twist. 

I don’t do legal prognostication, but this is a case I’ll be watching closely. Because even if you support price controls, you should probably support genericization even more. And Teva makes clear that the law, as implemented, is going to hamstring that genericization. 

(Hat tip to Bloomberg Law’s Nyah Phengsitthy, the only reporter that I have seen cover this so far. Nyah is absolutely dominating the IRA beat.)

So remember, yesterday, when I said you all had to read a killer NYT story on 340B? 

Well, today, I think you should all read ANOTHER killer NYT story on 340B. 

Today’s story looks at the way that price cuts on insulin have impacted clinics that depended on the 340B revenue. Because once those cuts took hold, the prices that clinics had to pay for their insulin rose. (It’s complicated, but you probably know the backstory. The Times has a pretty good explanation.) And that boomeranged on patients. 

I have a ton of sympathy for the clinics in this particular instance, just as I had a lot of sympathy for HIV clinics that were hammered when mainstay HIV medicines went generic and they lost an opportunity for 340B revenue. 

But this gets to why the system needs a fundamental reset. We absolutely need ways of supporting true safety net providers (and their patients), but creating a jerry-rigged system that requires high drug prices, big markups, and weird arbitrage is a super-dumb way of going about it. 

No one working from scratch would create the system we have today, which is a pretty good argument for starting over. Sure, we need a 340B program. But surely not this 340B program.

• I just wish that AARP would be straight with people. They just published a useful analysis looking at the savings of Medicare beneficiaries with high out-of-pocket drug spending, and they concluded that -- even with premium increases -- the $2,000 out-of-pocket cap is going to benefit nearly all of those patients. Cool, cool. But what about the vast majority of Medicare beneficiaries with OOP costs below the $2,000 threshold? They’ll probably see their spending rise (via increased premiums), but AARP is entirely mum on that side of things. 

• Lilly is considering expanding its cash-pay vial strategy by introducing more doses and coming in at a lower price point. “We’d like to lower the entry cost,” CEO David Ricks told STAT. No timeline on those moves.

• Look, I get that California Gov. Gavin Newsom was coming from a good place when he decided that the state should try to sell its own insulin. But the world has changed, and what was once a borderline-defensible idea (maybe) is now pretty ridiculous. This Cal Matters piece gets to the existing state of play, which is … not good.   

• I do not understand why the government is trying to keep gene therapy companies from providing free fertility treatments to gene therapy patients. I suppose there is a highly principled anti-kickback foundation to the argument, but fertility preservation for patients with a chronic disease is not the hill to die on. Anyway: Endpoints has the latest on the legal battle between Vertex and HHS on this.

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To learn more about how Reid Strategic can help you, email Brian Reid at [email protected].