Capitol Checkup: Drug cost-sharing; Merck CEO on Trump split; kid flu deaths up

When Congress created the Medicare Part D prescription drug program in 2003, the focus was on ensuring seniors had access to the medicines they needed. Now, though, the government and Congress are grappling with how to ensure that accessibility while paying for curative medicines with potentially $1 million price tags.

The debate sparked in 2014 over Gilead Sciences Inc.'s $1,000-per-pill drug Sovaldi will be a drop in the bucket compared with the tsunami that may be coming over curative medicines to treat dementia, said Nicholas Uehlecke, a Republican aide for the House Ways and Means Subcommittee on Health.

"Everybody who has ever forgotten their keys is going to want to take that drug," he said.

The U.S. lacks the payment structure to handle those products, Uehlecke said during a Feb. 16 forum hosted by the Brookings Institution and the University of Southern California Schaeffer Center for Health Policy and Economics.

Medicare Part D has undergone some changes throughout its history, though the most recent tweak imposed earlier this month has not gone over well with brand-name drug manufacturers, who must provide a 70% discount during the program's "doughnut hole" coverage gap starting in 2019.

In his fiscal year 2019 budget request, President Donald Trump has also proposed increasing Part D plan sponsors' liability in the catastrophic phase from 15% to 80%, while decreasing Medicare's reinsurance liability from 80% to 20%. Trump has also called for decreasing beneficiaries' coinsurance in the catastrophic phase from 5% to zero, which would create an out-of-pocket maximum in Part D for the first time in the program's history.

Even though 5% may not sound like much, that out-of-pocket is unlimited, leaving beneficiaries to pay possibly hundreds, if not thousands of dollars, said Erin Trish, associate director of health policy at USC's Schaeffer Center for Health Policy and Economics.

She insisted it was time for policymakers to consider implementing a "true out-of-pocket cap" for Part D beneficiaries "to provide true insurance protection from high and currently unlimited out-of-pocket spending."

But Douglas Holtz-Eakin, president of the American Action Forum and a former director of the nonpartisan Congressional Budget Office, warned that imposing a cap would put taxpayers even more on the hook and add to the U.S. deficit — "a bill the nation already can't pay."

"Are we willing to accommodate the trade-offs?" Holtz-Eakin asked. "You're going to have higher premiums, higher federal government spending and possibly changes in the formularies."

He said he already found Congress' recent change shifting more of the Part D doughnut hole liability to drugmakers "mystifying," comparing it to forcing auto parts companies to pay for their customers' auto insurance or builders to kick in for their clients' home insurance.

"This is a bizarre thing," Holtz-Eakin said.

Elizabeth Jurinka, chief health adviser for the Democratic members of the Senate Finance Committee, acknowledged that paying for an out-of-pocket cap for Medicare Part D beneficiaries was problematic.

She said policymakers must first look at drug manufacturers' role in setting their launch prices — a question Trump's budget request does not address.

The perverse world of couponing

Outside of Medicare, other Americans' cost-sharing for drugs has been on a steady increase, said Fiona Scott Morton, a professor of economics at Yale School of Management.

Employer-based health plans use cost-sharing tools like copayments to try to keep expenses in check and as part of their negotiation strategy with drugmakers, she said during a second panel discussion at the Feb. 16 Brookings Institution/USC Schaeffer Center forum.

Drugs in which biopharmaceutical companies offer a lower price usually end up on a plan's preferred tier, while the more expensive medicines are placed on stricter tiers, with higher out-of-pocket costs for beneficiaries.

If a drug company wants its medicine on the preferred tier, it must offer the plan a lower price, Scott Morton said.

But drugmakers have found a way around that negotiation process by offering coupons indiscriminately to patients, usually bringing their out-of-pocket amounts down for the expensive brand-name drug to what the beneficiary might pay for the cheaper medicine on the plan's preferred tier, she explained.

While that may sound good for the patient, ultimately, the plan is still stuck with paying the higher expense, whose cost ends up being spread across beneficiaries' premiums.

"The coupon defangs the only tool we have for lowering prices, which is getting drugs to compete," Scott Morton said.

Steve Miller, chief medical officer at Express Scripts Holding Co., added: "Coupons are put out there to protect market share."

Scott Morton said that patient coupons are essentially "kickbacks designed to reduce elasticity of demand."

"Allowing a manufacturer to pay patients to take their drug is perverse," she charged.

Elizabeth Fowler, vice president of global health policy at Johnson & Johnson, acknowledged that coupons were "not ideal," but they are "one strategy to make sure patients can afford their drugs."

She noted that the higher the copayment or deductible, the lower the compliance rates were for patients taking their medicines.

Adam Fein, president of Pembroke Consulting Inc. and CEO of the Drug Channels Institute, argued that "kickback" was a "very loaded word to describe a very complex system."

He insisted the biopharmaceutical industry was "bifurcated," in which most Americans pay relatively moderate out-of-pocket costs for their medicines, while only a small percentage — mostly patients with rare conditions — pays high amounts.

Fein warned policymakers against trying to "over-engineer" the cost-sharing process.

One area he did suggest needed examining was the rebates manufacturers pay to insurance plans — a large portion of which often end up in the pockets of employers, whose covered workers usually never share in those savings.

One survey found that 70% of employers did not share the value of rebates with their employees, Fein said.

Companies also may use the tiering structures of their health plans to discourage certain people from working for the organization, Fein said.

He noted that Publix, the largest supermarket chain in southeastern U.S., had left HIV medicines off of its workers' prescription drug coverage.

But after facing criticism from the public and at least one member of Congress — Rep. Carlos Guillermo Smith, D-Fla. — Publix changed its policy Feb. 6, saying in a series of tweets that it would now include HIV drugs in its employees' coverage.

Merck CEO explains exit from Trump panel

While Merck & Co. Inc. CEO Kenneth Frazier said he had disagreed with President Donald Trump on his immigration and climate change policies, it was the president's unwillingness to condemn white nationalists last summer that led the drug company chief to decide it was time to take a stand.

"In this case, we were not talking about politics," Frazier said in a New York Times interview, the first portion of which was published Feb. 19. "We were talking about the basic values of the country."

Frazier was the first CEO to resign from Trump's White House manufacturing council after the president was broadly criticized for not specifically calling out white supremacists and neo-Nazis for the violence in Charlottesville, Va., on Aug. 12, which led to the death of a 32-year-old woman.

Frazier's exit triggered what was first a slow trickle but later an exodus of corporate leaders from Trump's various industry advisory councils, leading to their collapse and dissolution.

"It was my view that to not take a stand on this would be viewed as a tacit endorsement of what had happened and what was said," Frazier told the newspaper. "I think words have consequences and I think actions have consequences. I just felt that as a matter of my own personal conscience, I could not remain."

Frazier said he was backed 100% in his decision to resign from Trump's council by Merck's board.

Pediatric flu deaths climb to 84

Another 22 children in the U.S. died of the flu last week, bringing the total number of pediatric deaths to 84, the Centers for Disease Control and Prevention, or CDC, reported.

Of the 22 new pediatric deaths, four were associated with the H3N2 virus — the predominant strain in the U.S. during the 2017-2018 season — while five were linked to the H1N1 strain. The CDC said eight of the deaths were associated with an influenza A virus for which no subtyping was performed, while the other five children died of influenza B virus.

The U.S. has been struggling with a particularly difficult flu season. On Feb. 15, the CDC reported that the vaccine was only 36% effective overall, though the product showed higher efficacy in young children — of up to 59% against the influenza A and B strains and 51% for the H3N2 strain.

Hospitalization rates also continued to soar — topping those reported during the 2014-2015 season when the H3N2 strain also was the dominant virus in the U.S.