Rule-a-Rama this week plus some sword rattling at the FTC.

Chart of the Week. The GAO issued a report on Medicare Part D drug spending versus the VA and it is not a flattering picture. The GAO, on average, paid 54% less than Medicare Part D for the same drugs on a per unit basis. The table continues to be set for a robust discussion of drug price negotiation by Medicare.

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Vaccines. Tuesday, Operation Warp Speed held their final press conference of the Trump administration. In what was portrayed as a reversal of policy, the group announced the release of the ~28 million doses that had been held to assure the second round would be administered. The reversal, based on comments by Azar, seems to have less to do with public pressure and more about comfort with $PFE's manufacturing process which had met with some obstacles in the fall. As of close of business last night, the federal government has delivered over 30 million doses. Almost 1.5 million people have received the full two doses. In what sounds more like poor communication between state and federal officials - a reality that predates Donald Trump's administration and will persist long after - the Washington Post has reported that no stockpile is available to ship. Rather, it appears vaccines are going to be shipped as they come off the assembly line. In other words, there will not be a surge of available vials and states will need to manage eligible populations against available doses in the near term. 

Rules, rules everywhere. The Trump administration finalized a number of rules meant to secure their agenda before departing the Capitol on Wednesday. These include rules on Medicare coverage of innovative technologies, Medicare Advantage plans and prior authorization in Medicaid, CHIP and exchange plans. We will cover these in depth after we have read them all but the highlights are these:

• Medicare coverage for innovative technologies would provide a more certain path to reimbursement for devices given breakthrough status by the FDA as soon as market approval is granted. These approvals would include, for example, $ILMN's Grail. The move is designed to encourage as much as possible FDA approval of devices including diagnostic and certain screening tests. Given the time from FDA breakthrough designation and FDA market approval, we expect 2021 to be a big year for innovations like liquid biopsy, now that reimbursement is better aligned with market approval.
• Medicare Advantage Part D plans will be required to offer real-time benefit tools to enrollees by Jan 1, 2023. These tools will allow plan members to assess cost-sharing and compare the prescribed drug to alternatives of equal effectiveness. As Tom Tobin has pointed out $GDRX's market skews younger than the Medicare population but it does sound like the federal government is mandating some competition. On the other hand, $GDRX could also offer a plug and play solution for plans.
• Medicaid, CHIP and ACA Exchange plans will need to offer electronic access to information on prior authorization requests. Prior authorization has been an access pinchpoint for Medicaid enrolled providers for years. When the preliminary rule was released, we noted the ancient process at $MOH which almost seems intentional given how easy it would be to make the process more automated.

None of these are particularly controversial so despite the late hour, we anticipate the Biden administration will let them go into effect in the next 60 days.

Geo Direct Contracting Model. Today, the Innovation Center at CMS released a Request for Applications for the new Geographical Direct Contracting Model. The GEO Direct Contracting Model will test whether a geographical approach to value-based care can improve quality and reduce costs in a region. Direct Contracting Entities will take full risk on cost of care of Medicare FFS beneficiaries in a specific region. In return, the DCE - which can be a health system, health plan, ACO or primary care practice - gets certain benefit enhancements. These include waiver of the 3-day SNF rule and the Home Health homebound rule, asynchronous telehealth services and access to curative care while on the hospice benefit. The regions being considered are: Atlanta, Dallas, Houston, Los Angeles, Miami, Orlando, Philadelphia, Phoenix, San Diego and Tampa.

Direct Contracting has become the new health policy buzzword and was mentioned more than once at JPM21. Certainly $OSH and the privately held Cano will probably fnd a place in the new model. We would also not be surprised if $HUM, which identified service providers as an M&A priority in their JPM21 presentation, is positioning themselves for a new era in Medicare cost management. What the Geo model signals more than anything, is the slow demise of post-acute care silos, initated by COVID and now making their way into Medicare policy.

Loads more info on the model can be found here. 

Drug Rebate Rule. To no one's surprise the Pharmacy Benefit Managers' trade group sued the federal government over the drug rebate rule. The PCMA's case is not very compelling,however. They argue that HHS lacked authority and the rule was arbitrary and capricious. Never heard that before.

We are sticking with our belief that this rule has a better chance of surviving the White House transition than the Most Favored Nation rule if only because PBMs have very few friends in politics. The Senate Finance Committee report released yesterday lays the blame for insulin prices, in part, at the feet of PBMs. In the wake of the Supreme Court decision, states have begun to move on regulating the industry which will no doubt favor independent pharmacists who take the brunt of PBM practices. 

We have heard anecdotally that independent pharmacists have refused to take $GDRX coupons because, given their weaker market position relative to $CVS and $WBA, they often find themselves upside down on prescriptions filled with the popular app. While not addressing couponing practice directly, the state laws we have seen may view coupons as a PBM's effort to steer patient's to one pharmacy over another. In that case, they may run into some state level headwinds. We will have to wait on the debate to see what takes shape throughout the winter and spring.

Anti-trust. Wednesday, the FTC submitted a request to six insurers; $AET, $ANTM, Florida Blue, $CI, $UNH and Health Care Services Corporation for inpatient, outpatient, and physicians' services commercial claims in 15 states for years 2015-2020. The purpose of the inquiry is to "help the FTC assess the impact of physician consolidation during this period, including physician practice mergers and hospital acquisitions of physician practices. It should also allow the FTC to assess the impact of healthcare facility consolidation during this period."

The idea behind the request is that the FTC needs to step up its retrospective reviews of merger approvals. While nothing is likely to change immediately, anti-trust fever appears to be taking hold and the request serves as a signal that large mergers just aren't going to be as warmly embraced as they once were. 

A New Future for $CYH and LifePoint? Buried in the year-end spending bill/COVID relief bill is a new category of provider to be known as the Rural Emergency Hospital. The new Rural Emergency Hospital will consist of hospitals with 50 beds or less in rural areas. They will not be permitted to offer inpatient acute care services and must have a transfer agreement in place with a hospital that can provide extended care for a patient if needed. The new Rural Emergency Hospital will offer outpatient, triage services and be paid as if they were an outpatient department plus a 5% add-on payment and a monthly subsidy amount.

Rural hospitals have suffered under the combined effects of aging and declining populations, payment practices that shift costs to patients and a lack of specialty physicians. The provision attempts to stem that tide beginning in 2023. 

Tweet of the Week. 

We would like to think this effort is sincere and possible. Mark Cuban announced, with the Baylor College of Medicine, the launch of a new company called Cost Plus Drugs which aims to provide cash price generic drugs. This approach is exactly what many people had hoped $AMZN would embrace as a response to $GDRX but instead is acting pretty conventionally. The idea is that certain drugs, like Albendazole which treats hookworm (yuck!), can be provided at a cash price low enough that health insurance becomes irrelevant. We could do without the picture of the hookworm, however,

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Upcoming Events.

Health Care 1Q2021 Themes Presentation | January 21 @12:30pm ET

NTRA CFO Michael Brophy with Tom Tobin | January 22 @10:00am ET

Chris Jacobs of Juniper Research Group on the legislative prospects for health care legislation in the 2022-23 term | January 27 @12:30PM ET

Have a great long weekend.

Emily Evans
Managing Director – Health Policy
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