The Healthcare Round-Up: 1/24 -1/31

Even as politicos geared up for today’s Florida primary, healthcare wonks are still shaking their heads at the fact that the Affordable Care Act –or healthcare generally—didn’t get much air time in President Obama’s third SOTU address last week. In contrast to 2010, when Obama devoted 570 words to the concept – an all-time high—this year’s tribute to healthcare was considerably briefer at just 44 words. One of the more telling passages: “I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny your coverage or charge women differently from men,” said President Obama.

March 23 marks the second anniversary of the landmark healthcare legislation; it’s also an election year. And that, according to WaPo’s Sarah Kliff, may be one of the reasons healthcare wasn’t a more prominent issue in last week’s address. “Spending too much time defending the health reform law gives weight to the threat of repeal, recognizes it as legitimate,” she wrote in this column.

With the Supremes scheduled to hear oral arguments in March about the constitutionality of the ACA’s individual mandate as well as the expansion of Medicaid, health policy wonks shouldn’t wring their hands too vigorously. Healthcare will continue to be in the news, and likely a subject of debate – especially if Romney wins the Republican nomination and must defend  his healthcare record in Massachusetts as NOT Obamacare. (As NPR’s Shots blog notes, Romney’s unexpected defense of the individual mandate in last Thursday’s debate was surprisingly persuasive.)

Read on for our top picks in the healthcare reimbursement space this past week…

1. Moody’s downgrades hospitals: On January 25 Moody’s Investors Service warned not-for-profit hospitals face an “unprecedented threat to revenues” on multiple fronts, warning this challenging climate won’t ease up for at least the next 18 months. Declining state and federal reimbursement and the transition to new healthcare delivery models are factors in the downgrade; so too are balance sheet pressures related to expensive pensions and capital investments, according the ratings group.  Part of the tension stems from the fact that hospitals must operate in a world where payment can be either fee-for-service or via a bundled payment; thus, even as they transition to new accountable care models where the rewards depend on delivering care efficiently,  healthcare providers also have an opportunity to provide investors with solid growth by increasing utilization of outpatient and retail pharmacy services. In a report released last week by the Huron Consulting Group, Dan Wolterman, president and CEO of Memorial Hermann Healthcare system, eloquently summarized the challenges facing hospital administrators: “The old strategy is quickly becoming the high cost, low margin strategy. Unfortunately, we get to run these two opposing strategies [value based versus volume] simultaneously. You can live in two business models for a while, but not forever,” he told Huron Group.

• See The Advisory Board’s analysis of the recent Moody’s report here.
• To download the Huron Healthcare report, “Leading Through Transformation” click here.
• Healthcare Finance News’ review of the Huron report is here.

2. The ICD-10 tempest continues: On January 17, Dr. James Madara, EVP and CEO of the American Medical Association, wrote a “Dear John” letter to House Speaker John Boehner, asking Congress to stop the federally mandated implementation of the diagnostic and procedural codes known as ICD-10.  In his letter, Madara said ICD-10 “will create significant burdens on the practice of medicine with no direct benefit to individual patient care, and will compete with other costly transitions associated with quality and health IT reporting programs.” The comments echo a resolution passed in November by AMA’s House of Delegates. The question is whether this eloquently worded dissent is too little too late. Payers know well that implementing costly new IT procedures tied to ICD-10 is impacting their ability to transition to new kinds of payment mechanisms that move away from fee-for-service. As one healthcare exec at a regional payer told V&I in December: ICD-10 “is the biggest non-strategic investment being made right now.” Essentially in his view it’s an “enormous expense” at a time when healthcare organizations ought to be focused on institutionalizing greater efficiency in care delivery.

• Read Madara’s letter to Boehner (courtesy of Modern Healthcare)
• Here’s Real Endpoints’s take on ICD-10
• Future news alert: ICD-10 will be a major topic of debate at the upcoming HIMSS 2012 meeting in Las Vegas.

3. Avalere dissects HHS’s “Essential Health Benefits” proposal: The consultancy released a report last week arguing that Health and Human Service’s proposal to allow state-based exchanges the flexibility to cover just one drug per category would lead to more limited prescription drug coverage than what is offered by today’s individual and small group plans. The findings smack of “stating the obvious”, and cynics’ tongues are sure to wag given the study was at least partially funded by Pfizer.  Recall that in mid-December 2011 HHS released a bulletin  noting its intention to offer plans the same flexibility in setting formularies as is available in the Medicare Part D program. But Part D formularies are currently required to include at least two drugs that are not therapeutically equivalent and bioequivalent in each category and class. As  ‘The Pink Sheet” DAILY writes, this suggests HHS “may permit more restrictive formularies under the EHB rule.” According to Avalere’s analysis, small group plans currently cover approximately 70% of the drugs available in a chosen class, say anti-diabetics or ACE inhibitors, compared to open formulary plans like Federal Employees Health Benefits. Health advocates worry that as states move to define the minimum essential health benefit, patients will lose access to certain prescription drugs pending individual state decisions. The National Health Council, which advocates for patients with chronic diseases and disabilities, for instance, stated last week in public comments that the one-drug per class standard “conflicts directly with the ACA requirement that essential health benefits be modeled after typical employer-sponsored insurance plans.” The deadline to weigh in on the HHS bulletin is looming: proponents and detractors have until today to make comments. HHS has not released a timeline for the release of a final EHB policy.

•  The Avalere analysis can be found here.
• Read “The Pink Sheet” DAILY’s analysis of the Avalere study here ($$)
• The National Health Council’s comments are here.
• For a primer on EHB and some humor check out Jon Stewart’s recent interview of HHS’ Kathleen Sebelius on “The Daily Show”.

4. FDA approves Roche’s new skin cancer drug Erivedge: As the Pharma Strategy Blog points out, it wasn’t a huge surprise that Roche/Genentech’s hedgehog inhibitor, Erivedge, won an easy –and rapid approval—from US regulators.  The drug, codeveloped with the biotech Curis, wasn’t scheduled for a regulatory nod until March 8^th, but promising results released over the past 12-18 months coupled with high unmet need – the drug is currently the only medicine approved for basal cell carcinoma – apparently paved the way.  Recently approved cancer drugs have come with expensive price tags and regulatory documents filed by Curis suggest Erivedge’s pricing doesn’t buck this trend. While the cost of Erivedge isn’t anticipated to reach the six-figure status associated with Seattle Genetics’ Adcetris, Dendreon’s Provenge, or Bristol’s Yervoy, the drug is estimated to cost about $75,000 for a typical 10-month course of treatment. The rising cost of oncology care is a source of major concern to payers, and while Erivedge’s use for now is limited to patients with BCC who are not candidates for surgery or radiation and for patients with metastatic disease, the likelihood that the drug will tested to treat more prevalent — and potentially costlier cancers –is high. Roche/Genentech are reportedly testing the medicine in 20 different tumor types already.

•  Here’s the Reuters article highlighting Everidge’s approval.
• See here for Genentech/Roche’s press release on the news.

5. The looming Bydureon vs. Victoza marketing battle: Erivedge wasn’t the only new drug FDA approved in recent days. Tuesday January 31 came news that Vertex won a nod for it’s long-awaited cystic fibrosis medicine, Kalydeco, which is approved to treat cystic fibrosis patients with a specific genetic mutation. On Friday January 27, after two regulatory delays it was finally Amylin’s turn; the biotech won approval for Bydureon, its once-weekly GLP-1 agonist. The approval sets up a very interesting marketing battle between Amylin and Novo Nordisk, whose once-daily Victoza had been steadily stealing share from the California biotech’s Bydureon predecessor, Byetta. (That drug is given twice a day.) While Bydureon’s once-weekly dosing offers greater patient convenience, there’s data to suggest Victoza may do a better job at controlling type 2 diabetics’ blood sugar. In one study published last year, Victoza reduced blood sugar levels to a greater degree than Bydureon. In addition, Bydureon is more difficult for patients to prepare and requires using a larger gauge needle.  As a result, Amylin is in a bit of a tight spot; it can’t necessarily compete on efficacy and the convenience of weekly dosing likely isn’t enough to drive patients and physicians to Bydureon — or to garner coverage from payers. Amylin has taken the step of competing on price; its version will cost about $323 for a one-month supply, while a high-dose pack of Victoza costs about $421 per month. Given Amylin’s launching this product on its own– it’s long-term partnership with Eli Lilly officially dissolved in November 2011–the biotech’s decision to price its medicine at a slight discount may offer it a significant advantage in the marketing battle to come.  That’s assuming Novo doesn’t quickly follow suit with a price reduction of its own.

• Here’s the WSJ’s take on the news.
• Here’s Amylin’s press release and it’s fourth quarter earnings results.

Image courtesy of flickrer DonkeyHotey via creative commons.