Small beer by the standards of this corrupt Administration (Halliburton anyone?) but given that former F.D.A. Chief Crawford is going down in a conflict of interest scandal, I can safely assume that at least one THCB reader is quietly smiling over his cornflakes today!
Everyone knows that hospitals have a “list” price that only a very few totally powerless uninsured patients pay (and in California that hospitals are bizarrely required to report that price to the state). Then there’s an actual amount that Medicare pays them, which is a real “price”, and then there’s the amount that they actually get from insurers. All figured out by market power, and all being challenged by the transparency movement.
Now Barbara Martinez, continuing her swath through the nether reaches of the drug business in the WSJ, has figured out that AWP (avg wholesale price) which is the fictional equivalent of hospital “list” price for the pharmacy business, is actually a real number. Or rather not a real number, but a fake number with real implications. Real in that that several insurers and health plans are actually paying a discount from AWP for their drugs. So that when McKesson (the biggest wholesaler) told First Databank, the dominant price reporter, that it was putting up AWP by 5%, effectively it was increasing the amount the pharmacies got paid for the drugs they sold. (FDB apparently was supposed to be surveying all the wholesalers but was actually just taking McKesson’s pricing).
This increase happened in 2002. Now eventually some of those payers figured out that their prices had increased for no good reason, and went after the pharma manufacturers. But they weren’t getting the increase—that was sticking with the pharmacy. McKesson, the wholesaler which sells all manner of stuff to pharmacies, was happy enough to make its customers happy, and point it out to them when their wholesaling contracts came up for renewal. So the result was that after chasing down a null result at the pharma manufacturers, the payers went after First Databank, which today fessed up to doing a not-too-thorough job on finding out just what AWP actually really was, and agreed to give up publishing about it at all in 2 years.
Here’s what Martinez writes about one “victim”
Mark Erlich, executive secretary-treasurer of the New England Regional Council of Carpenters, is one of the plaintiffs settling the case with First DataBank. He expects the settlement will save about $400,000 a year for his union’s health fund, which covers 22,000 people and spent $10 million on prescription drugs last year. Mr. Erlich calls the earlier rise in First DataBank’s published prices "a rip-off of consumers across the country." It affects the union, he says, because its contract with the company managing its pharmacy benefits specifies that the drug prices the union pays will be based on First DataBank’s AWP benchmarks.
Now I bet you a nickel that the “company managing its pharmacy benefits” was a PBM, which meant that it also owned its own mail-order pharmacy, and so it too was benefiting from the increase in AWP. I’m also not too sure that even now Mr Erlich the chippy realizes that, but it’s the PBM he ought to be flipping mad with.
But here’s the real point. Why the hell is an end payer agreeing to pay a discount from a notional price that it allows someone else to control in the first place? And even more so, why is the middle man, that is after all being paid to allegedly lower its drug costs, allowing its client to be reamed in that way. This is the equivalent of boasting that you “got it on sale” without noting that the company was marking up the pre-sale price. Why wouldn’t you figure out what it cost at Costco (or the equivalent cheapest outlet) and see what your market power could get you in comparison. After all that’s how real market pricing works.
Well you don’t have to be too suspicious to think that the PBMs did fine out of this little arrangement—presumably because it allowed them to mark up the cost of the drugs they were selling at mail order—and that the more they can obscure both the true costs of the drugs that they allegedly get at such a discount and also their own incredible profitability, the better for them. And so long as they have clients dumb enough to not question what they’re buying and the way they’re buying it, what do you expect to happen?
But if the University of Michigan can figure it out, should the rest of corporate America be so far behind?
The NEJM, in an article called The Price of Sight — Ranibizumab, Bevacizumab, and the Treatment of Macular Degeneration catches up with a THCB contributor from 4 months ago. The issue is that Genentech has a new and to the unwashed un-sophisticates (i.e. me and apparently most opthamologitsts) seemingly identical drug (Lucentis) for which it wants to charge 20 times the amount of Avastin, when Avastin works fine or better. Although of course Avastin hasn’t had a clinical trial for exactly that indication, and Genentech is apparently restricting supplies of Avastin in order to force you and me (the taxpayer) to cough up for Lucentis instead (and for the poor patient who must pay 20% of a much bigger number than if they’d paid out of pocket for Avastin.
Genetech does appear to be gilding the lilly here. I mean seriously who ever heard about a drug company complaining about un-promoted off-label use of its product? Unless of course, the off-label use cuts into the sales of a much more expensive version of the same thing!
On the other hand if someone can explain if there’s a justifiable difference, you know where the comments button is.
The federal government plans to halt a controversial crackdown on discount drugs mailed from Canadian pharmacies to U.S. customers, removing a significant hurdle to Americans buying cheaper medications from abroad.
So 80% of Seniors support importing Rx from Canada, and the DOJ backs off its crackdown on imports.
Could there just possibly be an election coming up soon? Just possibly, could these two events be related?
The NY Times has an article about how a biotech drug that basically is no better than a generic is selling off the shelves at $4,200 a Dose. Doctors think it’s better, patients believe it’s better and payers are too wimpy to stand up to them. Of course they haven’t got a government agency to help them, as exists in the UK.
Interestingly enough this is exactly what happened nearly twenty years ago with one of the the first major biotech drug, Genetech’s Activase (tPA) for the immediate treatment of heart attacks. it cost about ten times what the competing drug (streptokinse) cost, and basically had no better results. At the time there was lots of murky stuff including a positive NEJM article written by scientists with close (and undisclosed) ties to the company. (If you want to know much more about that ugly debate, look at the debate starting at page 3 in this link and particularly the far right column of page 9). And then after a study showed incredibly small relative and absolute benefits in survival from using Activase, allegedly Genetech sent lawyers to lots of hopsitals explaining what a jury might say now that a lawyer could "prove" they weren’t using the best possible drug. Pretty soon everyone switched over.
Sounds like despite lots of talk about cost-benefit analysis, cost controls, and pharmaco-economics, nothing has changed.
Interesting article in the WaPo about the impact of the donut hole in Part D on the Senior vote. I think it will matter, it will hurt the Republicans and the signs seems to be point that way in one House race in Florida. Of course whether it will matter enough to push the House over to the Democrats is another matter. But the most interesting stat in the article is buried on the second page.
Perhaps playing in Klein’s benefit: More seniors are finding themselves
in the doughnut hole as the election approaches. The Institute for
America’s Future, a group calling for the closure of the gap,
calculated that, on average, seniors who enrolled in the benefit at the
beginning of the year would have fallen into the doughnut hole on Sept.
So this problem will get worse all the way up to election day, and the greed fest known as the Medicare Modernization Act (of which to be fair the greed of big Pharma was only one small part) may play a factor. And if it does, the obvious change that the Democrats would now put in the bill would be negotiated pricing.
That was not what Pharma wants, but of course it’s a maybe and the CEOs of big Pharma who pushed the bill through are leaving their posts and leaving the potential consequences to their successors. My guess is that those successors will wise up and figure out how to cut a more reasonable deal so that they are not so squarely in the gun sights when the nation has a real debate about health care costs in a few more years.
You may have heard just a few things on THCB from Greg Pawelski, Matt Quinn, me and others about the oncologist prescribing franchise, and how it might just change physicians’ behavior a tad. Well Greg informs me that last Thursday the whole issue made it onto the NBC Nightly News.
Greg also notes that the community oncologists (well, he calls them something rather ruder, but he’s insulting the world’s oldest profession so I won’t use his language) have their own response. They are “outraged!”
When Democrats attack, somehow it doesn’t convey the ferocity of the original series…but with Bush’s approval ratings going up as the price of gas comes down, the Democrats are issuing a Medicare drug report. Yup, they’ve noticed that there is both an election in November and that plenty of Part D participants are in the donut hole. And perhaps it’s about time to take the initiative back from the BS meme that “most people in Part D are happy so it must be a good thing/Republican votegetter, and the donut hole doesn’t really exist anyway.” The donut hole is the most obvious thing to go after, and the one that most seniors are concerned about, so here goes:
The analysis includes a breakdown by state showing how much more money residents would have to pay annually if they switched to a plan that had no doughnut hole. The nationwide average was $458. Residents of New Jersey would have to pay, on average, an additional $298. Residents of seven states would have to pay, on average, an additional $721. Those states are Iowa, Minnesota, Montana, North Dakota, Nebraska, South Dakota and Wyoming.”As this report shows, the opportunity to purchase plans that fill the hole is a mirage,” said Rep. Pete Stark, D-Calif. “Beneficiaries are no more able to afford expensive, full-coverage plans than minimum wage Americans are able to afford a Mercedes.”
On the other hand, they don’t seem to mention getting effective drug re-importation, even though that is banned by the legislation and over 80% of adults are in favor of it. And somehow they’ve managed to get the AP guys confused by the White House spin:
Democrats contend that one solution to filling the doughnut hole would be to let the government negotiate drug prices on behalf of beneficiaries, instead of having fragmented insurance companies doing that. Then, the government could use the savings achieved to do away with the gap. But Nelligan replied that all of the Democratic proposals that have been scored by thehad cost projections at least twice as high as the cost of the current drug benefit.
Hmm… it’s hard to imagine something costing more per benefit delivered than the current version of the Medicare Modernization Act, especially when the payoffs to employers, insurers and hospitals are counted in. And wasn’t there something about a certain government agency that already negotiates rather better on drug pricing that the Part D private plans, and yet somehow that information didn’t make it into this article? Oh yeah, there was.
So the book that Rost has been working on is out. (Here’s a very quick summary of his story I wrote back in March). It’s called The Whistleblower: Confessions of a Healthcare Hitman.
In contrast to John Mack’s review which calls it a little dull, I think it’s a very, very interesting tell-all and much more interesting than a fictionalized version would have been. It’s 200 pages and I devoured it in 2 hours. I am of course bitter that he stole my title, but we’ll let him off!
There are some problems with the book. First, Rost is a little late to the game on the series of corrupt practices that big Pharma has been involved in over the years. Marcia Angell did it better, and John Abramson gets better into the details. Rost’s chapter on that corruption (ch 19) is a big mess, because it presents several different types of malfeasance as being the same thing, whereas there are activities within big pharma that are way over the line, and others where the line may been approached but not crossed. In the latter case a pharma company may settle because it didn’t want to run the “death penalty risk” of not settling with an aggressive prosecutor and potentially being banned from government programs. The key point of that chapter gets a little lost—and that point is that breaking the law is a considered business risk for pharma and many other health care entities; more so when the “law” is unclear—which it often is.
However, the rewards are worth it and not just in pharma. After all St Barnabas paid a Medicare fine recently of $265m odd when it acknowledged overcharging some $630m! So crime does pay, and it pays in the health care world to fuzz up the notion of “crime”. (There is one great catch, which is that the front organization that nominated Rost for whiny whistleblower of the year was headed by a guy who’d done Federal time for Medicaid fraud). But I think the whole chapter could have been cut.
The other frustration with Rost’s book is that we don’t learn much about some key issues that are ongoing in the Genotropin suit and he hid the whole existence of the suit from the narrative, whereas I think it would have been better done to introduce it with everything else he was up to chronologically, as the rest of the book is organized. However, some of the lack of details is inevitable as that one has some while to play out…and at the moment it looks like Rost is facing an uphill battle. We do learn that there is or at least was an ongoing criminal investigation into the the Genotropin issue as well as Rost’s civil Qui Tam suit. That may have been public information but I didn’t know about it. But it’s a little like Wayne Rooney writing his autobiography aged 20!
Finally, Rost spends much time going on about how tough it is to be poor–but he was earning $500K a year until recently and must have some stashed away. He also doesn’t tell us how much he got out of Wyeth (and maybe he can’t under that settlement) even though he details in the book that apparently many Wyeth execs had to settle with their local tax authorities at great personal pain.
But in any event the book is mostly about what happened when Pfizer took over Pharmacia, and has some interesting revelations about how Pharmacia may have juiced its earnings to indue Pfizer to overpay. That, of course, wouldn’t exactly have been an unknown act (Enron? Worldcom?)—although Pfizer today is at pains to say that the SEC has already investigated this and found it baseless. Not that corporate America has any sway over the SEC, the DOJ or anything, unless your name is the same as the leader of the Senate’s, or the current President’s!
Other than those quibbles I genuinely found this a terrific page turner. For sure it’s written in a self-sympathetic manner. Well what did you expect? There’s no doubt that Rost enjoys pissing people off, and knows his way around some Internet tracking tools that few corporate suits understand. We also of course don’t hear Pharmacia/Pfizer’s side of the story—but it’s going to be very interesting if they try to explain that Rost was behind the Genotorpin scheme himself. Because their defense must be either that or he’s made the whole thing up. (And if they really are withholding a database of contracts from the DOJ, as Rost says, I assume that they’ll be found out one way or another).
But it’s a great read straight from the horse’s mouth of a guy fighting a massive corporation with the weapons he has at his disposal. And very entertaining too. I know that it will be read alot, especially in the pharma business! And it’s yet more embarrassment for a big corporation that had a knee-jerk reaction to a problem that it could have solved easily by a) coming clean and b) buying off the squeaky wheel.
It reminds a great deal of the Thatcher government that could have got rid of the whole Spycatcher scandal by paying the ex-spy his pension, and instead landed itself in deep doo-doo, while helping the ex-spy turned author Wright sell a ton more books!
Michael Moore dissects U.S. health care. So the first excerpts of "Sicko" have been shown, and the spin from the industry is already quite remarkable.
We can’t control what a major Hollywood entertainer does," said Mohit Ghose, a spokesman for the trade group America’s Health Insurance Plans. "Our focus remains on a positive agenda of high-quality health care for more Americans."<SNIP>
Ken Johnson, senior vice president of the trade group Pharmaceutical Researchers and Manufacturers of America, said industry officials were "freaking out and pulling their hair out" when they first got word of Moore’s documentary. They have since calmed down, Johnson said. "Michael Moore is a political activist with a track record for sensationalism. He has no intention of being fair and balanced," Johnson said.
Because when you think of health insurers the very first thing that comes to mind is them creating a "positive agenda of high quality health care for ‘more’ Americans" and of course when you think of big Pharma, "fair and balanced" is exactly what popped into your head.
My suggestion is that until they can put together a fact-based rebuttal–we know that Moore plays fast and loose with the facts–both those organizations should shut the hell up. Otherwise the focus may shift to their not-entirely-glorious track records of telling the truth in public.