Wholesale Drug Price Transparency Laws Won’t Lower Costs

 

Price transparency is an enormous benefit to consumers in retail markets. Consumers who make the effort to shop around often discover drug prices can vary from one pharmacy to the next. Retail drug prices are mostly transparent; patients generally encounter few problems when calling a pharmacy to ask what a given drug costs on their health plan. However, with the possible exception of buying an automobile, wholesale price transparency provides little benefit to consumers. The reason price transparency serves almost no purpose for consumers in wholesale markets is because consumers don’t buy from wholesale markets!

Transparency Tools Work — but Require Appropriate Incentives

 

A recent New York Times article by Reed Abelson blames the slow adoption of online transparency tools on “health care’s complexity.” Abelson argues… “It is impossible to know, for example, whether a dermatologist who costs twice as much as another can more successfully diagnose skin cancer.” The article briefly mentions the case study of two large employers who found online transparency tools did not reduce consumer spending.

Efforts to Boost Generic Competition are Bearing Fruit

 

The U.S. Food and Drug Administration (FDA) has a backlog of nearly 4,000 generic drug applications – each of which currently requires more than two years to approve. Over the past few years the FDA typically approved between 400 and 500 generic drugs a year. Under pressure from Congress, the agency hired 1,000 new employees and managed to approve (or tentatively approve) 99 drugs in December alone.  That is more than in any other single month.  The FDA has taken a lot of heat for the backlog. But the reality is actually more positive than many people realize. The primary reason for the backlog is competition; generic drug makers have filed an average of more than 1,000 abbreviated new drug applications (ANDAs) a year for the past four years. That is about one-third more than what the FDA expected. That is good news: Research finds that the average price of a generic drug relative to its brand prior to generic competition is inversely correlated to the number of competing firms producing a generic version. Basically, the more the merrier!

The Real Lesson of John Oliver’s Medical Debt Forgiveness Stunt

 

money-burdenLate-night TV host John Oliver recently caused a stir by attacking debt collectors in a clever way. He set up his own collection agency, bought $15 million of medical bad debt, and then forgave it all. This was all done on TV, to the cheers of his audience.

Oliver claimed to have outdone Oprah Winfrey, who once gave a car to each person in her studio audience. Oprah’s car give-away cost $8 million, just over half of Oliver’s. So, Oliver wins the charitable ego competition, right?

Nope. Oliver did not forgive $15 million of medical debt. That was the face amount of the accounts receivable. He bought them for about half a cent on the dollar, or about $60,000 total. The lesson of Oliver’s stunt is that medical accounts receivable are very hard to collect. That is why they trade so cheaply in the secondary debt market.

Obamacare Slightly Increased Short-Term Uninsured

 

NHISThe best measurement of people who lack health insurance, the National Health Interview Survey published by the Centers for Disease Control and Prevention (CDC), has released early estimates of health insurance for all fifty states and the District of Columbia in 2015. There are two things to note.

Reforming Medicare Part D to Improve Access to Medicines

 

Variety of Medicine in Pill Bottles(A version of this Health Alert was published by Forbes.)

Specialty drugs are typically high-cost prescription drugs used to treat complex chronic and/or life threatening conditions. Many do not have substitutes available at lower costs.  Over the last decade, the Medicare Part D benefit has imposed high out-of-pocket costs as a way to control costs of specialty drugs. This is causing many patients not to fill prescriptions. Some patients may be adding costs to the system by getting drugs more expensively by injection in doctors’ offices, where they are covered by Medicare supplemental insurance.

QSS: Strong But Inconsistent Health Services Revenue Growth

 

Census2This morning’s Quarterly Services Survey from the Census Department showed good growth in revenues for health services, but it was inconsistent within the industry. Overall, first quarter revenue grew 0.7 percent from the fourth quarter and 5.2 percent from the first quarter of 2015 (Table I).

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A Bogus Solution for High Drug Costs

 

Americans’ prescription drug bills are on the rise. Total drug spending increased by nearly one-quarter in the past couple years. Much of that increase is on high-tech, specialty drugs — such as those used to treat cancer, hepatitis, rheumatoid arthritis and multiple sclerosis. Drugs whose patents have not yet expired are sometimes very expensive; especially those recently approved. By contrast, most of the drugs Americans take are actually cheap generic drugs. Generics are cheap because they are no longer protected by patents and different manufacturers can compete on price. Consumers opt for a generic drug about 88 percent of the time when filling a prescription. Nonetheless, policymakers have a solution; but it’s the wrong one.

Obamacare 2016 Average Rate Hike 8 Percent

 

HealthcaredotgovWe are already anticipating double-digit premium hikes for Obamacare plans in 2017, based on insurance filings in a sufficient number of states to show the trend.

Obamacare’s defenders point out two limits to these leading indicators. First, they are requested, not approved rate hikes. Second, Obamacare beneficiaries can trade down. A person whose plan hikes premiums double digits can switch to a plan with a lesser increase. Both criticisms are fair.

Nevertheless, now that the dust has settled on 2016, and all the data on this year’s enrollment analyzed, we can confirm from two pro-Obamacare sources that premiums in Obamacare’s exchange plans increased by an average of eight percent from 2015 to 2016. General measures of price changes, such as Consumer Price Inflation, were effectively flat over the period. That is, the eight percent Obamacare premium hike was a real, not nominal, price hike.

Eight Thousand Non-Health Jobs Lost in May

 

BLSThe true scope of this morning’s miserable jobs report is disguised by the headline figure of 38,000 jobs gained. In fact, health services added 46,000 jobs while civilian non-health, non-farm employment dropped eight thousand (Table I). The warping of our economy towards the government-controlled health sector has reached the tipping point I have suggested for months.

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