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Monday, November 30, 2015
Drugmakers Plan to Defend Prices by Proving Value of Medicines
Drugmakers Plan to Defend Prices by Proving Value of Medicines
By Kerry Young, CQ Roll Call : Nov. 25, 2015
Executives from the nation’s biggest drugmakers are telling their investors and stock analysts that they will defend the high prices of their products by showing the benefits that they can deliver in maintaining and restoring health.
Proving the medicines can deliver significant results will become “a more significant component of the pricing discussion,” said Dominic Caruso, the chief financial officer for Johnson & Johnson, on a webcast from the Credit Suisse conference earlier this month.
“We think that that’s a good thing,” Caruso said. “Raising the bar for innovation to be associated with meaningful outcomes, we think, will solve the pricing dilemma" for companies able to make strong cases for their products.
Caruso is among the executives from drugmakers with household names and jealously protected reputations that are trying to distance their companies from the backlash sparked largely by smaller firms. The Senate Committee on Aging has said it intends to hold a December hearing on drug prices following an uproar about Turing Pharmaceuticals, led by Martin Shkreli. The panel has asked Turing to explain why it licensed the Daraprim tablet used to fight life-threatening parasitic infections in people with compromised immune systems and then raised the price from $13.50 to $750 a tablet. Daraprim has been approved in the United States since 1953, according to federal records.
Marquee members of the Pharmaceutical Research and Manufacturers of America want the public to see a difference between their companies, which they say make significant investments in the hunt for new medicines, and firms like Turing. J & J, Merck & Co. and Eli Lilly & Co. each spent between $4.7 billion to $8.5 billion on medical research last year.
Merck Chief Executive Kenneth C. Frazier, who also serves as the chairman of PhRMA's board, said he tries to "very hard to distinguish between" what he calls "the innovation-based companies that do take a value approach to pricing" and "a few companies that I think are unrepresentative of the entire industry."
"While there's a lot of noise out there, my experience in Washington is that people do recognize that this industry is important, that these innovations are critical to society," Frazier said on an October call with analysts about quarterly financial results.
Merck's roots as a company date to the 1880s. Its legacy for charitable contributions includes developing and providing for free a drug to combat a parasitic infection that causes an affliction called river blindness. Kenilworth, New Jersey-based Merck now is working on fighting several kinds of cancer by spurring reactions in the immune system, as well as drugs for Alzheimer's disease and diabetes.
“People do recognize that this industry is important, that these innovations are critical to society, that we, for example, need a disease-modifying agent for Alzheimer's,” Frazier said. “People see what these immuno-oncology drugs are doing, and they know that that's just the beginning of what we can do as an industry.”
National Debate
Yet there’s growing anger among cancer patients and physicians against pharmaceutical giants like Merck because of the prices charged for their newer cancer drugs. Merck’s Keytruda cancer drug, which works by acting on the immune system, costs $12,500 a month. That puts it beyond the reach of some patients unless they can get financial assistance. The protests of oncologists are muted in contrast to the widespread public vitriol sparked by Shkreli, but they are more likely to persist and perhaps have a greater influence on the debate ahead on drug prices.
Former Obama administration adviser Ezekiel J. Emanuel, a trained oncologist, sees the December hearing planned by the Senate Committee on Aging plans as only one of the earliest steps Congress will take in looking at the costs of medicines. It’s unlikely that Congress will take any substantive action on drug pricing in this session or even the two-year 115th session that starts in 2017, but the level of public anger makes it likely that the federal government may take action in time, said Emanuel, who is now a professor at the University of Pennsylvania and a senior fellow at the liberal Center for American Progress. Drugmakers in the meanwhile would do well to look for strategies to cool this rage and put some voluntary limits on the costs of their products, he told CQ HealthBeat.
"We're just at the start of a national debate,” Emanuel said in the interview. "If they don't come to the table with something that does keep costs under control, you are going to see a lot more pressure."
Pharmaceutical companies and their advocates have long argued that these firms charge high prices in the United States to cover the risks of drug research. Lilly last month, for example announced that it would discontinue development of the experimental evacetrapib medicine for clogged arteries. It's publicly claiming a loss associated with this drug of as much as $90 million, which will be accounted for in the company's financial results for the last three months of 2015, or the fourth quarter.
For the third quarter, which ended in September, Lilly reported a profit of $800 million and revenue of $4.96 billion. That equals roughly 16 cents of profit for each $1 taken in. The firm spent $1.14 billion on research, and more than $2.8 billion on production, marketing, selling and administrative expenses.
Like his peers at J&J and Merck, Lilly Chief Executive John C. Lechleiter was asked by stock analysts on an October conference call about third-quarter results to weigh in on Washington’s concerns about drug pricing and profits. Lechleiter, a research scientist who climbed the ranks at Lilly, said complaints about drug prices often surface around presidential campaigns, as the industry remains a popular target with politicians.
Like his peers at J&J and Merck, Lechleiter said that he will emphasize the work Lilly is doing in fighting diseases such as diabetes in defending its prices. Pharmaceutical companies have a "great story to tell," said Lechleiter, whose firm brought the first insulin injections to the market in the 1920s and the Prozac antidepressant in the 1980s.
“I’ve never been as optimistic as I am about the chances we have as an industry to really make a difference for patients,” said Leichleiter, who joined Lilly in 1979. “We have got to keep telling the story, keep reminding people.”
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Deal: September tax revenues up 4.6 percent
Deal: September tax revenues up 4.6 percent
Gov. Nathan Deal announced today that Georgia’s net tax collections for September totaled nearly $1.97 billion, an increase of $83.4 million, or 4.6 percent, compared to September 2014. Year-to-date, net tax revenue collections totaled almost $5.13 billion, for an increase of nearly $438.7 million, or 9.4 percent, compared to last year, when net tax revenues totaled $4.69 billion.
House Bill 170, which introduced an array of tax reforms and new tax legislation beginning on July 1, generated transportation revenue of $74.3 million in September. As a result, the total revenue for September 2015 increased 8.7 percent over September 2014.
The changes below within the following tax categories contribute to September’s overall net tax revenue increase:
Individual Income Tax: Individual Income Tax collections for September totaled roughly $1.01 billion, up from a total of nearly $949.9 million in September 2014, for an increase of $62.3 million, or 6.6 percent.
Individual Income Tax: Individual Income Tax collections for September totaled roughly $1.01 billion, up from a total of nearly $949.9 million in September 2014, for an increase of $62.3 million, or 6.6 percent.
The following notable components within Individual Income Tax combine for the net increase:
• Individual Income Tax Withholding payments were up approximately $48.7 million, or 6.4 percent.
• Individual Income Tax Withholding payments were up approximately $48.7 million, or 6.4 percent.
• Income Tax refunds, totaling $46.9 million during the month, were up $15.2 million, or 48.1 percent.
• All other Individual Tax categories, including Estimated and Return payments, were up a combined $28.8 million.
Sales and Use Tax: Gross Sales Tax collections deposited during the month totaled $865.2 million, which was an increase of $7.8 million, or 0.9 percent, over the previous year. Net Sales Tax revenue decreased $1.5 million, or -0.3 percent, compared to September 2014, when net sales tax totaled $445.6 million. The adjusted distribution of sales tax to local governments totaled $413.8 million, for an increase of $7.5 million, or 1.9 percent, compared to last year. Lastly, sales tax refunds increased by $1.7 million compared to September 2014.
Corporate Income Tax: Corporate Income Tax collections for September increased by $2.5 million, or 1.4 percent, compared to September 2014, when net Corporate Tax revenues totaled $184.6 million.
The following notable components within Corporate Income Tax make up the net increase:
• Corporate Tax refunds issued (net of voids) were up $3.9 million, or 25.4 percent.
• Corporate Tax refunds issued (net of voids) were up $3.9 million, or 25.4 percent.
• Corporate Income Tax Return payments were up nearly $4.1 million, or 30.1 percent.
• All other Corporate Tax categories, including Estimated and Net Worth payments, increased $2.3 million.
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Should Medicaid Recipients Have to Work?
Should Medicaid Recipients Have to Work?
- September 30, 2015
- By Michael Ollove : Stateline
If Arizona gets its way, its able-bodied, low-income adults will face the toughest requirements in the country to receive health care coverage through Medicaid.
Most of the those Medicaid recipients, and new applicants, would have to have a job, be looking for one or be in job training to qualify for the joint federal-state program for the poor. They would have to contribute their own money to health savings accounts, which they could tap into only if they met work requirements or engaged in certain types of healthy behavior, such as completing wellness physical exams or participating in smoking cessation classes. And most recipients would be limited to just five years of coverage as adults.
Despite its conservative bent, Arizona already has expanded Medicaid under the Affordable Care Act. In October, however, Republican Gov. Doug Ducey will ask the federal agency that oversees Medicaid to approve changes in the state’s program that are designed to promote healthy behavior in a traditionally unhealthy population, while encouraging people to become less economically dependent on the state.
“The governor wants to help them move from a place of dependence on the state to independence and to be able to take care of their own health needs,” said Christina Corieri, the governor’s health care adviser. (The proposals would not apply to several categories of beneficiaries, including children, pregnant women, the disabled and the elderly.)
Some of Arizona’s proposals have been made in other states, and the federal government has signed off on them. It has rejected work requirements, however, and has never allowed lifetime limits on eligibility.
The work requirement and lifetime limit originated in legislation passed by the Arizona Legislature earlier this year. The law requires the governor to submit the same proposals every year, apparently in the hope that a future Republican presidential administration would look at them more favorably.
Critics say denying health care to people who don’t meet the new standards punishes them for being poor.
“I think in some of [the proposals], we see a punitive strain and an assumption that, left to themselves, people will make bad choices and that we the government will make better choices for them,” said Joan Alker, executive director of the Center for Children and Families at Georgetown University.
The Center on Budget and Policy Priorities, a nonpartisan research organization in Washington, D.C., notes that 60 percent of Medicaid recipients live in a family with at least one full- or part-time worker.
Health Savings Accounts
Though Arizona passed its Medicaid expansion in 2013, more recently a number of states have used expansion as an opportunity to gain greater flexibility from the federal Centers for Medicare and Medicaid Services (CMS) in how they administer the program.
For example, CMS has allowed Arkansas, Indiana and Michigan to require or encourage beneficiaries to contribute to tax-advantaged HSAs. Beneficiaries can use the accounts toward copays—the portion of their medical bills not paid by Medicaid—or for health-related services not covered by Medicaid, such as dental, vision or chiropractic care. The idea is to force enrollees to build their own safety net to help cover their health care costs.
In Arizona, beneficiaries would have to contribute up to 2 percent of their annual household income to their HSAs.
But only beneficiaries who meet Arizona’s work requirements or health behavior goals—such as completing well-patient visits or adhering to regimens for patients with chronic conditions—would be permitted to access their HSAs. And beneficiaries earning above the poverty level—$11,770 for an individual—who failed to make their HSA contributions could be suspended from Medicaid benefits for a period of six months; those earning less than the poverty level would be deemed to owe the state a debt.
Other states have received permission to impose similar penalties. For example, Indiana charges a premium to all Medicaid recipients and can cancel the enrollment of those making more than the poverty level for six months if they fail to make their premium payments. The poorest Indiana beneficiaries do not owe a debt to the state if they don’t pay their premiums, but they lose eligibility for enhanced medical services, such as vision or dental care.
Arkansas imposes a debt on the poorest beneficiaries who do not make payments into their HSAs and it can deny Medicaid services to those making above the poverty level for failure to do so.
Arizona, which has 1.7 million Medicaid beneficiaries, also isn’t the first state to try to encourage beneficiaries to adopt healthy behaviors. Several states—such as Indiana, Iowa, Michigan, Minnesota and New York—include what are called healthy behavior incentives in their Medicaid programs, to nudge people to lose weight or stop using tobacco.
In Iowa, for instance, participants are asked to have a wellness examination once a year. People who meet their health targets in Indiana, Iowa and Michigan will see their premiums or HSA payments reduced or eliminated altogether.
Minnesota gives cash or debit cards to beneficiaries with pre-diabetes who participate in a YMCA diabetes prevention program. In New York, beneficiaries can receive cash or lottery tickets for keeping doctor’s appointments or filling prescriptions for nicotine replacement therapy or drugs to manage high blood pressure or diabetes.
If approved by CMS, Arizona’s Medicaid plan would be the first to use deterrents, rather than incentives, to push healthy habits. Those who don’t meet established goals could be shut out from access to their HSAs. (They’d also forgo the chance to reduce their mandatory HSA contributions in the future.)
Working for Coverage
Arizona is asking permission for two provisions that CMS has not granted to any other state: establishing employment requirements and imposing a lifetime limit on Medicaid coverage.
Indiana proposed a work requirement, but it was shot down by CMS in January. The agency said that while states may promote employment through state programs operated outside of Medicaid, they could not do so under the Medicaid program.
Instead of being able to impose work requirements, Indiana and New Hampshire have had to settle for referring Medicaid applicants to jobs and job training as a requirement for receiving coverage.
Several health advocacy organizations in Arizona object to policies to exclude otherwise eligible people from Medicaid, which they say are contrary to the program’s intent.
“We see some of these proposals as inconsistent with the Medicaid law, which is to have a safety-net program to provide access to health care to a population that doesn’t otherwise have that,” said Tara McCollum Plese, a senior director with the Arizona Alliance for Community Health Centers. “To take these people out of Medicaid at a time they still need health care services is not prudent.”
Some national groups, such as Families USA, agree.
“Medicaid is designed to be an affordable option for people and putting a time limit on it is poor public policy in keeping people covered and healthy,” said Dee Mahan, Medicaid director for Families USA, which advocates for affordable health care. “Lots of people are working at low-wage jobs, and at low-wage jobs on a part-time basis, and their incomes are not necessarily going to increase to the point where they can get out of Medicaid.”
Others question the effectiveness of some restrictions. The Urban Institute, a nonpartisan policy research organization, found that HSAs have high administrative costs. It also said that wellness programs have not been shown to be effective.
On the other side, Americans for Prosperity, the conservative advocacy organization co-founded by billionaires Charles and David Koch, strongly favors the Arizona proposals, particularly the work requirement.
“It reduces dependency on government and encourages able-bodied folks to work,” said Boaz Witbeck, the organization’s Arizona policy analyst.
After Arizona submits its proposals to CMS, there will be a monthslong review process, during which there will be room for negotiation between the state and the federal agency.
When then Gov. Jan Brewer, a Republican, won approval for Medicaid expansion in 2013, Arizona’s plan did not include these provisions. The current governor is not threatening to pull back from expanded Medicaid coverage if the federal government rebuffs the state’s proposals, according to Dan Scarpinato, his communications deputy.
“The focus right now is on getting approval on this waiver, and we are hopeful,” Scarpinato said.
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