All posts by Raymond T Kyle

Epipen, the Story Behind the Story

The media storm that erupted over huge price increases for the Epipen, a medication delivery device that provides an automatic injection of epinephrine to an individual suffering a severe allergic reaction, had everything a muckraking editor, or ambitious politician, could hope for: The manufacturer is a highly profitable pharmaceutical company, Mylan, led by a highly compensated CEO, who also happens to be the daughter of a member of the US Senate. In addition, the Epipen device itself is considered so vital, so irreplaceable, it is stocked in the nurse’s office of approximately one-half of all schools in the United States.

Newspaper editors across the country responded with righteous outrage. Some, like the St Louis Post-Dispatch, called for Congress to institute price controls on pharmaceutical products. Liberal politicians saw an opportunity to transfer blame for the steep rise in costs under the Affordable Care Act, aka Obamacare, to corporate America. Television reports showed anxious parents wondering if they’d be able to afford a potentially life-saving medication. Under withering criticism, Mylan expanded its support program for patients, and eventually announced it would produce a generic variant of the device that would retail for about half the cost of the original Epipen.

So, a pretty open-and-shut case of corporate greed, right? Maybe, but the salient point goes far beyond a simple, pat answer. Further investigation provides a glimpse into the convoluted way prescription medications are marketed and sold in the US, and how little the average consumer knows about the process.

Marketing Epipen

Mylan acquired the generic drug division of the Germany-based Merck KGaA in 2007. That purchase included the rights to Epipen. The company soon began a marketing campaign to raise awareness of the danger of severe allergic reactions to things like food, insect stings, and medications. The worst reaction, anaphylaxis, is characterized by an itchy rash, swelling of the throat or tongue, shortness of breath, vomiting, lightheadedeness, and low blood pressure. It has a rapid onset from within minutes to hours of exposure, and can be life-threatening. Mylan began a marketing program, Epipen4Schools, in 2012, and, as stated earlier, more than half the schools in the US have participated. While some have criticized the company for fanning fear among parents re the possibility of their child suffering such an event, it’s estimated that as many as 1 in 13 kids have food allergies, and up to 43 million Americans are at risk for anaphylaxis. In a 2013-2014 school year survey of 76,000 schools, more than 1000 cases of anaphylaxis were reported, with 75% treated with an epinephrine auto-injector. 40% of those treated utilized an Epipen provided through the the Epipen4Schools program. 25% of the cases occurred in individuals with no known allergies. The Epipen marketing campaign has proven to be a huge success for Mylan.

Epipen Pricing

Probably the most galling aspect of the controversy is that epinephrine, the medication contained in the Epipen device, only costs about a dollar per pen. That’s scant consolation to the parent who’s seen the price for a two-pack of Epipens jump from $200 to over $600 in less than a decade (Ed. Note: It is recommended that two pens be immediately available in case the first delivery doesn’t impact the reaction sufficiently. The epinephrine in the device has a rather short shelf life, as well, so Epipens need to be replaced relatively frequently, adding to the price shock). Some families have more than one child with allergies, so the cost is multiplied for each extra pair of devices required. Needless to say, price has become a defining issue, especially for parents of children with severe allergies whose lives could be at risk if Epipens became unaffordable.

But, hold on, most people have insurance, don’t they? Why would parents have to fork out the entire $600 bucks for a pair of auto-injectors? It turns out that the move to curb health care costs plays a significant role in emptying the average consumer’s pocket, and involves more players than just an upstart pharmaceutical company.

Insurance, Deductibles, & Pharmacy Benefit Managers. Strange Bedfellows.

The ever-increasing cost of health care was a main driver for passage of health care reform in 2010. The Affordable Care Act, President Barack Obama’s signature domestic legislation, promised reduced premiums and better benefits. One of the ways insurers lowered premiums was to offer plans with high deductibles. In exchange for lower monthly payments, individuals and families are responsible for much higher out-of-pocket costs before their insurance kicks in. These high deductible plans often include drug costs in their calculations. A family might be required to spend thousands each year before their insurance plan shoulders any portion of the cost. People used to paying relatively modest co-pays for brand-name medications were now paying much, much more.

As the insured began to fully understand the impact of their low premiums/high deductible health insurance, they reacted, and loudly. Those companies tasked with overseeing the price and availability of medications, mostly Pharmacy Benefit Managers (PBMs), who negotiate drug prices on behalf of employers and insurance companies, responded by charging the pharmaceutical industry with gouging patients and insurers. Pharma companies blamed the PBMs for using retail drug prices in their claims, prices PBMs never pay due to the rebates and discounts that manufacturers provide as an incentive. Liberal politicians used the Epipen controversy to insulate themselves from criticism that their highly touted health care reform legislation was an expensive failure. Conservatives got to say, “I told you so,” despite never championing a market-based plan of their own until the beginning of the 2016 national election campaign. About the only thing all sides could agree on was that it wasn’t their fault. Meanwhile, the people who actually need Epipens are stuck holding the bill. So, what’s the answer?

Transparency, Competition, Choice

First, and foremost, consumers need to know what their medications actually cost.  As part of the research for this post, I checked with the PBM for my health insurance provider. I haven’t yet reached the individual, or family, out-of-pocket limit for my high-deductible plan this year, so a pair of Epipens would run me a cool $541. Now, is that the actual price my PBM paid the manufacturer, plus a modest profit, or am I paying full, or nearly full, retail price? Is the PBM making out like a bandit after it receives its discounts and rebates from the manufacturer? The only people who know aren’t talking.

There are direct-to-patient (DTC) discounts provided by Mylan, but even then, I still don’t know whether the discounted price is a fair one. There are even some DTC discount cards for other meds that PBMs have refused to honor because they believe them an attempt by manufacturers to skirt paying the PBM. Heather Bresch, the Mylan CEO, has even conceded that in an attempt to make discounts given to PBMs look bigger, manufacturers sometimes artificially boost retail prices, and, by extension, discounts. One would think PBMs would balk at this scheme, but, if they are able to brag to their customers that they’ve scored big discounts, retail price inflation by manufacturers becomes an advantage, not a liability.

That’s yet another reason for transparency in dealings between PBMs and the pharmaceutical industry. A lot of the hanky-panky that surrounds drug pricing would disappear if the man behind the curtain lost his cover.

Competition is almost always a good thing, and promoting competition in the pharma industry has gained new advocates during the furor over the Epipen. The “one drug approved in each class and no more” crowd has been weakened significantly, although Epipen is not a typical example. It is both ingenious device, and simple drug, allowing an affected individual, having been previously trained in its use, to administer the prescribed dose safely, even with one hand. It greatly reduces the risk of misapplication or accidental needle stick. That’s compared to a syringe filled with epinephrine, which asks a stricken person, or other individual, to fill and administer delivery, under stress, without accident, perhaps twice. In addition, any generic version of the device would have to prove to the FDA it can be used without ever failing, so the cost of making a successful generic knock-off is greatly increased.

There had been current, and upcoming competition to Epipen, but Auvi-Q, an auto-injector marketed by Sanofi, was recalled late in 2015 due to a problem with dosing consistency. The license for Auvi-Q is reverting back to the original manufacturer, so the timing of a possible return to the market is a question mark at this point. A generic rival, from Teva, saw its application for approval for sale in the US rejected by the FDA in February of 2016.  One other auto-injector, Adrenaclick, by Amedra, does offer an alternative, but operates slightly differently than Epipen, and users would need to be trained in its unique application. Here again, Mylan’s Epipen marketing strategy effectively discourages competition. All the uncertainty about Epipen’s competitors almost certainly contributed to Mylan’s decision to raise prices following its marketing success. Monopolies are rarely beneficial to consumers, even in health care.

Finally, consumers need choice. Choice to purchase their medications in a more direct way from manufacturers. Most manufacturers offer direct-to-consumer discounts, with substantial reductions in cost, but consumers are often unaware of them. Sales reps provide discount cards, vouchers, and even rebates for mail order prescriptions, to doctors’ offices, but the sheer volume overwhelms both staff and physicians, who are already dealing with heavier patient loads and increased administrative requirements. Pharma company websites also offer these incentives, but most patients probably never visit them, or have already filled their prescriptions before they know for certain the name or manufacturer of a new drug they’ve been prescribed. A change in approach by pharma companies could see sales reps spend less time chasing doctors’ signatures, and more time being advocates for patients. A supported patient is more likely to stay compliant on their treatment, and hopefully, see better results.


The outrage over the Epipen pricing debacle creates an opening for a new approach to drug marketing. Transparency in interaction between drug makers and PBMs, and between PBMs and their customers would allow patients to hold both manufacturers, and PBMs, more accountable. Unless the ultimate consumer, the patient, has confidence that they’re receiving value for their money, they may pass on even bothering to fill their prescriptions, and there’s no less effective medication than the one not taken.

Competition needs to be encouraged, not opposed in the hope of forcing ever-greater government intervention. Calls for price controls, and restrictions on competitors, only sets the stage for the next outrage. Restrictions on the number of drugs in a class of medications seems a way to cut costs, until a recall or other problem eliminates substitutes, leaving patients at the mercy of a single supplier, or worse, without any acceptable alternative.

Drug manufacturers can help to restore public confidence by directly engaging the  customers who rely on their products to preserve, or restore, their health. The byzantine route medications take from manufacturer to patient needs to be shortened, and clarified. That’s the best way to head off even further government encroachment on the industry, and defuse consumer anger.

Raymond T Kyle

Copyright 2016   Kyle Policy Partners

As Aetna Exits the Obamacare Exchanges

In the beginning, insurers were prepared to balk at entering the exchanges. Without the ability to adjust for the extra expense associated with patients who have poor health histories, and the unknown quantity of the pool of patients in the plans, insurance companies feared the exchanges would be a losing proposition. The Obama Administration sought to allay concerns, and gain support, by promising assistance to compensate insurers for losses. As it turned out, insurers were right to be nervous. The young and healthy avoided the exchange plans, so they were heavily populated by older, sicker patients. Then, Republicans in Congress moved to block any subsidies to insurers who experienced losses on the exchanges, seeing the subsidies as a clear case of crony capitalism. With the 2017 enrollment period quickly approaching, many insurers see the handwriting on the wall, and want out. Aetna lost $200 million on exchange plans in 2nd quarter 2016, and projects $300 million lost by year’s end. Those insurers that do remain will survive by offering narrow choices of doctors and hospitals, and higher premiums, deductibles, and co-pays. Not exactly the definition of, “If you like your doctor, you can keep you doctor”.
“Medicare for All” sounds like a great alternative, until you consider that the program only takes in 13 cents of premium payments for every dollar of care delivered. That’s not sustainable either, unless care is rationed, and doctors and hospitals are willing to do more work for even less pay.
It’s time politicians admit they were wrong in believing they could ignore basic rules of economics, and common sense. The way to promote competition in the health insurance market is to put the checkbook back in the hands of consumers. Refundable tax credits and expanded Health Savings Accounts would empower every individual and family to demand better care, better options in insurance, and an informed role in every decision. Insurers, doctors, and hospitals should have to compete for the business of every patient, not bypass them to negotiate with employers or the government. Innovators would develop new, more efficient ways to deliver better care, free from the excessive administrative constraints and regulations of bureaucracies like the Department of Health & Human Services
The free market works for every other segment of the economy. It’s past time politicians admit they were wrong in thinking they could do a better job.

Who’s Controlling the Cost of Prescription Drugs?

A recent headline in the business section of my local newspaper’s website reported that a large pharmacy benefit manager (PBM) had listed a number of drugs it would not cover in 2017. The accompanying article cited a press release in which the company explained it was acting in order to better control healthcare costs to employers and patients.

Great, right? Everyone knows the pharmaceutical industry overcharges for its wonder drugs, and it’s about time somebody put a stop to it. At least, that’s what some self-appointed experts put forth as common knowledge. Unfortunately, the basis of their claim often rests on a misunderstanding, or, misrepresentation, of the facts.

First, some clarification. Most of us who have health insurance carry two separate types of coverage, one for care delivered in a physician’s office or hospital, and another for prescription drugs. Many health insurers contract with a separate company to administer their prescription drug program, hence the partnership with a Pharmacy Benefit Manager, or PBM. The PBM represents the health insurance company and/or employer in negotiations with pharmaceutical manufacturers on pricing and availability of medications. The goal is to deliver safe, effective treatments at affordable prices. Drug manufacturers typically offer these purchasers substantial discounts and rebates in order to be included on the PBM’s preferred medication list. Optimally, this holds down drug costs, especially for newer, brand-name medications.

But this arrangement can make it difficult for the average consumer, or watchdog, to determine the actual cost of a particular drug. PBMs are notoriously reluctant to disclose the true cost of the medications they buy, while critics focus on a drug’s listed retail price, a pre-discount price that virtually no PBM ever pays. This puts pharmaceutical companies in the unenviable position of having to defend themselves from charges of price gouging, while negotiating their way onto a PBM’s approved list without losing their shirt. Through all this, the patient is clueless as to whether the price they’re paying for their brand-name medication reflects a good value for money spent.

Even additional savings offered directly to patients by pharma companies can experience tough sledding. Many pharmaceutical companies offer discount cards and/or rebates that patients can redeem at the point of sale at their local pharmacy or through mail order. A major obstacle is just knowing such discounts are available. Although sales reps often leave cards/coupons with doctors’ offices, the staff and prescribers are often too busy, or too confused by all the programs/materials to consistently distribute them to patients. Usually, these savings plans are also available at the companies’/products’ website, but patients may not even know such options exist.

Then there’s the roadblock sometimes thrown up by the PBM itself. These middlemen see direct-to-consumer rebates/discounts as an attempt by drug companies to bypass the negotiating  process. They argue, sometimes even via lawsuits, that their contractual agreements with pharmaceutical manufacturers preclude dealing directly with the ultimate customer. Some PBMs have gone so far as to announce they will not honor drug company discount programs offered directly to consumers!

While these battles rage, patients are often paying far more for their brand-name medications than they could be. We need a new approach to the marketing of prescription drugs. Either a more transparent process of drug purchasing by PBMs, so patients know the true cost of their medications, or allow the average consumer to fill their prescription directly with the manufacturer, so any discounts/rebates end up in the pocketbook of the person actually taking the medication.

Copyright 2016    Raymond T Kyle


Medicare for All?

The 2016 presidential election season has produced its share of surprises, none quite as interesting as the contest in the Democrat Party primary, where a long-term member of Congress, not even a member of the party, has shown surprising strength against the heir apparent, Hillary Clinton.

Vermont Senator Bernie Sanders has garnered a lot of media coverage, mostly due to his call for free tuition at the country’s colleges and universities. But, he also has a proposal to replace the Affordable Care Act, aka Obamacare, with a Medicare-for-all plan that has attracted attention as well.

At first glance, expanding the Medicare program seems like an attractive alternative. Seniors seem to be mostly happy with their coverage, and the system has a long track record of paying bills. It’s also single payer, so it’s often used as an example of how the United States could move away from a for-profit health insurance model. So what’s not to like about simply dropping the current system and enrolling everyone in Medicare? Like most problems with government entitlements, it begins with a lack of money to run the program.

Medicare has a funding problem as it exists today, and that problem would only become worse if it were adopted across the population of the US. Healthcare expert John C Goodman has reported that for every dollar Medicare pays out to doctors and hospitals, it only takes in about 13 cents in premiums. It’s a great deal for recipients, but expand it to a few hundred million Americans, and the question arises of just how to pay the bills? Avik Roy estimates that the cost of Medicare-for-all over the next ten years would be $28 trillion, at a minimum.

Raising taxes and premiums to offet the cost is an option, but taking such a huge amount of money from the economy to pay for health care would mean little money left over for schools, infrastructure, defense, police and fire service, etc, etc. And most of us have enough experience with how government works to know it’s not always successful at getting value for the money it spends.

In a special bit of irony, an option for today’s Medicare recipients that is gaining in popularity are Medicare Advantage (MA) plans, administered by private companies. These plans offer additional benefits, like coverage for prescription drugs, at no additional cost over their Medicare premium. They’ve become so popular, about one-third of Medicare participants have opted for a MA plan. Why would a private company be able to offer additional benefits over what the government plan provides? Because, surprise surprise, the private companies have lower costs.

You may have heard the claim that health care costs would be lower if only Medicare could negotiate prices with doctors and hospitals. In reality, Medicare doesn’t need to negotiate. It sets reimbursement amounts for covered services, and doctors and hospitals either accept the listed payment, or don’t participate.

To that point, if the country decided to move to a Medicare-for-all model, it wouldn’t need to navigate a complicated bureaucratic minefield and enroll everyone in the program. Congress could simply pass a law that doctors and hospitals would have to accept the Medicare rate for all covered services for everyone, without exception. Wouldn’t that be the easiest road to take? Just expand the Medicare pricing model across the board.

If you take that position on mandated payments and billing, however, then the folks who administer the program must accurately price all those millions and millions of medical transactions that take place every day in doctors’ offices, clinics, and hospitals across the country. If they can’t be right every time, then distortions will take place in the health care market. Some services will be over-reimbursed, making them more likely to be abused through overuse and waste. Others will be under-reimbursed, making it difficult for patients to get the care they desperately need without incurring huge out-of-pocket costs. It would only be a matter of time before doctors, hospitals, and patients would all be disheartened and angry, as more and more distortions became apparent.

Through the genius of the free market, there are ways to improve health care in the United States by increasing competition, encouraging innovation, and putting the patient back in charge of their own health care decisions. Medicare-for-all may be a well-intentioned proposal, but it would prove prohibitively expensive, distort medical decision-making, and deliver an ever greater proportion of the US economy into the hands of unelected government officials. That’s not a recipe for success.



Defining Value in Healthcare

There’s a vigorous debate in the country re the cost, and availability, of healthcare. Unfortunately, there’s little discussion of the value of the product patients receive. Mostly, staggering national costs are reported, with cries of pending collapse of the system if allowed to continue. Seldom is a voice raised that questions whether patients are getting value for their money, or even what healthcare value looks like.

There are some initiatives under the Affordable Care Act (ACA), like the Medicare program designed to reduce readmissions to hospitals, but it’s primarily a scorecard, not a measure of value. A surgery patient re-entering a hospital within 30 days of release due to an infected incision, is counted the same as a patient involved in a vehicle accident two weeks after suffering a heart attack.

So, just what is value as regards healthcare? Is it low premiums, deductibles, and co-pays? What about choice of doctors, clinics, and hospitals? Is it affordable prescription drug costs? Or, is it all these factors, and more? It all depends on who you ask.

A middle class family of four might opt for less choice, and lower-cost coverage, while someone with a serious medical condition would prefer more freedom at choosing doctors, specialists, and medical centers. Seniors on multiple medications may feel that generous prescription drug coverage best suits their needs. Do these differing opinions sound familiar? They should, because in just about every other sector of the US economy, individual consumers demand options, and seek out products and services that best serve their needs. For some reason, healthcare is treated differently, as if choice and individual taste were dangerous.

How might the healthcare system in America be different if patients held the purse strings, not employers or politicians? What if insurance companies were only guaranteed business if they provided a good product at a price acceptable to customers? What if a medical practice that delivered sub-standard care faced financial ruin when their patients took their money elsewhere? What if even the poor had real choice of doctors and hospitals?

I believe that health insurance, and health care, would see dramatic improvements in cost and quality, as companies, doctors, and hospitals scrambled to attract clients. Providers would be free to develop novel methods to make care more effective and less expensive, without having to hurdle the bureaucratic roadblocks lurking in the multi-layered morass of the current system. Most importantly, each individual, and every family, would be free to decide for themselves which companies, and which healthcare providers, best satisfied their needs. Value would no longer be a vague concept, but, would instead, be defined in millions of everyday healthcare transactions by the ultimate consumers, patients.


Defining Terms in the Healthcare Debate

There’s a weekly talk radio show in St Louis that airs every Saturday morning. The host is a practicing physician, and on a recent show, he took a call from a listener who roundly criticized Obamacare. Given the unpopularity of the President’s signature domestic policy agenda, that type of call is hardly news. The good doctor, himself no friend of government intrusion, inadvertently included a brief point in his response that should give everyone in the debate pause.

I’m paraphrasing here, but the doctor’s immediate reaction was to remind the caller, that for all of Obamacare’s deficiencies, the previous system had produced “health care that was too expensive!” If I could have broken in to the conversation, I would have asked the doctor one simple question: “Do you think you’re overpaid?”

This isn’t meant as an attack on the earnings of physicians. It is intended to illustrate the folly of the broad generalizations that are routinely thrown about in the  healthcare debate. For example, when  politicians, the media, and even doctors complain about the high cost of prescription drugs, exactly what do they mean? Are they citing specific drugs as overpriced, charging that too many prescriptions are being written, or claiming that pharmaceutical manufacturers are deliberately gouging customers? Part of the problem is that health care is such a complex system, few of us will ever be knowledgeable about more than just a small part of it. How do you debate an issue when no one knows what, exactly, the issue is?

It’s my contention that most politicians, many members of the media, and lots of folks susceptible to the siren song of blaming someone else, don’t want a debate on the issues. It’s far easier to place blame on something, or someone else, for the failure of a unchallenged assumption. What true believer in corporate conspiracies wants to consider the value of a $70,000 treatment regimen that cures a serious medical condition, and obviates a potential $500,000 liver transplant some years down the road? Unfortunately, it’s far easier, and more beneficial to the claimant’s campaign, to just call the treatment costs “outrageous” and demand penance and a pound of flesh from the accused.

It’s probably a pipe dream, but maybe, just maybe, the loud advocates of conventional wisdom could be asked to cite examples of the outrages they decry. No more bland statistics, or the even worse, “studies have shown” pronouncements that lack reference or citation. We could have a real, national discussion re the value of different aspects of the health care system, and a better understanding of what works and what doesn’t. This is a debate that directly affects every one of us. At the very least, let’s make sure it’s an honest one.

Copyright 2015  Raymond T Kyle

Big Pharma: Panacea, or Bad Medicine?

With the opening of the 2016 election campaign, incumbents, and attention-seeking challengers, are on the hunt for trophies to mount on the wall of political expediency. Combine that with the on-going battle over healthcare costs, and it’s pretty much guaranteed that some folks are going to be under intense scrutiny for at least the foreseeable future.

Pharmaceutical companies usually come in near the top of any list of villains during these periods. They’re big, they’re visible to anyone who watches television, reads magazines, or fills a prescription, and they make a lot of money. Big Pharma, as it is not-so-lovingly referred to, is regularly accused of charging too much for its products, promoting its drugs through underhanded manipulation of doctors and regulators, and actively opposing any effort to bring cheaper, generic versions of top sellers to the market.

Is it true? Well, yes and no. Yes, some medications are very expensive, drug makers do employ sales reps/marketing teams to promote usage, and many companies have been very aggressive in protecting patents on high-volume, high-profit drugs. In the recent past, several manufacturers have settled cases with state and federal regulators over allegations of promoting drugs for uses outside FDA approval, paying doctors for prescriptions written, and conspiring to delay introduction of lower-cost versions of brand-name medications. All make headline news, and provide ammunition for critics of the industry.

Before getting too far into the discussion, I need to inject some fair balance. I worked as a sales rep for pharma companies for 15 years, representing branded products to primary care physicians and specialists in eastern Missouri and southern Illinois. The companies I worked for ranged from small to mid-size to what most folks would describe as Big Pharma. I know I can’t be totally unbiased in my opinions, but I’m no shill for the pharmaceutical industry either. The public rarely gets the viewpoint of those out calling on doctors, nurse practitioners, physician assistants, and the other staff members who see patients every day, and I think most would be surprised at the level of commitment most reps have to their ultimate customers, the patients. That doesn’t make us saints, but it doesn’t make us evil, either, and our visibility means that, like it or not, we’re the face of the industry.

No one defends unethical or illegal behavior by pharmaceutical companies. As a sales rep, nothing will destroy your career faster than misrepresenting a product to the physicians that trust you to provide them accurate information about your products. Lie to a doctor one time, and your credibility is shot forever. No pharmaceutical rep worth their salt supports bad behavior by anyone in the business.

That being said, there’s another angle to the story that few people outside the industry, or the appropriate regulatory agencies, understand. When a pharmaceutical company is accused of promoting “off label” or other illegal activity, it faces two choices. It can admit wrongdoing, and negotiate a financial/regulatory settlement with authorities in order to put allegations and negative publicity behind it, or it can marshall its legal team, and go to court to prove its innocence.

Problem is, if the company loses its legal battle, in addition to any monetary penalty, it can be barred from participating in the Medicare & Medicaid programs for years. Without access to these programs, many small-to-medium companies would simply go under, and even a giant like Pfizer would be hurt. Mounting a successful defense still casts a company in a negative light, possibly for years, as the case winds through the legal system. So, the vast majority of cases are settled out of court, the company agrees to the penalty, and officials trumpet their success at bringing yet another greedy corporation to heel.

Is it justice? In many cases, yes, there was clear evidence of wrongdoing, and the company deserved sanction. In many others, we just don’t know, and that’s unfortunate, because like the guy on the evening news with a coat over his head, the public presumption is guilt. And ignorance of how the industry is regulated plays out in other areas as well.

Few people are educated about the patent life of pharmaceutical products. For most prescription drugs, a manufacturer is granted a 20-year period of exclusivity. The clock starts counting down when the molecule is registered, not when it’s later approved for sale in the US. Approval will only come, if ever, once the drug has cleared several years of clinical testing, and had its trial data reviewed. By the time the drug hits pharmacy shelves, 5-7 years of patent life will often have already passed. That shortens the time frame over which the costs of drug development can be recouped, increasing costs to customers, and even then, companies may need to expend additional funds to ward off patent challenges by generic manufacturers. Far from being a cartel of chummy co-conspirators, the pharmaceutical industry can often be a cutthroat marketplace. It is not an environment for the feint of heart.

While most molecules never make it to market, the costs of research and development still accrue. Pfizer invested a cool billion dollars in a novel cholesterol medication that held much promise, but failed in late clinical trials, and was withdrawn. There have even been rare instances where FDA-approved drugs have been recalled after release, due to undiscovered problems that never materialized in pre-approval testing. It’s the cost of doing business in a heavily regulated industry where public safety is a priority.

Simvastatin, the generic version of Merck’s blockbuster cholesterol drug, Zocor, is still listed as one of the most prescribed meds in the United States, with millions of patient-years of use, and a library of clinical data supporting its value in reducing the risk of cardiovascular events. Still, years after going generic, the FDA announced changes to the simvastatin prescribing information that restrict its use in certain patients, or when used in conjunction with certain other medications. Fortunately, the market had other drugs in the same class available as substitutes if doctors felt it prudent, or patients were unnerved by the FDA’s actions. Those alternative medications might not have been available had some critics had their way and refused FDA approval to any “me too” drugs once a first version had been cleared for sale.

What about all that marketing activity? The sales reps, the TV commercials, the billboards, and the print ads? Yes, it can, at times, be off-putting to hear about bladder leakage, or four-hour erections during every commercial break of a sporting event. And it can be aggravating to sit in a doctor’s waiting room with a small army of drug reps, some of whom gain access by bringing lunch to the office, while their ultimate customers don’t get so much as a bag of chips. Hey, is that pasta con broccoli I smell?

The sheer volume of lunches, treats, and giveaways supplied by sales reps definitely became a distraction. This most visible aspect of drug marketing, which began as a way to gain time with physicians to promote new medications, or new indications for established meds, morphed over the years into a quasi drug rep catering business. It became less about education, and more about food. There were actually medical practices that listed pharma-supplied lunches as perks in their help wanted ads! Even drug reps had grown to hate the superficiality of it all, as their knowledge and training re the risks and benefits of their products took a back seat to dishing out salad, bussing tables, and chasing signatures. Fortunately, those days are pretty much gone, but lost along with it is the opportunity to help doctors and staff stay abreast of new products and new information.

With the additional administrative/record-keeping duties heaped on doctors with the advent of electronic health records and healthcare reform, how can physicians possibly stay current re medications without support? When new information, good or bad, comes out, it’s often reps who bring that news to doctors. When you consider that there are literally hundreds of medications for everything from high blood pressure to alzheimer’s to diabetes, it’s impossible for prescribers to keep current on all the data. Since the typical rep only needs to be an expert on a handful of meds, they can serve as a tremendous resource, and bring real value to the office. For the future, successful reps will need to focus on bringing that value on every call, and not wasting their customers’ time with marketing slogans or flashy digital presentations. Some companies are ahead of the curve, directing their sales teams to assist patients in understanding the proper use of their medications, and providing information on discounts/rebates/programs available to lower the out-of-pocket costs of their prescriptions.

In some ways, the industry has been hurt by its own success. The development of effective treatments for many conditions once thought impossible to relieve short of surgery or other radical treatment, means that today, millions of people enjoy a better quality of life by simply taking a pill. That success has a price tag, though, and for every new/improved treatment, patients will demand access to it.  So, before condemning pharmaceutical companies for over-production, and over-promotion, let’s consider the other side of the ledger.

How often do critics stop and consider the people whose lives have been saved by the availability of effective medications? Do they recognize that tamoxifen, a pill indicated to treat/prevent breast cancer, was credited by the World Health Organization as the first treatment to actually reduce the mortality rate from cancer? Or that the pharmaceutical company that developed it gave away hundreds of millions of dollars of tamoxifen free to patients who otherwise couldn’t afford it? How many grandparents are active enough to keep up with their grand-children due to effective treatments for arthritis, COPD, or heart failure? As one doctor informed me, “You know, I’ve never had a patient thank me for the heart attack they never had. And, that’s OK, because I know it.”

So, by all means, keep close watch on marketing efforts by drug companies. Insist they play by the rules, and be transparent re product costs and pricing. Support a new role for sales reps as advocates for doctors and patients, helping them access the information, discounts and rebates so often available from manufacturers, but so rarely utilized. Finally, keep in mind that there are two sides to every pricing issue. One is the true cost of bringing the medication to the pharmacy, and the other is the cost of not treating the condition or illness. There is no prescription that is more expensive than the one that is needed, but never filled.

——Raymond T Kyle  2015  Kyle Policy Partners



Can We Get Back to Kansas, Toto? If the Affordable Care Act is Repealed, Then What?

Ever since the United States Supreme Court ruled in the 2012 Sebelius decision that requiring individuals to purchase health insurance was constitutional, opponents have vowed to repeal the Affordable Care Act (ACA, or, as more popularly known, Obamacare). Even after the 2015 King v Burwell decision, when the Court upheld government subsidies underwriting premiums in states that had not established an insurance exchange, demands for repeal continued.

As the 2016 election appears on the horizon, it seems appropriate to engage in a little “what if” speculation. What if Republicans capture 1600 Pennsylvania Avenue, while retaining control of the House and Senate? Will the GOP really move to pull the plug on President Obama’s signature legislative accomplishment? What will they replace it with? More importantly, how do they do so without creating utter chaos?

A visit to the GOP website finds a lot of complaints hurled at “Obamacare”, and calls for its repeal, but little in the way of specifics. In order to get a feel for what a post-ACA world looks like to Republicans, you have to revisit the Party’s 2012 Platform.

The Platform defines healthcare as an individual responsibility, and claims that chronic conditions, often the result of poor lifestyle choices, account for 75% of the nation’s medical spending. It supports fostering personal responsibility, increasing preventive screenings, and providing coverage for mental health issues. The plan envisions three pillars on which to build a legislative agenda.

Return states to a regulatory role in local insurance markets and caring for the needy. Congress would block grant Medicaid funds and other payments to the states to administer as they see best. Funding and subsidies for abortion would be banned. There would be limits to federal requirements re Medicaid and private insurance, and states would  be urged to show similar restraint in issuing their own regulations. Assistance would be provided in resolving issues with risk adjustment and re-insurance to all patients, including those with pre-existing conditions.

Achieve a free market in healthcare. Allow individuals and businesses to form purchasing pools for health insurance. Cap non-economic damages in medical malpractice lawsuits. Enforce price transparency for medical costs, so consumers could easily compare prices between different providers.

Provide choice in healthcare. End tax discrimination between individual and group purchases to break the chains that link employment and health insurance coverage. Allow individuals to purchase health insurance across state lines. Promote private financial resources for healthcare expenses, such as Health Savings Accounts (HSA). For the nation’s elderly, keep patients out of institutions by making home care a priority in public policy.

So, the political opposition does have a plan, and one that’s been around since the 2012 presidential campaign. One might wonder why the Romney/Ryan ticket didn’t spend more energy promoting it, at least until one remembers Romneycare.

President Obama and other Democrats constantly worked the refrain that the ACA was patterned after then-Massachusettes governor Mitt Romney’s health insurance reforms in The Bay State in 2006. They were mostly on target, especially as regards expanding coverage, subsidizing premiums, and mandating the purchase of health insurance. Candidate Romney countered that his reforms were enacted in only one state, not forced on the entire country, but his explanation never gained traction, even with the GOP faithful. Obamacare, the issue that flipped the House of Representatives to Republicans in 2010, and ended the careers of several US Senate Democrats, sat on the shelf during the 2012 presidential election. What should have been a powerful campaign advantage became a liability for the Romney candidacy.

Because the Republicans’ commitment to their alternative was never battle-tested, just how prepared the GOP is to actually implement their plan is unknown. What type of timeline would be required to move from Party Platform to law? Which Congressional committees would be tasked with writing legislation? Once legislation is signed into law, how will the switch be accomplished? Most importantly, are the architects of the Republican proposal confident their plan will actually work?

The country might be better served if the GOP follows a two-tiered approach to health insurance reform. One track should certainly begin strategic planning to prepare for life after the Affordable Care Act. It will serve no one’s interests if, on day one of a Republican Administration, the first words the new president utters to Congressional leaders are, “What do we do now?” The GOP also needs to be transparent about the planning process, so potential supporters aren’t panicked by Democrat campaign ads predicting death and disaster if Obamacare is repealed. The entire process need not be dumped on the electorate, but reassurances should be made that no individual or group will be hung out to dry when repeal takes place. Here is where the GOP needs all hands on deck, whether they are current office holders, candidates, or party officials. In this era of candidate-centered elections, the one area where party discipline must be enforced is the issue of repeal and replacement of Obamacare. If Republicans take multiple positions on an alternative to the current law, the message will become so diluted as to be meaningless. For a change, the GOP needs to speak with one, coherent, confident voice.

A second, but equally important task for the GOP is to analyze what changes to the current law would lessen its impact on both those insured and their healthcare providers. What can be done NOW to reduce overzealous regulation, put more control in the hands of patients, protect doctors and hospitals from arbitrary cuts in Medicare/Medicaid reimbursements, and roll back built-in tax increases? Republican lawmakers and candidates could build credibilty with voters if they demonstrate themselves well versed in the complexities and shortcomings of a government-run health insurance system. It would be wise to consider what a Secretary of Health & Human Services, appointed by a Republican president, could accomplish with the flexibility accorded the Secretary in many provisions of the Affordable Care Act. In politics as in war, it never hurts to have a fallback position in case the unexpected happens, as it often does.

So, yes, Toto, we can get back to Kansas. The question is, what will Kansas look like when we get there?



“And Then There’s Statistics”—The Hospital Readmissions Reduction Program

Reducing readmissions to hospitals is sound medical and administrative policy. No one who’s been admitted for surgery, illness, or injury wants to return shortly after discharge because of an infected incision or some other complication. These readmissions are also costly, and the Center for Medicare/Medicaid Services (CMS) was tasked with reducing Medicare Fee-for-Service readmission rates.

The Hospital Readmissions Reduction Program (HRRP), a provision of the Affordable Care Act (ACA) implemented in 2013, is designed to encourage better, more cost-effective care by leveraging reduced Medicare reimbursements for hospitals that sustain higher-than-average readmission rates.

A readmission is defined as a patient returning to the same or different hospital within 30 days of discharge. The US national readmission rate fell to 13.5% in 2013, after maintaining at about 19% for years.

Not all readmissions are counted as avoidable. Certain readmissions do not count against a hospital’s total:

1) Planned readmissions, where the patient returns for scheduled follow-up treatment, or a second condition was discovered at the initial visit and requires timely attention.

2) The patient is transferred to another hospital.

3) The patient leaves the hospital on their own accord against medical advice.

However, CMS includes readmits unrelated to the original admission in calculating the Excess Readmission Ratio (ERR). Have a heart attack patient break his arm in an accident two weeks after release? Sorry, it gets counted.

At the beginning of the HRRP program in FY2013, readmissions were tracked for three expensive, high-volume reasons for original hospitalization, specifically, acute myocardial infarction, pneumonia, and heart failure.

In FY2015, as authorized by the ACA, the HHS Secretary added total hip/knee replacement and chronic obstructive pulmonary disease (COPD), while FY2017 will see the addition of coronary artery bypass graft (CABG) to the list. Penalties for readmissions that exceed the national average totaled 1% of Medicare reimbursement for readmissions in 2013, 2% for 2014, and top out at 3% for 2015 and beyond. With the combination of multiple tracked conditions and an increased penalty rate, hospitals that score worse than the national average can suffer a substantial financial sanction.

But it’s not only substandard performers who can be hit in the pocket. Since the calculations for excess readmissions are based on a confusing mix of national averages, a ratio of discharges to readmissions, and a multiplier based on ALL admissions, even hospitals showing improvement can be penalized.

A hospital that reduces its readmission rate, but not by as large a percentage as the nation, can still see reductions in reimbursement in spite of its improved performance. And if the overall number of discharges in a particular hospital drop by a greater degree than their readmits decline, the penalty can increase even more. Throw in multipliers to the formula, and some hospitals could pay back to CMS more than the excess readmissions cost Medicare. This is especially troublesome, because as more and more medical conditions are added to the list by the HHS Secretary, it’s likely that most hospitals will routinely suffer cuts in reimbursements. As the HRRP now exists, it appears more a way to recoup money to CMS than a program designed to improve patient care and quality of life.

In fact, some have argued that the program does not account for other factors affecting readmissions that are beyond the control of the institutions being rated. In response, CMS conducts what it terms Risk Adjustment, an attempt to balance the scales by considering a hospital’s patient population as part of its calculations. CMS now acknowledges that age, gender, co-morbidities, and frailty all contribute to readmissions, and that hospitals have little control over these factors.

Factors that CMS does not consider are those socio-economic conditions that may also play a role in determining whether patients stay out of the hospital once they are discharged. The poor are often without the local support that more affluent patients enjoy. These patients may have difficulty understanding written or verbal instructions regarding care and/or medications provided them at discharge. They are often not aware of the availability of home nursing, tele-health, health coaches, or nutrition counseling. They may even lack basic transportation for follow-up visits with their Primary Care Provider (PCP). While there have been attempts by some in Congress to address this issue, as of this writing, socio-economic factors are not included in the Risk Adjustment.

Obviously, the goal of reducing readmissions is both morally imperative and financially smart. However, the HRRP needs tweaking to achieve the goal of reducing readmissions without penalizing hospitals that make good-faith efforts to achieve better outcomes. In addition to implementing clinical improvements within hospitals, many institutions are working to assist patients even after discharge, including measures to reduce readmits in their most vulnerable populations. Teams are identifying high-risk patients, providing health coaches, assisting them in obtaining community-based support, and co-ordinating their care with pharmacies and PCPs. To insure CMS can maintain support for the HRRP, some changes in calculating penalties are also in order.

Instead of comparing apples and oranges, establish a baseline for each hospital, and measure that hospital’s improvement, or lack thereof, versus the baseline, not some national standard that doesn’t account for the hospital’s size or the socio-economic area the hospital serves. Correct the current imbalance between penalty amounts and the actual cost of readmissions, and count only those readmissions directly related to the original reason the patient was hospitalized.

The willingness of regulators to address these concerns will demonstrate to both the public, and the medical community, that CMS is committed to improving the quality of care for the nation’s seniors, and not just cutting costs. This issue needs to be addressed urgently, before the combination of cuts in reimbursements, and an increasing number of tracked medical conditions threatens the sustainability of the program.




Preventive Care -Don’t Assume You’re Covered

One of the selling points of the Affordable Care Act was the promise of free preventive care. Indeed, a reading of the Explanation of Benefits (EOB) from your health insurance policy most likely lists a fully-covered annual “well” visit for individuals and family members, with women usually granted an additional visit covered at 100% with an OB/GYN if they have a separate Primary Care provider.

The hitch comes when your health care provider chooses the code that designates the reason for your visit. Let’s say the office requires an annual appointment in order to obtain a renewal for your blood pressure medicine. You see it as preventive, eligible for a cost free visit. You’ve been vigilant in checking your pressure at home, and take your medicine as prescribed every day. You’ve had no events, no heart attack, no stroke, no chest pain.

The doctor, however, may view checking your hypertension as diagnostic, as it may require a change in dosing of your current meds, or the addition of, or a switch to, a drug from an entirely different class of medications. Even if your BP is perfect, the doctor may feel your previous diagnosis of hypertension precludes coding your visit as preventive. To add to the patient’s perception of being misled, unless your doctor or his/her staff is savvy enough re the EOB language in your insurance policy, AND proactively informs you that you may be liable for the entire cost of your visit, you may not grasp the intricacies of medical coding until you receive a bill in the mail for the full amount.

You can call your insurer, and their customer service rep may go to bat for you with the doctor’s office, or they may refer you to a designated Health Advocate to intercede on your behalf. But, if the doctor sticks to his/her guns, you’ll be paying out-of-pocket. In today’s world of a shrinking number of doctors in private practice, your physician may be subject to the rules of the medical group that employs him/her, regardless his/her personal feelings.

Don’t feel vindicated if the bill shows an “insurance discount” subtracted from the total. That “chargemaster” amount is part of the negotiated billing contract between insurance companies and providers (doctors/medical groups/hospitals). A provider may well try to push that full price onto cash-pay patients, but negotiations with those individuals usually include a “generous” offer to reduce the bill to the rate charged insurance companies.

At the very least, insurers and providers should be transparent about the practice of how a “well” or “preventive” visit is defined. Patients should not be expected to play guessing games when scheduling an appointment, or be subjected to “bait & switch” tactics that stick them with a bill for services they were led to believe would be provided at no charge.

This disconnect between the language of the law and its interpretation when applied in the real world, is  one more reason health care dollars should be controlled by the person receiving care. Customer satisfaction should depend on the quality and cost-effectiveness of care as measured by the patient, not by lawyers or marketing-execs representing insurers and providers.