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PBMs: Medco settles state complaints, but pretty cheaply

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Medco today settled its ongoing lawsuit with several state attorneys-general at the relatively modest cost of $30m. The stock rose slightly on the news, although there is an another ongoing Federal lawsuit, that TCHB has covered before. While this looks like a kind of business as usual story of “company gests caught with hand in taxpayer cookie jar, company pays fine, stock goes up as investors are happy fine isn’t bigger”, some of my more jaded readers have been poking into the details. Matt Quinn writes about a different Medco settlement with Massachusetts:

    Maybe I’m missing something, but it appears that Medco only had to pay back part of what it stole from the state of Mass:

    “Medco Health Solutions will pay Massachusetts $5.5 million to settle allegations that the company cheated the state while it managed prescription drug benefits for nearly 200,000 state employees and retirees, according to documents expected to be filed in US District Court today.”

    “Over the course of the contract, Medco passed along about $9 million in rebates, but kept another $10 million, the state alleges.” So, steal $10, pay back $5.5… Not a bad deal.

    And, of course, this plot to make Medco millions of dollars was dreamt up and executed by a few “rogue employees”:
    “Medco officials have acknowledged that the company had isolated problems with “rogue employees” at a mail-order pharmacy in Tampa, but said those problems were quickly corrected and did not affect drug costs.”

Of course this is nothing to the “business opportunities” those PBMs and their rogue employees will be looking at when they get to run the Medicare drug program after 2006.

I suspect the lawyers, state AGs and the DOJ have jobs for life.

HEALTH PLANS: UnitedHealth to buy Oxford for $4.9 Bln

So three days after Wellchoice (the Old Empire BCBS) decides that it won’t buy Oxford Health plans, a bigger fish steps in. UnitedHealth decided to buy it instead for $4.9 Bln, which is roughly the price Wellchoice had agreed to pay. In some ways this make more sense and in some ways it makes less, and it reflects how the game has changed for health plans . Oxford gives United greater presence in the north-east and it gives it greater access to the Medicare HMO market, which was Oxford’s original strength. Now that the PDIMA Act is funneling more money to Medicare plans, it makes sense for United to want to grab its share. However, back in the day (i.e. before 2001) the goal of managed care plans was regional market concetration, so that they could grind local providers down on price by developing what Ian Morrison used to call “virtual single payer” capability in each market. It looked like Wellchoice was still going that route when it decided to buy Oxford , but decided that it was about to adopt a 90s strategy in a Zero’s world, and thought better of it. This encouraged analysts at Bank of America who gave Oxford a sell rating, based on its likely poor profit outlook. They won’t look quite so smart today to any of their clients who took them up on their advice!

As an aside. It’s good to see that the sanctity of Wall Street remains inviolate. Reuters reported at 4.11pm that United was going to buy Oxford, but looking at the day’s chart, you figure that the word got out about 40 minutes earlier! I wonder how that was possible?

TECHNOLOGY: A hint that not all is well with Boston Scientific’s Taxus stent

I’ve noted the incredible new success of Boston Scientific’s Taxus stent several times in THCB. Taxus is moving from factory to artery as fast as it can be pushed off the production line. However, the New York Times reports that the FDA is looking into some stories of problems with the stent in its first month. The lead quote criticizing Taxus is from Dr William Campbell at Borgess Medical Center in Kalamazoo. While I’m sure the problems they have seen with Taxus are real, it’s worth noting that Campbell’s colleague Dr. Tim Fischell basically invented the rival Cypher stent (see the last line of this press release)and their program is funded by its manufacturer, J&J’s Cordis unit.

The number of problems with Taxus quoted thus far are very small and probably not indicative of anything, as the NY Times quoted one cardiologist:

    “I would not be alarmed by a few reports,” Dr. Hodgson said. “Those same things have happened with previous generations of stents and balloons.”

But do not doubt that there is a huge battle for supremacy here in a very large and growing market , and the impact of these reports will be felt as the marketing machines pushing these rivals go to work.

QUALITY/PHARMA: Is the anti-obesity movement a con job?

Fascinating article extracted in The Guardian from a new book from Paul Campos suggests that obesity is not a health problem. Well worth reading the article, but basically he suggests that while fitness and excercise have some impact on health outcomes, in general people with a Body-Mass Index (BMI) in the “recommended range” don’t do any better and in some cases do worse than those who are above that range. In fact it’s better to be overweight by several pounds than underweight by a few. Additionally the desire to reduce BMI suggests that people who become thinner have the same health outcomes as those who were thin all along, and although there have never been studies to support this (because you can’t get fat people to stay thin long enough) the evidence suggests that it’s not true. Further, the “propaganda” causes health problems by encouraging yo-yo dieting and poor body image, particularly amongst young white women. This leads of course to the serious medical and psychological consequences of eating disorders.

I’m not sure I know enough to be convinced of his arguments, but of course the treament of obesity is big business and getting bigger for the pharmaceutical industry. Campos lays at least some of the blame for the acceptance of the argument that “obesity is a disease that needs treatment” at their door. The rest he ascribes to the desires of Americans to discriminate, and now that civil rights and political correctness have taken away the ability to aim that discrimination at ethnic minorities, obese people are an easy target.

So basically I can have that bacon sandwich so long as I go to the gym. But on an industry level this conversation about what to do about obesity has serious implications for physicians and pharmaceutical manufacturers. And if the answer is not to worry about reducing obesity per se, that has some profound implications for how we may treat some of our biggest disease classes–diabetes and cardio-vascular disease–in the future. We are very quick to go to the pill when “diet and excercise” hasn’t worked. But what if, even if the pill works in reducing obesity, it doesn’t in improving outcomes?

HEALTH PLANS/HOSPITALS: Quick left-coast round-up

The California Health Care Foundation released a report a few weeks back showing that medical groups are losing their clout to hospitals. Meanwhile, over the last few years hospitals have been exercising their new found clout against the plans, and now it appears that the end-payers (such as CalPERS) are not going to take it lying down. Matt Quinn wrote about the battle between CalPERS and Sutter (the big N. Cal Chain) in TCHB last week. This week legislation was introduced in the California assembly to stop provider systems from being allowed to force health plans to contract with every hospital in their network. Whether this meddling in the market will stand up to further legal scrutiny is open to question, or at least it should put some fear into WalMart (or anyone else who uses market clout to get a better deal)!

By the end of the week it appears that CalPERS is stepping back from the brink, but the market power of hospitals is only increasing as we head into the baby-boom golden age in the next decade, so don’t expect this story to be over too soon.

PHARMA: Drug re-import bill moving into the Senate

Just a tickler update about a process that I’ve reported on enough and which has been rolling for a while, a bi-partisan group of Senators who’s staffers can read opinion polls have introduced a bill to allow Canadian imports. Meanwhile, despite some hysteria from the right in Canada, prodded by their fellow-travelers south of the border, the Canadian government has denied that there’s a shortage of product at home.

    David Mackay, executive director of the Canadian International Pharmacy Association, said Canadians are “not at all losing drug supplies needed for Canadian residents. Those who say so are fear-mongering.”

Fear-mongering? About a health care issue? Well, just imagine that!

BLOGGING: New Healthcare Blog

Go say hi to John Rodat at Health Signals New York. It’s an excellent health policy blog that I found today, even though it’s been around for 3 months. Plenty of interesting stuff, with a large concentration on New York issues and the closely related issue of Medicaid. (New York has by far the most expensive Medicaid program in the nation, exceeding California’s on an absolute level).

Today John has an article on the Medicare chronic care DSM initiative (which is great as it means I don’t have to write one!)

HEALTH PLANS/POLICY: Real research on consumer-directed health plans

THCB‘s author’s anecdotes about HSAs seem to have been the Internet’s major source of information about consumer-directed health plans (CDHPs). We may be wandering slowly past that dangerous stage! Both Health Affairs and Forrester are out with some more information about them.

John Gabel from the HSC group has an article in Health Affairs which has a nice description of the HRA/high deductible plan, the consumer selected plan and the (as yet only existing in Powerpoint) “customize your own plan”. Gabel suggests that the analysis Harris provided THCB with last January is spot on. Employers have no confidence in CHDPs to either save much money or improve quality, but the CDHP may help them to continue to shift costs to employees–which is their main strategy. However, many employers are rightly worried that the CDHPs will ensure adverse selection against their overall risk pool. Currently only 2% of employees have access to an HRA, but Gabel’s team estimate that that number could increase to up to 30% in 2 years. Much more likely is a growth to 7-10% of employees over a slightly longer time period, roughly akin to the fast growth in PPO members in the 1980s.

Regular TCHB readers will know that I harbor deep skepticism about CDHPs even though I (sort of) have one myself. Brad Holmes from Forrester has some interesting new data about engaged consumers shopping for Rx and hospitals on price and quality. The data is well worth a look if you are working on creating services that are attractive to this upper-tier consumer group, which represents from 20% of the population, and is roughly akin to the “new consumer” group that IFTF has been telling you about forever (or since 1997).

TECHNOLOGY: Online consults growing (but slowly) in California

I’ve been continuing to watch the online consult service provided by RelayHealth (the former Healinx). It’s an online system allowing secure interactions and requests from patients to doctors’ offices. It’s up and running in Mass and in California, sponsored by Blues plans in both places. The SF Business Times reports that about 1,000 California doctors have signed up. Apparently, Blue Cross of California plus Healthnet are about to join anchor tenant Blue Shield in reimbursing for online visits. What does the services do?

    RelayHealth’s approach, which incorporates reimbursement for physicians along with other clinical and business-oriented components — such as scheduling appointments, refilling prescriptions, obtaining lab results, updating patient information, collecting copayments and submitting claims — is rapidly changing physicians’ attitudes. It isn’t intended for emergency or urgent-care situations, and generally allows physicians the flexibility to respond within an eight-hour time frame.

    “The structured web visit is the sexiest thing,” notes Darryl Cardoza, Hill Physicians’ chief operating officer, but other functions, such as electronic prescriptions and appointment scheduling, “are equally important.”

Of course Healinx has been pushing this since 1999 and only 1,000 of California’s 60,000 doctors are signed up–meaning that it takes years to become an overnight sensation.

Hat-tip to iHealthbeat

PHARMA: TAP trial starts today, by MATT QUINN

The trial of TAP officials accused of defrauding Medicare over the sale of the cancer drug Lupron starts today in Boston. Matt Quinn isn’t sure that the blame is falling entirely where it should:

    Although “two health plans, 26 group practices, and 25 individual doctors from Massachusetts to California were offered or took bribes, including cash, free drugs, Red Sox and Yankees tickets, and trips to swanky resorts, according to a list of “kickback transactions” filed in US District Court in Boston…None of the medical professionals face charges in this trial.”

    It appears that federal prosecutors are using tactics from that other drug war in their efforts to root out corruption and fraud in Big Pharma: get the minor criminals to “turn” in order to land the “big fish”. But there is a fundamental difference between the two scenarios. Big Pharma sinks to these lows BECAUSE medical “professionals” demand it of them (for example…):

    “In documents supporting those charges, prosecutors asserted that Lahey Clinic officials agreed to continue prescribing Lupron only if TAP offset the clinic’s cost by about $100,000 by paying for a Christmas party, golf tournaments, and seminars and for providing free drug samples.”

    “At Yale-New Haven Hospital, the documents say, the urology department in 1999 asked for and received $10,000 from TAP to fund a seminar after threatening to switch patients from TAP’s prostate cancer drug Lupron, to a less expensive competitor.”

    “A urology practice affiliated with the former New England Deaconess Hospital in Boston also played TAP against its competitor and from 1995 to 1998 received 111 free doses of Lupron, worth at least $400 each, according to the indictment and kickback records. The doctors prescribed the samples to patients and billed Medicare for the full cost of the drug, turning the samples into a cash kickback…”

    Oh, and street drug dealers don’t agree to the Hypocratic Oath…

    Of course, this kind of kickback / fraud is largely a moot point if the government/payers quit paying for injectable drugs…

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