Weekend update

The FEHBlog is back from a relaxing vacation just as Congress headed out of DC for its Fourth of July recess which will end on July 7.  Here is a link to last week's Congressional news.

Tomorrow is the last day of the current U.S. Supreme Court term. The Court has two more decisions to release before heading out on its summer vacation. In anticipation of the Hobby Lobby decision due tomorrow,  HHS on Friday released a report which includes the following findings

IMS estimated that the total number of prescriptions for oral contraceptives with no co-pay increased by more than four-fold from 6.8 million in 2012 to 31.1 million in 2013 (an increase of 24.4 million) in part due to the Affordable Care Act’s zero-cost sharing provisions for certain preventive services.

This increase in oral contraceptive prescriptions dispensed with no co-pay contributed to a reduction in out-of-pocket costs estimated by IMS at $483.3 million that would have been spent in 2013 had women bought the same mix of oral contraceptives as those purchased in 2012. 

But few things in life are free. The half billion dollars were not avoided. Those costs were shifted onto other insureds. The ACA's reforms principally add (25 million prescriptions) and shift costs (here half a billion dollars) from one group to others. The law reflects political decisions, but it does not hold down health care costs. 

The Washington Post and the Wall Street Journal reported this weekend on Anne Wojcicki, the estranged wife of Google's CEO who runs a DNA screening company for John and Jane Doe called 23andme. House Energy and Commerce Committee Chairman Fred Upton and President Obama hosted Ms. Wojcicki a different events here in DC last week. Some months ago, the Food and Drug Administration shut down her company's consumer operation for lack of testing on her company's consumer product, which TIME magazine trumpeted a few years ago. According to the article, Ms. Wojcicki thinks that this is just a disconnect between advanced technology and bureaucracy. Her observations on the health care system are worth reading.  

Also on the technology front, the New York Times reports today on the University of Pittsburgh Medical Center's health insurance arm, which participates in the FEHBP.  UPMC is trying to apply consumer shopping data to its member analytics.  

The Pittsburgh health plan, for instance, has developed prediction models that analyze data like patient claims, prescriptions and census records to determine which members are likely to use the most emergency and urgent care, which can be expensive. Data sets of past health care consumption are fairly standard tools for predicting future use of health services.

But the insurer recently bolstered its forecasting models with details on members’ household incomes, education levels, marital status, race or ethnicity, number of children at home, number of cars and so on. One of the sources for the consumer data U.P.M.C. used was Acxiom, a marketing analytics company that obtains consumers’ information from both public records and private sources.

With the addition of these household details, the insurer turned up a few unexpected correlations: Mail-order shoppers and Internet users, for example, were likelier than some other members to use more emergency services.

Of course, buying furniture through, say, the Ikea catalog is unlikely to send you to the emergency-room. But it could be a proxy for other factors that do have a bearing on whether you seek urgent care, says Pamela Peele, the chief analytics officer for the U.P.M.C. insurance services division. A hypothetical patient might be a catalog shopper, for instance, because he or she is homebound or doesn’t have access to transportation.

 What next? 

TGIF

It has been Friday for the FEHBlog all week as he has been vacationing on the Outer Banks. In a surprising development, Businessweek reports that the government recalculated the first quarter gross domestic product at a 2.9% decline. Two quarterly GDP declines in a row is a recession but the experts expect the 2nd quarter GDP to grow rather than decline again. According to this article,  

The big surprise in the first quarter was the dip in health-care spending. The U.S. spent $6.4 billion less on health care in the first quarter than in the last quarter of 2013. Government statisticians initially forecast a 9.9 percent increase in health-care spending—and what we got was a 1.4 percent decline. Considering all the millions of previously uninsured people who are gaining access to health insurance under the Affordable Care Act, how can they be shrinking so dramatically?

Health-care costs overall have been increasing more slowly in recent years compared with the pace before the 2007-09 recession. Slow growth in the price of health-care services combined with a decline in utilization—the amount of health care people consumed—in the first quarter. So lower costs and greater access translated into lower consumption. That’s a head-scratcher.

Heartily agreed. 

Speaking of dollars, EBRI released its annual health care savings account ("HSA") survey as we mark the first decade of the HSA / high deductible health plan pairing. Among other findings are these --

Starting from scratch a decade ago, enrollment in HSA-eligible health plans is estimated to range from 15.5 mil-lion to 20.4 million policyholders and their dependents, and it has also been estimated that there are 10.7 mil-lion accounts holding $19.3 billion in assets as of Dec. 31, 2013. Seventy percent of HSAs were opened since 2011.

The average HSA balance at the end of 2013 was $1,766, up from $1,280 at the beginning of the year. Average account balances increased with the age of the owner of the account. Account balances averaged $697 for owners under age 25 and $4,460 for owners ages 65 and older.

Reuters reports that "People who visit their primary care doctors shortly after high-risk surgeries are less likely to end up back in the hospital during the next month, according to a new study. Visiting a primary care doctor was particularly beneficial for the high-risk patients who experienced complications during their time in the hospital for surgery, though it made little difference for people without complications." Interesting.

Finally, here's an interesting survey report from Becker's Hospital Review for customer service types --

[T]he majority (54 percent) of insured consumers are either sometimes or always confused by their medical bills.
The survey made several findings concerning price transparency. The survey found 63 percent of survey respondents want to know the full cost of care, including their insurance company's portion, while 35 percent said they only cared about their direct medical costs. The survey also found 62 percent of survey respondents were either sometimes or always surprised by their out-of-pocket medical costs.
Although 80 percent of respondents said receiving pre-treatment cost estimates and pre-treatment insurance coverage estimates would be helpful in managing medical costs, only about 25 percent of the respondents had received pre-treatment cost estimates from providers.

Mid-week update

It's another lovely day on the Outer Banks of North Carolina. The Federal Times reports that today the House Appropriations Committee will consider the Financial Services and General Government spending bill that funds the FEHBP.  Govexec.com reports that signs point toward a 1% pay raise for federal employees next year. The FEHBlog took a look at the bill under consideration. He found that it includes the traditional FEHBP related provisions -- a prohibition against full Cost Accounting Standards coverage, a contraception coverage mandate (except for faith based plans), and an abortion coverage restriction.

The Federal Times reports that OPM Director Katherine Archuleta recently issued a memorandum encouraging agencies to discuss available mental health resources with their employees. Those resources include employee assistance programs and of course FEHB plans. It would be nice if OPM arranged for better communication between the EAPs and the FEHB plans, in the FEHBlog's opinion.

Modern Healthcare featured a fascinating report on hospital profit margins.

Modern Healthcare's analysis found that the average operating margin in 2013 was 3.1%, down from 3.6% in 2012 based on data available for 179 health systems, which included acute-care, post-acute care, rehabilitation as well as specialty hospital groups and some stand-alone hospitals. A total of 61.3% of organizations in Modern Healthcare's analysis saw their operating margins deteriorate over the previous year.

One tool that hospitals use to boost their profit margins is providing for their own doctors known as hospitalists to care for their acute care patients. Bloomberg reports that the Justice Department recently intervened in a False Claims Act lawsuit against a hospitalist company based on an upcoding charge.  But the FEHBlog has been thinking about hospitalists since his own (trusted) internist told him that hospitals frequently do not tell him about his patient's admission in order to allow their hospitalists to care for his patients while confined to the hospital. These are often patients with chronic illnesses that my doctor regularly sees. That lack of coordination is appalling to the FEHBlog.

Weekend update

The FEHBlog is on vacation this week on the Outer Banks of North Carolina. But Congress is in session, and the Supreme Court has 11 more decisions to issue before it can go on its summer vacation. Decision days are today, Wednesday and Thursday this week according to the Scotusblog.

The FEHBlog was disappointed to conclude that the Hill has stopped publishing its next week in Congress report on the Floor Action blog. The FEHBlog did some online research and found this helpful The Week in Congress website as a replacement. There's a lot of attention to appropriations right now.

The New York Times had an article Saturday on how big PBMs like CVS Caremark and Express Scripts are pressing prescription drug manufacturers to bargain over prices or "be banned" from their formularies.   As you can tell from the examples of banned and approved drugs, the PBMs can attempt to excercise this leverage when there is more than one prescription drug available to treat a particular condition. In the most recent call letter for benefit and rate proposals, OPM gave FEHB plan carriers the green light to use such managed formularies in their plans beginning in 2016.

The ACA regulators have been pushing health plans to include more information on their explanations of benefits, e.g., diagnoses. Here's a link to a story about such disclosure backfiring on the plan.

TGIF

Tomorrow is the official first day of summer so today kicks off our first real summer weekend.

So change is in the air. Fierce Health Payer reports from the ACO Summit that

As many as 50 percent of [healthcare] delivery systems say they will be in the insurance business in the coming years.  Despite these new entrants into the market, WellPoint Chief Medical Officer Samuel Nussbaum, M.D., said payers will continue to exist, but in a different form due to the transformation of the healthcare industry. They won't go off the map completely as there's still a gap in providers' ability to manage population health, have the necessary data analytics and coordinate comprehensive care, he said.  So what could payers look like in the blurred future? Aetna pointed to its strategy of virtual integration. "You won't see Aetna buying groups or hospital systems," said Joseph Zubretsky, senior executive vice president of national businesses at Aetna. Instead, the insurer will partner with providers in collaborations.

ABC News reports on a new type of FDA authorized cancer research technique that is akin to speed dating. According to that report

A bold new way to test cancer drugs started Monday in hundreds of hospitals around the U.S. In a medical version of speed dating, doctors will sort through multiple experimental drugs and match patients to the one most likely to succeed based on each person's unique tumor gene profile.
It's a first-of-a-kind experiment that brings together five drug companies, the government, private foundations and advocacy groups. The idea came from the federal Food and Drug Administration, which has agreed to consider approving new medicines based on results from the study.
Its goal is to speed new treatments to market and give seriously ill patients more chances to find something that will help. Instead of being tested for individual genes and trying to qualify for separate clinical trials testing single drugs, patients can enroll in this umbrella study, get full gene testing and have access to many options at once.
The study, called Lung-MAP, is for advanced cases of a common, hard-to-treat form of lung cancer — squamous cell. Plans for similar studies for breast and colon cancer are in the works.

In a man bites dog story (at least from the FEHBlog's perspective), Kaiser Health News is reporting that the Public Citizen consumer advocacy group is urging hospitals to stop promoting "low-cost screenings for heart disease and stroke risk, saying the promotions are “unethical” and the exams are more likely to do harm than good." The article explains

The programs are advertised on websites, in newspapers or through direct mail. Screenings — often performed in specially equipped buses — include  ultrasound tests for blockages of the carotid artery and weak spots in the abdominal aorta, a resting electrocardiogram, or EKG, a test of elasticity of the arteries and another for blockages in arteries serving the legs, a condition called peripheral arterial disease.
What the promotions don’t say, generally, is that most of the tests are not recommended for people without risk factors or symptoms.  Widespread screening of people without the risk factors could lead to misleading results and potentially even unnecessary surgery. Other medical experts warn that the tests could needlessly raise health-care spending.

If health plans must align their benefits with US Preventive Health Task Force Services recommendations, why shouldn't providers similarly align their service offerings?

Midweek tidbits

Becker's Hospital Review reports on a June 2014 Accountable Care Organization update by Leavitt Partners. According to that update, Leavitt Partners has tracked 626 ACO's across the U.S.  329 have government contracts; 210 have commercial contracts, and 74 have both. The total number of ACO covered lives is now over 20 million. 

EHR Intelligence has an interesting article about pay for performance reimbursement structures in health care. The article is based on an interview with Michael Dermer, Chief Incentive Officer at Welltok. According to Mr. Dermer

Every single health plan has some type of reward and incentive program.  I would argue that if a health plan doesn’t have a significant health and wellness incentive program sometime during the year 2015, they won’t be able to compete. When somebody goes to buy health insurance on a state exchange, for example, it will be very hard for a health plan to win business if they don’t have a robust reward program.
It’s going to start to look just like your credit card, airline, and hotel loyalty programs.  It’s really grown and evolved.  The thing about incentives is that you don’t write the check until somebody does what you want them to do.  So, as long as you align it to the right behaviors, it’s got almost a built-in return.

Health Data Management reports about the increasing success of CAQH's EFT and ERA enrollment program that allows providers to enroll in electronic payments with multiple payers at no cost, eliminating redundant paper forms and saving administrative time and costs.

Aetna and Cigna were the original participating insurers during 2013. In January, HIPAA operating rules requiring payers to support EFT and ERA went into effect and multiple insurers have joined during the first six months of 2014. They include WellPoint and 14 affiliates: Unicare, Empire Blue Cross Blue Shield, and Anthem plans in Colorado, Connecticut, Indiana, Kentucky, Maine, Nevada, New Hampshire, Ohio, Virginia, California, Missouri and Wisconsin. Additional insurers now participating include Blue Cross Blue Shield of Georgia, BlueCross BlueShield of Tennessee, CDPHP, CareCentrix, MAPFRE and Midwest Health Plan. Other payers committed to join in coming months are Kaiser Permanente, Humana, Health Plan of San Mateo and First Community Health Plan.

Bravo!

Last week, HHS sent its annual HIPAA Privacy and Security compliance reports to Congress. In calendar year 2012 over half of the 222 HIPAA unsecured protected health information breaches reported to HHS resulted from theft.  68% of the breaches were reported by health care providers. In contrast, 7% were reported by health plans.  The HHS breach report from which the FEHBlog took these statistics is worth a glance. 

The Drug Channels blog analyzes 2013 trend reports from the four largest PBMs (Express Scripts, CVS Caremark, Prime Therapeutics, and Catamaran) here. 

Finally Kaiser Health News reports that Cambria Health Systems, a northwestern U.S. Blues organization, is revving up a "huge" palliative care program. "The company is going to start paying for things not typically reimbursed by other insurance companies including home health aides and advanced care planning counseling. One of the larger initiatives is training physicians and caregivers in how to have appropriate conversations about end-of-life care." 

Weekend Update

Happy Father's Day. The House and Senate are in session this week, and the U.S. Supreme Court has seventeen more decisions to announce before the justices can go on their summer vacations.

On Friday, OPM released an FEHBP carrier letter explaining that the agency was removing the Program wide exclusion of gender reassignment treatment coverage costs for 2015. This action comes on the heels of a recent Medicare coverage decision that was reported in the Washington Post. Like the Medicare decision, the OPM carrier letter allows carriers to make their own coverage decisions. Advocate perspectives are presented in this Washington Blade article.

The Federal Times offers a U.S. map displaying states winners and losers in federal employment over the past three years during which the federal government shedded 60,000 jobs.

The New York Times included a couple of interesting health care mergers and acquisition articles this morning. The more interesting of the two concerned Allergan the company that sells Botox. The article explains how Allergan's CEO built the brand. On the M&A front, the article explains that

Since April, Allergan has been trying to fend off a takeover attempt by Valeant Pharmaceuticals International, a serial acquirer of specialty drug makers. Valeant, based near Montreal, has partnered with William A. Ackman, an investor whose hedge fund holds about a 10 percent stake in Allergan. If their takeover bid is successful, Valeant intends to increase earnings by paying taxes in Valeant’s home country, Canada, where corporate rates are significantly lower. It also plans to cut jobs and Allergan’s research budget.

The other article concerns Medtronic, a medical device company, which is reportedly close to acquiring a competitor Covedien for over $45 billion.

The potential acquisition, which would most likely be structured as a so-called inversion, would also relocate Medtronic to Covidien’s home in Ireland. Such a move would lower Medtronic’s corporate taxes since Ireland’s tax rate is substantially lower than the one in the United States.

TGIF

Fierce Health Payer reports on an interesting speech from Prime Therapeutics chief customer experience officer, Ingrid Lindberg. Ms. Lindberg advised insurers to improve the customer experience by

focus[ing] on doing a good job at insurers' core business. "You have to meet peoples' basic needs," Lindberg explained. For insurers, that means they can't start trying to delight consumers if they're not even paying claims in a timely manner. "Just pay the claim," she said, and then insurers can enhance the consumer experience after they meet that baseline.

For example, instead of simply denying a claim or request from a consumer for a medical service, they could suggest another possibility. They could say, "'You can have this instead' or 'Did you know this service could save you money?'" Lindberg said. The most important part is that insurers must "remove 'no' from the vernacular."

Ms. Lindberg  also "has banned all acronyms, industry jargon and anything over a 5th-grade reading level from all internal and external communications at Prime Therapeutics."

AIS Health discussed on a recent Magellan Rx annual drug trend report  Magellan Rx notes that injectable drugs are increasingly being administered at hospitals rather than at doctors offices or other lower priced facilities.

Of the top 10 medical benefit drugs based on spend, seven have seen an increase in hospital administration between 2009 and 2012, while two have seen decreases and one has remained the same. The No. 1 drug, Remicade (infliximab), shifted from a 23% hospital infusion rate in 2009 to a 32% rate in 2012. During that four-year period, Remicade’s total per-claim cost rose from $3,711 to $4,389. Herceptin (trastuzumab), the No. 7 drug, saw its hospital administration more than double, from 23% to 49%, with the cost per claim rising from $2,562 to $3,301. Five drugs — Neulasta (pegfilgrastim), Rituxan (rituximab), Eloxatin (oxaliplatin), Herceptin and Alimta (pemetrexed) — experienced double-digit increases.

AIS explains that

As a result, Magellan Rx Management recommends a variety of strategies when it comes to managing the utilization of hospital outpatient facilities for medical pharmacy products. Some of the tactics it has developed with its medical pharmacy customers are to:

•     Change reimbursement in the hospital outpatient facility to be based on a drug pricing benchmark, such as average sales price or average wholesale price. 
•     Change benefit design so that the member’s out-of-pocket incentive aligns with the plan’s network strategy.
•     Preserve office-based community providers through shared savings or innovative payment models.
•     Include hospital outpatient facilities in utilization management programs and enforce the site of service policy upfront during the drug prior authorization process to assign the physician office or home as the rendering provider.
•     Implement a program to help members understand their benefits by site of service and choose a lower cost, convenient site for their injectable administration.

Makes sense to the FEHBlog.

Finally speaking of drugs the WSJ's Pharmalot blog reports that the State of Oregon is trying to go slow on covering the Solvadi hepatitis C pill.  The article notes that 

In this year’s first quarter, for instance, the drug generated $2.3 billion in revenue. Wall Street analysts say prescriptions have slowed more recently because they expect Gilead to launch a more potent, all-oral combination treatment this fall and physicians have, for now, delayed prescribing to new patients, a practice known as warehousing. * * * 

Meanwhile, several other drug makers are racing to develop their own treatments – AbbVie, Bristol-Myers Squibb, Johnson & Johnson and Merck, which earlier this week agreed to pay $3.85 billion for Idenix Pharmaceuticals in hopes of catching up to Gilead. But whether any of these companies will attempt to trigger a price war remains to be seen.

Time will tell.

Mid-week update

Aon Hewitt the large actuarial consulting firm, reports today that based on its survey "of more than 1,230 employers covering more than 10 million employees":

In the next three-to-five years, more than 60 percent of employers plan to "gate" employees to richer designs, where employees are required to complete a "task" to access richer design options. About one in five employers gate their employees today.

"Gating strategies are becoming an increasingly attractive incentive technique among employers as they look to improve the health of their employee populations," said Jim Winkler, chief innovation officer of Health & Benefits at Aon Hewitt. "For example, employers may offer a basic high-deductible plan to their entire workforce, but make a richer PPO option available to those employees who complete a health risk questionnaire or biometric screening."

In addition, 68 percent of employers plan to adopt reference-based pricing—where employers set a pricing cap on benefits for certain medical services for which wide cost variation exists with no discernible differentiation in quality. Just 10 percent of employers have adopted reference-based pricing as a health tactic today.

Fascinating. The FEHBlog is keen on reference based pricing.

Express Scripts, the large prescription benefits manager, reports on a study finding that "Forty percent of U.S. narcotic prescriptions in 2011-2012 were written by only five percent of opioid prescribers." Now that's troubling. Here's a link to Express Scrpt's web site providing insights on narcotic use and abuse in the United States.

In that regard, the Wall Street Journal has a new blog on the prescription drug industry called Pharmalot.

Finally Government Health IT reports that "Personal wellness tracking devices—called wearables—sit directly at the center of two powerful trends that are transforming the healthcare industry: the consumerization of healthcare and explosive data proliferation."

While the details—such as which wearable is “cool” this year—change quickly, the overall movement towards empowered, informed consumers is not likely to end any time soon, according to a whitepaper on healthcare data analytics. Healthcare providers will continue looking to data for the answer to serve those patients’ needs most effectively.  

Health plans too.

Weekend Update

Both Houses of Congress are in session this week, and the Supreme Court is poised to issue the most significant decisions of its current term which will be completed at the end of this month. None of those decisions as far as the FEHBlog knows will have a significant impact on the FEHBP. Nevertheless he will be checking in with scotusblog. 

The St. Louis Business Journal notes that Humana is considering the sale of its prescription benefits management business valued at $7.1 billion and Express Scripts, which is based in that fair city, would be a likely bidder.

The Motley Fool reports that Aetna, Cigna, and United Healthcare are jumping on the smartphone app revolution in order to connect to their customers. Smart move.

Finally, Kaiser Health News reports that surgeons are not yet playing a major role in accountable care organizations.

That’s according to a case study and survey published this week in the journal Health Affairs. The authors conducted case studies at four ACOs in 2012 and sent a survey to all 59 Medicare ACOs in the first year of the program, with 30 responding.
“I’m a surgeon, so I was really curious as this model probably continues to gain steam, what’s this going to mean for me?” said lead author James M. Dupree, a urologist at Baylor College of Medicine. “We found that thus far, very little of the strategic attention seemed to be devoted to surgical care and the integration of surgeons into the ACO.”

That's odd.  The article explains

“Dermatologists, endocrinologists, all the different specialties want to know how they fit in, but generally ACOs are not prioritizing the specialties. They’re focusing on the lowest hanging fruit, and generally the specialties aren’t the lowest hanging fruit.” It’s easier to focus first on things like reducing expensive hospital admissions by managing the care of patients with chronic illnesses, including diabetes.
Another reason, [Dr. Dupree] ys, is that it’s hard for an ACO to figure out how to share savings with specialists like surgeons. With a primary care physician, it’s relatively easy to figure out their share of the ACO’s savings by factoring in the number of patients they see. “It’s harder with specialists who may only see a handful of patients a week,” he said

Rome of course was not built in a day.

TGIF

The Washington Post reports that the Senate confirmed Sylvia Burwell as the new HHS Secretary. Ms. Burwell will be sworn into her position on Monday at which time Kathleen Sebelius's resignation will be effective. 

One of the first items for Ms. Burwell is to consider is a June 4, 2014, letter from her advisory group WEDI urging an the adoption of an industry roadmap for implementing the ICD-10 code set now set for October 1, 2015. Heallthcare Data Management reports that

Last week, the Centers for Medicare and Medicaid Services announced that the partial code freeze for ICD-9-CM and ICD-10 will continue through October 1, 2015. And, last month, CMS canceled limited end-to-end testing that had been scheduled for late July, when a small sample group of providers were to have been given the opportunity to participate in end-to-end testing with Medicare Administrative Contractors and the Common Electronic Data Interchange contractor.
"We believe the canceling of the limited July 'end-to-end' testing sent the wrong message to the industry. Rather than delay this critical form of testing until 2015, we recommend expediting and expanding this form of trading partner testing," states [WEDI Chairman Jim] Daley.

Agreed.

Sun Life Financial, an insurance company, released yesterday an interesting report on its health plan stop loss claims experience.

The U.S. business group of Sun Life Financial, Inc. (NYSE: SLF, TSX: SLF) today reported a tenfold rise in the number of individual $1 million or more catastrophic claims paid by the company over the past four years. These findings are based on a study released today by Sun Life Financial U.S., the largest independent writer of stop-loss insurance in the U.S., with $915 million of in-force premium as of December 31, 2013.

The most significant rise related to complications surrounding dependent infants, including premature births, failure to thrive newborns and congenital anomalies, according to Sun Life. While there was no single explicit driver for the increase in these particular complications, Sun Life continues to monitor the underlying business, specific claims, and potential trends related to health care costs and demographics. The Company also notes that these diagnoses often stemmed from normal pregnancies that unexpectedly turned into catastrophic claims, reinforcing the need for protection against "unpredictable" catastrophic claims.

Agreed again.

Mid-week update

The Hill reports that the Senate will vote today on whether to end debate on Sylvia Burwell's nomination to serve as HHS Secretary.

On Monday, at the annual Health Datapalooza HHS announced the internet release of 2012 hospital charge data. 

The data include information comparing the average charges for services that may be provided in connection with the 100 most common Medicare inpatient stays at over 3,000 hospitals in all 50 states and Washington, D.C. Hospitals determine what they will charge for items and services provided to patients and these “charges” are the amount the hospital generally bills for those items or services. With two years of data now available, researchers can begin to look at trends in hospital charges. For example, average charges for medical back problems increased nine percent from $23,000 to $25,000, but the total number of discharges decreased by nearly 7,000 from 2011 to 2012.

Kaiser Health News offers a consumer perspective on the data release. A Fierce Health Finance editor, Ron Shrinkman, cogently observes that 

Hospitals have resisted price transparency in small and large ways. That makes sense, because being opaque about what you charge presents specific business advantages--such as the ability to charge whatever you want, particularly in the case of patients who lack insurance and have virtually no bargaining power.

As I noted a couple of weeks ago, price transparency is slowly taking place in the hospital sector. But reference pricing could become a threat to price opacity, and possibly the greatest threat to opacity of them all.

Speaking of costs, a Reuters article offered an FDA official's informal perspectives on expensive specialty drugs.  Here the upshot which rings true with the FEHBlog:

By law, Dr. Richard Pazdur, the U.S. Food and Drug Administration's cancer drug czar, is not allowed to consider the cost of treatments his agency reviews, only whether they are safe and effective.

But Pazdur is not blind to escalating drug prices and the growing debate over how to place an appropriate value on cancer drugs, which can cost $100,000 a year or more a year.

"It's very difficult for me to talk about," Pazdur said in an interview at the American Society of Clinical Oncology meeting in Chicago, where the issue of value has been a consistent theme among the world's top cancer doctors.

Instead, he recounts a story about buying his first house in Detroit in 1982. "I was very nervous. I asked the realtor if I was paying the correct price. She said to me, 'Rick, the price is what anybody is willing to pay for it.'" In his view, the same applies to cancer drugs.

"Everybody knows that these are expensive drugs," he said. "Obviously, we can't just continue going on with escalating prices of drugs. That's not a regulatory decision or anything profound from the FDA. It's just the reality of the situation."

Pazdur said the solution will likely take "a national dialog" involving all stakeholder - insurers, patients, doctors, lawmakers.

An FDA regulatory pathway to biosimilar drugs also would help.

Weekend update

The Senate is in session at the Capitol this week while the House has a district work session according to the Hill's Floor Watch blog. OMB Director Sylvia Burwell's nomination to serve as HHS Secretary will be taken up later this coming week.

The Hill also has an article about the Sovaldi pricing battle. The article notes that the health insurance trade association's (AHIP) spokesperson, Robert Zirkelbach, has moved over to be the spokesperson for the prescription drug trade association, PhRMA.  AHIP has hired Brendan Buck, a former spokesperson for the House Speaker, to be its new spokesperson.

In a bit of good news, the New York Times reports that the Food and Drug Administration on Friday approved a generic version of the anti-inflammatory painkiller Celebrex. "Teva [Pharmaceuticals now] has exclusive marketing rights to three doses of the drug for 180 days. Mylan received approval for the lowest dose of the drug, 50 milligrams. Celebrex was Pfizer’s fourth-best-selling drug last year with sales of $2.92 billion." According to the Times article, generic drugs are priced 30% to 60%  lower than the brand name drugs. It has been over four years since Congress in the Affordable Care Act authorized the FDA to create a regulatory pathway for generic versions of specialty drugs known as biogenerics or biosimilars. Fierce Biotech reports that in mid May, the FDA broke its silence on the issue with nonbinding draft guidance on such a regulatory pathway. The article notes that "the industry is hardly standing pat. In the four years since Congress authorized the agency to sort out an approval pathway for biologic copies, many makers of proprietary drugs have started investing in their own biosimilar operations, including Amgen, Merck, and Biogen Idec."  The European Union started approving biosimilars early in the last decade.