Interesting Pharmacy Development

CVS, which is the largest pharmacy chain in the Washington, D.C., area and has 5,400 pharmacies in 37 states, has bought MinuteClinic. There are 83 MinuteClinics in ten states, including 66 located inside CVS pharmacies, including one in my hometown, Bethesda, MD. According to the CVS press release, "MinuteClinic locations, which are staffed by certified nurse practitioners and physician assistants, offer treatment for common family illnesses, such as strep throat, ear infections, poison ivy and pink eye. They also provide some common vaccinations." Clearly CVS has room for expanding this convenient service. Will other pharmacies follow CVS's lead?

More on the VA Security Breach

Steve Barr reports in today's Washington Post about an Inspector General report on the massive Veterans' Administration security breach. What a dysfunctional agency!

Senate Approves Canadian Drug Imports

The U.S. Senate today amended by a 68-32 vote the Homeland Security appropriations bill to prohibit Customs and Border Protection officers from from preventing an individual not in the business of importing a prescription drug from importing an FDA-approved prescription drug from Canada into the United States.

CMS Fact Sheets

The Centers for Medicare and Medicaid Services released two fact sheets today on Medicare and Medicaid spending. Medicaid spending is below budget projections, but Medicare spending is above those projections:

Medicare Part D expenditures are now projected to be $34 billion lower over 5 years (2006-2010) than in the President’s Budget, and $110 billion lower than in the Mid-Session Review one year ago. The average Part D premium is almost 40 percent lower than had been projected a year ago as a result of strong competition, and 90 percent of Medicare beneficiaries are receiving prescription drug coverage.

Medicare Part A and Part B expenditures are higher, primarily because of continuing rapid growth in the use of Medicare services. Part A projected expenditures over 5 years (2006-2010) are $17 billion higher and Part B projected expenditures over 5 years are $30 billion higher than in the President’s Budget. Rapid growth in physician-related services and hospital outpatient services are the main factors responsible for a projected increase in the Medicare Part B premium of 11 percent for next year.

The continued rising costs in Medicare Part A and Part B highlight the need for reform of the original Medicare program to pay more accurately and especially to pay more for better care, not simply more services. The President’s Budget proposed building on MedPAC’s recommendations for more accurate payments to health care providers, and the adoption of performance-based payment systems.

On June 20, CMS released another fact sheet which provides more details on why CMS finds Part D prescription drug program spending is substantially below projections.

HSA Hearing

On June 28, the House Ways and Means Committee held a hearing on health savings accounts / high deductible health plans (HDHPs). Karen Ignani, AHIP's President, gave interesting testimony on consumer acceptance of HSA/HDHPs. A recent GAO report on first year FEHBP experience with HSA/HDHPs concluded that "FEHBP HDHP enrollees were younger and earned higher federal salaries than other FEHBP enrollees." Ms Ignani reported about

Two other studies – one by the Employee Benefit Research Institute (EBRI), another by the Blue Cross Blue Shield Association (BCBSA) – have demonstrated that the health status of individuals with HSAs is comparable to the health status of those with other types of coverage. The EBRI study[4] found that 86 percent of individuals with HDHPs and 87 percent of individuals with non-HDHP coverage reported their own health status as very good or good. The BCBSA study[5] yielded similar results, with 77 percent of individuals in both categories – those with HDHP coverage and those with non-HDHP coverage – describing their health status as very good or good.

The EBRI study also found that the income distribution is fairly similar for persons with HDHP coverage and with other types of coverage. According to EBRI, 31 percent of HDHP enrollees and 27 percent of non-HDHP enrollees have annual household incomes below $50,000. Similarly, Assurant Health found that 29 percent of enrollees in its HDHPs have annual household incomes below $50,000. Other data[6] from Assurant indicate that 43 percent of HDHP applicants did not have prior health coverage and, additionally, that 69 percent of HDHP purchasers are families with children and 62 percent are over the age of 40.

In connection with this hearing, the Joint Committee on Taxation staff issued an illuminating report on the tax benefits of various health benefit arrangements that are available to federal employees and other citizens.

HIT Update

Ben Butler of Crowell & Moring call my attention to this excellent overview of PHR initiatives from Modern Healthcare. I was interested in learning that

On June 30, the CMS awarded contracts to perform feasibility studies on creating PHRs using claims data from existing Medicare fee-for-service programs. One of the winners was Capstone Government Solutions, Nashville, a for-profit consortium formed in 2004 by Blue Cross and Blue Shield of Tennessee and Cigna Government Services, an arm of publicly traded Cigna Corp. ViPS, a business unit of Elmwood Park, N.J.-based Emdeon Corp., formerly WebMD Corp., was awarded the second PHR pilot contract.

There's not much news, however, about the status of the major House health information technology bill, HR 4157, which probably means that there's a lot going on in the proverbial smoke filled rooms on Capitol Hill. The current AMA News does report that the medical community joins the insurance community in opposing to Rep Nancy Johnson's 10/09 ICD-10 mandate in the Ways and Means version of HR 4157.

Prescription Drug Trends

The Kaiser Family Foundation has posted its June 2006 report on prescription drug trends. "The updated fact sheet shows that while spending on prescription drugs had been rising more rapidly than for other types of health care, its rate of growth has slowed somewhat recently and now is rising at about the same pace as spending for hospital and physician services." Presumably that trend will continue due to the recent spate of expiring patents on iconic brand name drugs such as Zocor and Zoloft.

Fun facts to know and tell from that report:

• In 2005, about three-quarters (74%) of workers with employer-sponsored coverage had a cost-sharing arrangement with 3 or 4 tiers, over 2½ times the proportion in 2000 27%).
• Co-payments for nonpreferred drugs (those not included on a formulary or preferred drug list) have doubled from an average of $17 in 2000 to $35 in 2005.
• Copayments for preferred drugs (those included on a formulary or preferred drug list, such as a brand name drug without a generic substitute) increased by 69%, from $13 in 2000 to $22 in 2005.

OCR releases Emergency Preparedness Guidance

The HHS Office for Civil Rights, which enforces HIPAA's Privacy Rule, has released guidance for covered entities and business associates to describe information flows in the event of an emergency, such as Hurricane Katrina. Covered entities should consider incorporating this guidance in their Privacy Policies and Procedures.

NHIN Forum

Last week, HHS sponsored a Nationwide Health Information Network (NHIN) Forum. The NHIN will be the backbone of the Nation's developing electronic medical records system. 500 people attended (the admission charge was only $50). Government HIT magazine reports that the attendees had a lot of questions and comments. The National Committee on Vital and Health Statistics will be considering these comments as it develops a privacy and security oriented requirements document for the NHIN over the summer. In addition, four HHS-contracted consortia -- are developing and assessing different NHIN models. For what it's worth, I have been most impressed by the Connecting for Health Common Framework model developed in partnership with CSC. For more details, Oracle has created a NHIN Watch.

CMS Proposes Major RBRVS Changes

Since 1992, Medicare has reimbursed physicians services pursuant to a resource based relative value schedule. The American Medical Association explains that

In the RBRVS system, payments for services are determined by the resource costs needed to provide them. The cost of providing each service is divided into three components: physician work, practice expense and professional liability insurance. Payments are calculated by multiplying the combined costs of a service by a conversion factor (a monetary amount that is determined by the Centers for Medicare and Medicaid Services). Payments are also adjusted for geographical differences in resource costs.

Many health plans utilize the RBRVS to establish the basis for compensating network providers.

At least every five years, CMS must reevaluate the RBRVS. The most recent re-evaluation was published in the Federal Register on June 29. CMS's press release explains that

The proposed notice includes substantial increases for “evaluation and management” services, that is, time and effort that physicians spend with patients in evaluating their condition, and advising and assisting them in managing their health. The changes reflect the recommendations of the Relative Value Update Committee (RUC) of the American Medical Association.

"It’s time to increase Medicare’s payment rates for physicians to spend time with their patients,” said CMS Administrator Mark McClellan, M.D., Ph.D. “We expect that improved payments for evaluation and management services will result in better outcomes, because physicians will get financial support for giving patients the help they need to manage illnesses more effectively.”

These are the largest revisions ever proposed for services related to patient evaluation and management. For example, the work component for RVUs associated with an intermediate office visit, the most commonly billed physician’s service, will increase by 37 percent. The work component for RVUs for an office visit requiring moderately complex decision-making and for a hospital visit also requiring moderately complex decision-making will increase by 29 percent and 31 percent respectively. Both of these services rank in the top 10 most frequently billed physicians’ services out of more than 7,000 types of services paid under the physician fee schedule.

Medicare law requires that CMS impose a budget neutrality adjustment if changes in RVUs will cause an increase or decrease in overall fee schedule outlays of more than $20 million, compared with what they would have been in the absence of the changes. CMS estimates that the proposed work RVU changes would increase expenditures by approximately $4.0 billion. CMS is proposing to create a separate budget neutrality adjuster that can be applied just to the work RVUs for Medicare purposes, without changing the number of work RVUs assigned to a particular service. This would preserve the integrity of the existing work RVU structure, which is often adopted by other payers.

CMS will be accepting comments until August 21 and it plans to announce the final policy changes in November and implement the revised RBRVS on January 1, 2007, subject to a phase in period.

Surprising survey

OPM has an FAQ page on prescription drug coverage which states that

Q. Are generic drugs likely to cause more side effects than brand name drugs?

A. There is no evidence of this. The FDA monitors reports of adverse drug reactions and has found no difference in the rates between generic and brand name drugs.

However, the Washington Post reports today in its health section about a Medco survey finding that 27% of physicians are of the opinion that generic drugs are more likely to produce unwanted side effects than brand name drugs (in contrast to 5% of pharmacists and 10% of consumers).

Pfizer to market its own generic Zoloft

Pfizer's iconic anti-depressant drug Zoloft just lost its patent protection. Pfizer announced that its Greenstone Ltd subsidiary would manufacture an "authorized generic" version of Zoloft. If an independent generic drug manufacturer brings a successful patent challenge against a brand name drug, then that manufacturer (and the brand name manufacturer) share an exclusive right to market the generic drug for the first 180 days after the patent expires under the Hatch Waxman amendments to the federal Food and Drug Act.

If the brand name manufacturer does not license or manufacture its own authorized generic, then it's clear sailing for the independent company, such as Teva, to gain market share. But if the independent must compete with an authorized generic, then the generic price drops even lower (50% of the brand name price according to the Wall Street Journal as compared to a 35% to 40% average dip when the independent generic manufacturer has no competition. The U.S. stock price of Teva, which now will be competing with Pfizer for sale of generic Zoloft, dropped 3% on Friday on the news. (Pfizer was up 1% on Friday.)

Cancer Drug Pricing

On Thursday, the Food and Drug Administration approved the use of Celgene's drug Revlimid to treat patients with relapsed or recurring multiple myeloma. Trial data has shown the Revlimid, which is a pill, combined with a steroid boosts the survival rate of these patients by a year or more.

According to Reuters, the manufacturer will price the drug at more than $6,000 a month for the highest, 25 milligram, dose. Today's Wall Street Journal (subscription wall) observes an industry trend of aggressively pricing cancer drugs while creating a safety net for the uninsured. The Journal quotes a Morgan Stanley analyst Sapna Srivastava, "Every time a [cancer] drug is priced, it's higher." Other examples are Genentech's Avastin and Bristol Myers Squibb/Imclone's Erbitux. Recently Bristol Myers declined to market Eribitux in Canada because of pricing concerns. This strategy has been noted for over two years with no no end apparently in sight.

Domestic Partner Coverage Study

On June 29, The Human Rights Campaign, a gay advocacy organization, released a report showing that 51% of Fortune 500 companies now extend health benefits to the domestic partners of their employees -- double the number since 2000. Under the Federal Employees Health Benefits Act, self and family coverage is limited to the "spouses" of employees, and pursuant to the Defense of Marriage Act, a spouse is "a person of the opposite sex who is a husband or a wife."