Biopharma and device companies big and small are in San Francisco this week for the annual hepatic challenge known as J.P. Morgan. Lest you think product makers get to have all the fun, this year there are more than a few payers on the investor docket. Aetna, Cigna, Humana, and WellPoint make their pitches Tuesday, while smaller, but no less interesting health systems like Geisinger, Kaiser, and Intermountain Healthcare also have their chance to opine the first two days of the circus – even if they are relegated to the 32nd floor of the Westin St. Francis. (It’s okay. We LIKE to be far from the madding crowd and its ignoble strife.)
Before the parties, before the ceremonial exchange of business cards, before the elevator pitches (sometimes in the actual elevator), it’s time for Real Endpoints’s Weekly Round-Up of important reimbursement-related news.
It’s good to be an insurer: Expect a certain cadre of investors to be very interested in the fiscal health of payers at this week’s JPM, not least because of a report titled “Despite Predictions, Health Insurers Prosper Under Overhaul” issued by Bloomberg Government last week. (The report is available only to subscribers but the key take-homes are summarized in this 5-minute youtube video.) Authored by Peter Gosselin, the study finds insurers, led by WellPoint, saw their average operating profit margins increase more than 8% in the 6 quarters since healthcare reform was passed. Moreover, diversification was a key reason for the success: A Bloomberg article summarizing the study’s findings notes companies are changing their business focus to gain from provisions in the Affordable Care Act that will expand the size of Medicaid, the $401 billion government health plan for the poor. “Only by substantially reshaping their businesses can they profit,” the study says.
- For more, read Bloomberg’s analysis of the study here.
Private insurers and healthcare exchanges: If there’s a JPM bingo game going, add the phrase “healthcare exchange” to the board. Indeed one way payers like WellPoint are diversifying is via the creation of private health insurance exchanges that will compete with the state-based organizations for employer-sponsored coverage. As private exchanges come to pass in 2014, insurers aim to remain relevant, betting they can provide better insurance – or at least market the product more effectively—than the state-sponsored programs. To prepare for exchanges, in the fall of 2011 WellPoint, Blue Cross Blue Shield of Michigan, and Health Care Service all bought a stake in the Minneapolis-based exchange Bloom Health. The strategy is to use Bloom to launch a private exchange available to consumers nationwide. Meanwhile, in August 2011, UnitedHealth Group subsidiary OptumHealth purchased Orlando, Florida-based Connextions, which is working on exchanges including a Medicare Advantage plan for Walgreens.
- For more on this shift, read this take, published January 4, by American Medical News.
Defining parsimonious healthcare: The American College of Physicians, the second largest U.S. doctors’ group after the American Medical Association, set off a minor tempest Monday January 2 when it issued ethical guidelines for some 132,000 internists urging them to consider cost-effectiveness when treating patients. The new guidelines include the following provocative statement: “In making recommendations to patients, designing practice guidelines and formularies, and making decisions on medical benefits review boards, physicians’ considered judgments should reflect the best available evidence in the biomedical literature, including data on the cost-effectiveness of different clinical approaches.”
That doesn’t sound so bad, but what gets critics riled is the following language:
“Parsimonious care that utilizes the most efficient means to effectively diagnose a condition and treat a patient respects the need to use resources wisely and to help ensure that resources are equitably available.”
To some, the word parsimonious implies not the smart application of healthcare dollars but dastardly Euro-style rationing. The American Enterprise Institute’s Scott Gottlieb told NPR, it “really implies that care should be withheld.” Virginia Hood, president of the ACP, stood behind the controversial language, however, saying “parsimonious is a good word in the sense that it means that you use only what’s necessary.”
- Find the abstract of the ACP’s ethics manual here.
- Find the coverage from Shots, NPR’s health blog here.
Innovation at the FDA: It’s not exactly reimbursement focused but when FDA’s Peggy Hamburg speaks – or in this case writes – it’s an event that merits one’s attention. As the regulatory agency gears up for the renewal of the Prescription Drug User Fee Act, new fees for generic drugs, and greater clarity on the 510K-approval pathway for devices, the FDA’s New Year’s resolution is once again about transparency. And in 2012 that means blogging. In a newly launched blog, FDA Voices, Hamburg (or one of her minions) promises the agency will “meet new and complex challenges” in 2012, including “FSMA and the Tobacco Act, promoting advancements and innovation in medical products, and broadening our strategic globalization and regulatory science initiatives.” Okay, the prose doesn’t exactly roll off the tongue. (Nor is it tweetable.) Still the blog site is updated and a show of FDA’s attempt to enter the digital age, which is critical as it tries to convince Congress and others of its innovative edge. That Hamburg’s first post played up its emphasis on innovation isn’t that surprising. To avoid criticism over its decision on Avastin, the agency went on the offensive in November regarding its drug approval record. This week’s Pink Sheet reviews the 2011 numbers, noting “the new molecular entity and novel biologic class of 2011 isn’t just the largest since 2004 – CDER also posted near-perfect on-time review performance.”
- Check out the FDA’s new blog here.
- “The Pink Sheet”‘s 2011 year-end review of FDA approvals can be found here.
Will Express Scripts/Medco come to pass? Is Express Scripts/Medco the healthcare version of AT&T/T-mobile? Analysts and investors think not, despite the tougher stand by the Obama administration on mergers. Why? For the simple reason that Washington regulators advocating lowering healthcare costs won’t be able to argue with the math Express Scripts and Medco execs are spouting. Unlike the failed telecom merger, these two companies claim a combined Express Scripts/Medco will only be responsible for the pharmacy benefits of three in 10 Americans. Moreover, the notion that a bulked up PBM will have greater bargaining power with product makers –savings it can then pass on to its customers—is attractive when accountable care and cost-effectiveness are the presiding principles of the day (provided such savings do come to pass). While its increasingly likely the deal will go through, there are still a lot of questions. Note a Senate Subcommittee convened in early December to discuss the anti-competitive nature of the merger; in September the FTC asked for a second round of additional information, an action it takes in less than 5% of proposed mergers. Political support for the deal may also be an issue given the potential jobs lost as employees are let go post merger. What’s the impact for drug makers of a combined Express Scripts/Medco? As Walgreens knows first-hand, Express Scripts is a tough negotiator. The ongoing struggle between the drug chain and the PBM highlights Express Scripts’ aggressive pursuit of greater discounts from retail chains. That worldview is likely to be at work when the PBM negotiates with biopharmas, especially if it subsumes Medco. Thus, drug execs might want to make sure to stop by the Westin St. Francis’ Colonial Ballroom at 9am PT Monday Jan. 9 to hear the company for themselves. In this industry, the best defense ain’t Tim Tebow…
- Read this article from Bloomberg for more on the subject.
The Westin St. Francis courtesy of flickrer http2007 via creative commons.