The Incidental Economist

The FDA is moving forward to let some antibiotics get to market with only 200-400 people in the clinical trial.  Minnesota Public Radio gave us 20 minutes to discuss it. Listen here.

Prior TIE coverage on antibiotics policy here.

@koutterson

I’m at the 36th Annual Health Law Professors’ Conference, a wonky meeting that’s the highlight of my conference year. I plan to blog some of the highlights each day.

The first plenary on the ACA featured Tim Jost (W&L), Sara Rosenbaum (GW) & Vicki Robinson (OIG).

Jost focused on private market reforms. The Exchanges open on October 1st, with daunting HIT issues as we attempt to enroll millions more Americans. Jost discounted fears about employers dropping coverage, primarily due to the employer mandates and the generous tax subsidies for all employer-based private coverage. As for predictions of “rate shock” in the Exchanges, individual and small group markets, Jost reasons that groups with increased premiums will get more press coverage than those whose premiums will decline. The prototype will be the young, healthy male. But with the elimination of gender discrimination under the ACA, young healthy women should save money [but see the contraception mandate litigation]. Jost also noted the individual clawbacks: the tax subsidies in the Exchanges are paid real-time, based on expected annual income. But of course, many people who will qualify (income between 138 – 400% FPL) don’t have the sort of jobs that allow precise predictions of annual income. The individual clawbacks will retrospectively adjust subsidies and cost-sharing once the actual income is known. That will be quite a shock for poor people who exceeded their expected 2014 income.

Rosenbaum started with the federalism ironies in Medicaid – a program designed as cooperative federalism has driven so much conflict. She discussed Medicaid problems in the “nullification states” after SCOTUS “weaponized” the coercion doctrine. (Long BU Law Review article here)  In the months after the NFIB decision, she said, some states talked about “partial expansions” and the Administration didn’t push back until after the election. (Prior TIE coverage here)  Now it is clear that NFIB allows states a binary choice to either accept or reject the Title II ACA Medicaid expansion. Rosenbaum fears for the millions of poor people who will not gain coverage in nullification states. Heavy pressure will fall on community health centers and free clinics in those states, largely in the south. Her preferred solution is a federal fallback plan for Medicaid expansion, akin to the federal fallback for the Exchanges.

Robinson led the OIG effort to modify the fraud and abuse laws to the new world of ACOs, particularly the the Medicare Shared Savings Program. She described the “heavy lift” of getting multiple federal agencies to work together to issue consistent ACO guidance, including the IRS, FTC, DOJ, OIG and CMS. (Prior TIE coverage of these rules here and ACOs generally here). She had no updates for how these rules might apply in the commercial market, which is a major concern.

@koutterson

Private and public insurers use tiered drug copays to encourage patients to use cheaper medicines, including generics. Drug companies undermine these economic incentives with cards and coupons that waive or rebate the copay differential to the consumer (JAMA article here). Clever, but is it legal?

In Medicare, this is probably a violation of the Anti-Kickback Statute. But for private insurers, two recent decisions have tossed out lawsuits (h/t to Ed at Pharmalot). These cards and coupons explicitly don’t apply to federal government programs covered by AKS or state analogues.  (MA amended our statute to permit some of these coupons in 2012).

The first case is Plumbers and Pipefitters Local 572 Health and Welfare Fund v. Merck (D. NJ. April 29, 2013). The insurance payer is a union health plan, so the AKS doesn’t apply. Instead, they allege violations of RICO, mail fraud, commercial bribery, and tortious interference with contract. The case was dismissed for lack of standing, not substantive grounds. The union failed to point to any example of increased cost to the insurer due to the coupons. It shouldn’t be hard to fix this mistake and refile.

The second case is AFSCME v. BMS (S.D. NY. June 3, 2013), also brought by a union health plan. Here, the union plan failed to demonstrate that either the drug companies or the pharmacists owed the health plan any duty regarding the copay and dismissed the complaint with prejudice. The plan can refile only on the “benchmark” theory that claims that the waived copays were inaccurately reflected in certain price benchmarks like AWP.

Both cases would be easier for the health plans if their contracts with participating pharmacies included a provision forbidding the rebates.

@koutterson

One example of path dependance in health care is our strong ties between employment and health insurance. Another is the complicated division of health care authority between state and federal governments. Obama promised no fundamental changes if you liked your health insurance, which is another way of saying he respected path dependence.

One prominent nod to federalism was the structure of the Exchanges, allowing states to set up their own if they wanted to. Federally-facilitated exchanges kick in only if a state failed to act.

Ironically, the very states who were most concerned about federal encroachment have failed to make the deadlines and will get federal exchanges. These are mostly Red States who sued to block ObamaCare. Many Blue States, such as California, New York and Massachusetts (who didn’t sue the federal government) successfully set up their state exchanges. From a recent GAO Report:

@koutterson

Polls indicate that Americans don’t know much about ObamaCare. 42% are unsure whether it is still law (WaPo). But that will begin to change this fall. Open enrollment in the Exchanges will start October 1, 2013.  Billions have been spent to prepare for this event and civil society groups (hired as patient navigators) will facilitate the PR roll out. Insurers eager for new customers will advertise their offerings as well. The CBO expects 7 million people to enroll in the Exchanges before New Year’s Day in all 50 states and the District of Columbia.

@koutterson

Rep. Markey (D-MA) has studied the problem carefully (NECC is in his district) and has filed a thoughtful bill in Congress today (one pager here; section summary here; full text here). Simple compounding is left to state regulation; sterile compounding and commercial scale operations get stricter federal oversight. It’s a good bill, but I have some comments:

• The transparency provisions should be stronger: inspection reports should be published, like restaurant inspections.
• The bill requires warnings on the label, but that won’t directly impact patients since they never see the labels for sterile injectable drugs. I suggest making patient disclosure a condition for billing the drug.
• Instead of “one-size-fits-all” regulation, the bill allows states with demonstrated regulatory capacity to share regulatory responsibility.
• The bill also avoids constitutional pitfalls, which doomed the last attempt to regulate this industry.

On the state level, the Massachusetts Joint Committee on Public Health should release their bill soon.  It is expected to also propose an enhanced “intermediate” level of regulation for the higher risk forms of compounding. If the federal bill becomes law, some adjustments will have to be made at the state level, but Massachusetts shouldn’t wait for the feds. (Congress has many issues to face). The most prominent example is the state regulation of out-of-state compounders. This is inefficient, but necessary, at least until we have a real federal law.

Both bills avoided the temptation to over-regulate the traditional practice of compounding.

@koutterson

Note:  I’ve talked with many government officials and others after the NECC crisis about compounding, but always pro bono.

Michael Hiltzik’s article in the LA Times doesn’t pull any punches:

But you’d be hard-pressed to find a campaign against the ACA as narrow-minded and dishonest as the one mounted by medical device manufacturers.

This campaign has been largely a data-free zone:

The industry can’t cite a single objective study that supports its contentions that the tax will suppress innovation in the field and make U.S. manufacturers globally uncompetitive.

Worth reading the entire thing.

@koutterson

Fungal meningitis from improperly compounded products at NECC (NEJM article here) killed 55 people and infected more than 600 others (CDC data here). All of these products originated in Massachusetts, but all of the injuries occurred in other states. But Massachusetts felt some responsibility for the failures at NECC, as acknowledged by both Gov. Patrick and the Interim Commissioner of Public Health.  The DPH enacted emergency regulations on Nov. 1, 2012 and the Governor’s special commission delivered a comprehensive set of recommendations.  Both efforts informed the Governor’s proposed legislation in January 2013 and several bills pending in the Massachusetts House and Senate.

In the interim, the Governor boosted the budget for inspections at compounding pharmacies.  In a series of surprise inspections, just 4 out of 37 compounding pharmacies passed.  The Governor proposed an additional $1 million for pharmacy inspections next year.

So it comes as a surprise that the Governor’s requested budget was cut to zero by the Massachusetts Senate Ways & Means FY 2014 proposed budget (4510-0772).  Sen. Keenan has filed an amendment to restore about $600,000 for additional compounding pharmacy inspections (proposed amendment 513), but it is not clear whether that amendment will pass or whether that amount is sufficient. Action by the US Congress may take some time, so it is up to the states to police compounding pharmacies until we get federal legislation.

Prior TIE posts here.  I was an appointed member of the special commission.

@koutterson 

The Atlantic has a story out on delinkage, an alternative model for recovering R&D costs in drugs & devices. Delinkage relies on prizes and grants instead of patent-protected sales above marginal cost. For the definitive background on prize-based alternatives to intellectual property rights, see Jamie Love’s page.

For many goods and services, relying on patents and market prices might be a great outcome. For prescription drugs, however, the “market” rarely sets prices, at least in countries with government-funded reimbursement systems. Access is another salient issue. We might be fine with patents raising the price of an iPhone 5 to be beyond the reach of the lowest income quartile (for example), but that result seems unacceptable when the drug is lifesaving and is priced beyond the reach of several billion people. Differential pricing theoretically addresses some of these concerns, but has been very challenging in practice.

One delinkage proposal is the R&D Treat proposal floated at WHO during the last few years, coming from the CEWG process. The Atlantic article describes the strident opposition to the proposal from the Obama Administration, which seems surprising. Some major pharmaceutical companies (such as GSK) publicly support delinkage, while most do not.

Several other delinkage proposals were discussed in late February at an FDA conference at the Brookings Institute, all focused on antibiotics. As I’ve written with Aaron Kesselheim (in Health Affairs and the Yale JHPLE), antibiotics might be a particularly apt drug class to test the delinkage concept. One model (with Thomas Pogge & Aidan Hollis) is the antibiotic health impact fund, paying annual prizes to the patent holder over 10 years for the actual health impact of the drug around the world. For the first time, companies would have a financial incentive to get the drug to the sickest people able to benefit the most at an affordable price instead of overmarketing a precious exhaustible resource. Another model is the Strategic Antimicrobial Reserve, paying a company NOT to market a particularly valuable antibiotic, saving it for a time of greater need. A third might be to modify antibiotic reimbursement away from unit sales (which drive resistance) through payer-based models.

Prior TIE posts on antibiotics here.

@koutterson

Over the past 20 years, hospitals have gradually implemented many safety improvements to reduce the number of hospital-onset central line associated blood stream infections (CLABSIs). In the June 2013 issue of Infection Control and Hospital Epidemiology, Matthew Wise & colleagues at the CDC give national estimates in critical care patients over the past two decades. The good news:

Total effect of these safety efforts:  from 104,000 to 198,000 CLABSIs were prevented over the 20 years. The job isn’t done, as about 15,000 still occur each year, but this is substantial progress. This is valuable for several reasons:

1. Patients don’t suffer from unnecessary life-threatening infections.
2. Everyone saves money.
3. Patients don’t need powerful antibiotics to fight these infections, antibiotics that often trigger other unintended consequences, such as resistance. New antibiotic drugs are valuable, but avoiding infection is the best way to avoid resistance. 
4. This is strong evidence that quality initiatives can reap real results over many years.
5. Most of the remaining 15,000 annual CLABSIs are clustered in medium and large teaching hospitals, suggesting more focused ongoing quality efforts.

One final point: this is exactly the type of surveillance and research that the CDC excels at. We need more funds here, not fewer.

Previous TIE posts on antibiotics.

@koutterson