"Me Too" Drugs

Today’s Managing Health Care Costs Number is $121

The FDA approved a seventh statin, Pitavastatin (Livalo) – a “me-too” drug to lower cholesterol.  Newly approved drugs can increase competition and lower prices, and in some instances they can be downright better than existing drugs. The benefit to society of "me too" drugs tends to be very low in a class where generics are already in place, though.

The Medical Letter,  a non-profit, noncommercial organization that evaluates medicines, says:

Recommended doses of pitavastatin (Livalo) have not been shown to decrease LDL cholesterol more than recommended doses of other statins with longer safety records and, unlike other statins, no data are available on clinical outcomes with pitavastatin. In addition, pitavastatin has a worrisome potential for clinically significant drug interactions. There is no good reason to use it.

This new medication costs $121 per month, while generic statins cost under $30 per month. 

A commentary in JAMA last week suggests that the FDA should only approve “me too” drugs in classes with existing generics if those drugs are frankly superior to existing drugs, rather than non-inferior, which is required by the current regulations.

I think that’s a great idea. This could help us increase the value of pharmaceutical spending, and help the FDA focus its attention on meaningful innovation.     Alas, the likelihood of passing this kind of revision of the FDA’s role is very low.

My colleague Craig Shelley has pointed out that my last post suggesting that the FDA should consider cost-effectiveness when approving medical devices would also require new legislation. This is also very unlikely.

Dueling Headlines: Does the FDA Take Too Long to Approve Medical Devices?

Sometimes, reading the news from day to day makes my head spin.

The New York Times headline  on Sunday, February 10 was “Medical Treatment, Out of Reach.” The opening paragraph outlined a southern California biotech company which had packed up and moved to Europe, because the FDA process for approval of cardiac stents took too long.   The article goes on to describe Americans traveling to Europe to gain access to implantable spinal devices not yet approved by the FDA.  American venture capital investment in the medical device sector is reported to have plummeted since 2007.

A tough approval process can lead to life-saving technology not being available to Americans.  It can also lead to higher prices from established manufacturers, who don’t face the competition of new ‘disruptive innovators.’ 

But just four days later, the Archives of Internal Medicine  published a review of 113 medical devices recalled by the FDA from 2005 to 2009.  This was covered in the Times under the headline “Recalled Devices Mostly Untested, New Study Says.”  Under 1/5 of these recalled medical devices had been approved through the standard FDA process; a staggering 71% were approved through the expedited process.  The Government Accountability Office recommended that high risk devices no longer go through the expedited process in a report in early 2009,   but this is apparently still not in effect.  The authors suggest that the FDA should increase the rigor of its evaluation of new medical devices – the rigor that the earlier article had decried. 

What’s the truth?

Many new devices do not increase competition or lower cost.  If the device displaces other more invasive medical therapy, it usually will cost the same or even more.   The track record of spinal disk implants is especially troubled; they often do not help patients nearly as much as promised.   

On the other hand, miniaturization has been a real boon to patients, and medical devices keep people’s hearts beating and keep people on their bikes and on the tennis courts – others hold some promise to treat various neurologic conditions.

The FDA has continued to promised to streamline its review of medical devices. 

It seems to me that patient safety should be paramount, and we should revise regulations to allow the FDA to consider cost-effectiveness in its decisions about approval of new devices. 

And my head will continue to spin as I read the newspaper from day to day. 

Most Medicaid Expense is for Elderly and Disabled

Today’s Managing Health Care Costs Indicator is 70%

Governors all over the country are slashing Medicaid  – which represents a larger and larger portion of state budgets.  This is one of the largest challenges to the effectiveness of the Affordable Care Act.   Medicaid is supposed to cover an additional 16 million in 2014, and many states are going in the opposite direction.

Here’s the challenge.   Seventy percent of all Medicaid spending is on the elderly and disabled.  55% of all Medicaid spending is on long term care facilities, and Medicaid pays for almost half of all nursing home care in the country.  This information all comes from the Kaiser Family Foundation Medicaid Resource Book . Table of contents  Financing chapter 

SO – while 75% of the population on Medicaid is kids or nondisabled adults (often young parents), only 30% of the dollars are spent on this group of enrollees, even including costs of pregnancy and delivery.   Slashing Medicaid won’t save that much money if the target of the cuts are the nonelderly nondisabled.

A few charts to make the point.  (Numbers from KFF references above with some calculations by me)

  

Massachusetts’ Health Care Reform: Chapter 2

Today’s Managing Health Care Costs Indicator is 52

  

Governor Deval Patrick of Massachusetts announced the state’s plans to move from fee for service to bundled payments for accountable care organizations (ACOs) last week.   The initiative could be a bold reshaping of health care in the Commonwealth It could be the opening volley in a battle to reintroduce rate regulation.  Or it could be an interesting idea that doesn’t make any legislative headway. 

Here’s my outline of the 52 page proposed legislation: 

·      * The Attorney General is instructed to:

o   Evaluate potential provider mergers and accountable care organizations (ACOs) to be sure these are not anticompetitive

o   Help arrange necessary federal waivers

o   Develop an enforcement mechanism to prohibit providers from shifting costs from one payer to another.

·      * The Division of Insurance will

o   Collect data on provider contracts and determine if they are consistent with legislation, including increases below certain thresholds.

o   Disapprove rate hikes that are based on provider contracts inconsistent with this legislation

·      * The Executive Office of Health and Human Services will

o   Help arrange necessary waivers

o   Establish an ACO pilot with early-adopter provider organizations

o   Report on progress

·      * The Division of Health Care Finance and Policy (DHCFP) gets substantial new responsibilities:

o   Evaluate alternative payment methods

o   Determine how to share reporting on payments with the public

o   Examine terms of health plan contracts with providers, and require annual reporting on these, including an inventory of payment methods to be completed by March, 2012

o   Figure out how to apply the state’s preferred payment methodology to self-funded employers

o   Study best practices from other states and other countries

·      * Establishes a Health System and Payment Reform Coordinating Council with responsibilities including:

o   Collects data and report on quality and cost

o   Determines what entities qualify as an ACO

o   Monitors and reports on ACO performance

·      *Establishes a Health Care Information Technology Council and a Behavioral Health Task Force

·      *Mandates that primary care physicians participate in only a single ACO

·      *Establishes a mandatory self-funding reinsurance plan for ACOs 

·      *Standardizes and enforcesuniform risk adjustment so that ACOs and health plans will not “win” by failing to serve those with serious illness.

o   Risk adjustment is supposed to include socioeconomic status, which is notoriously difficult

·      *Malpractice reforms include

o   “Cooling off” period before malpractice claims can be filed, to allow for settlement talks.

o   Disallows apologies from being used against providers in malpractice claims.

o   Protects peer review privilege within ACOs

This is a big bill – and will be changed significantly as it winds its way through the legislative process.

Here are some key observations about factors which will determine this bill’s success.

•  There are many new responsibilities, especially for DHCFP.   Will there be staff to complete these requirements? Will there be adequate budget to hire independent actuaries and analysts for what the department cannot do within its own staff?
• Providers and health plans feel proprietary about their contractual arrangements, and have spent years developing the expertise to maximize returns.  The contracts are complex and often not easily comparable
• It isn’t easy to compare provider prices
• It’s easiest to compare cost using relative discount rates.  But the ‘chargemaster’ used by most providers is hopelessly irrational.
• It’s also possible to compare charges for high volume units of service (such as medium intensity office visits.) 
• However, it’s more appropriate to compare the cost of risk-adjusted episodes of care, so that the provider who uses more units of service doesn’t inappropriately appear to be offering a better “deal.” 
• Risk adjusting episodes of care is doable- but it’s not for the faint of heart.
•  The current bill appears to target rate of increase, which would not address existing disparities in allowable fee schedules.
• A substantial portion of Massachusetts residents get coverage through ERISA eligible plans, where an employer self-funds the health insurance benefit.  These plans are not subject to Massachusetts regulations.   If these plans continue to be fully committed to fee for service, it might be hard to get traction with the provider community
• On the other hand, Patrick has announced that he expects full participation of 1.7 million beneficiaries who have state-funded health care (state employees, many municipal employees, and Medicaid recipients).

This proposed legislation is ambitious and groundbreaking – a fitting followup to the health care reform that has led to insurance coverage for 98% of Massachusetts residents.