Trump’s Big, Uncertain Step to Lower Drug Prices

Plus, Obamacare insurers have their best year yet

Trump’s Big, Uncertain Step to Lower Drug Prices, Explained

The Trump administration on Wednesday finalized a rule requiring pharmaceutical companies to disclose drug prices in their television ads if the cost is greater than $35 a month. The requirement is set to take effect as early as this summer.

This is “the most visible action the administration has taken so far to address the rising cost of prescription drugs,” The New York Times’s Glenn Thrush and Katie Thomas note.

The big question: Will it work?

Supporters of the move say it will increase transparency for patients and foster competition that will drive prices lower.

“Requiring the inclusion of drugs’ list prices in TV ads is the single most significant step any administration has taken toward a simple commitment: American patients deserve to know the prices of the healthcare they receive,” said HHS Secretary Alex Azar. “Patients who are struggling with high drug costs are in that position because of the high list prices that drug companies set.”

Critics of the proposed rule, including the pharmaceutical industry, contend that list prices are not a good indicator of what patients actually pay at the pharmacy counter since they don’t factor in the discounts and rebates that insurers and pharmacy benefit managers negotiate. They also argue that the mention of high list prices could create sticker shock that keeps patients from getting the medications they need.

Azar pushed back against some of those concerns. "If a drug company is afraid that their prices are so excessive and abhorrent that they will scare patients away from using their drugs, well they ought to look inside themselves and think about whether they should be lowering their prices," he said.

Many experts also say that it will take far more to get drugmakers to lower their prices.

“Telling people what the price is doesn’t change the price,” Stacie B. Dusetzina, associate professor of health policy at the Vanderbilt University Medical Center, told NBC News. “Instead we would need reform to price setting or related to how patient payments are set.”

The administration argued that list prices genuinely do matter to many patients, who either pay them or prices based on them. Still, the final rule will allow insurers to note that patients with insurance may pay different prices, a provisions pharmaceuticals companies wanted — and one that researchers found could undercut what the administration is trying to achieve.

2018 Was the Best Year Yet for Obamacare Insurers

Companies selling individual policies in the federal health insurance markets recorded strong financial results last year, according to a new analysis from the Kaiser Family Foundation.

“Annual results from 2018 suggest that despite significant challenges and recent enrollment declines, insurers in the individual insurance market are now generally profitable,” Cynthia Cox, Rachel Fehr and Larry Levitt wrote. “Insurer financial results from 2018 … reveal the most favorable year in the ACA-compliant market’s history.”

Insurers’ ledgers were helped by a big increase in premium prices in 2018, spurred by considerable uncertainty about the effects of Trump administration’s efforts to undermine the Affordable Care Act, the report said. Potentially problematic issues included the enforcement of the of the individual mandate, the payment of cost-sharing subsidies, the reduction in outreach spending and the possibility that the ACA would be revoked entirely.

As it turns out, the markets were more stable than some analysts had predicted, and the premium hikes were more than enough to cover increased costs. Average premiums per enrollee rose by 26% but claims rose by just 7%, boosting average gross margins to a record $167 per enrollee (see the chart below).

In the wake of this sharp uptick in profitability, insurers are expected to pay roughly $800 million in rebates to more than 3 million enrollees. The ACA’s “medical loss ratio” standard requires most insurance companies to spend at least 80% of their premium income on health care and pay refunds to enrollees if profits, marketing and administrative expenses exceed 20%.

The bottom line: The report concludes that while “markets in some parts of the country remain more fragile, the individual market on average is becoming more profitable. Some insurers have exited the market in recent years, but others have been successful and expanded their footprints, as would be expected in a competitive marketplace. … While signups through the marketplace during the 2019 open enrollment period declined somewhat compared to 2018, financial results suggest the market is still stable and sustainable.”

Quote of the Day

“The Democrats want some [items] we don’t want, we want some they don’t want, the president wants some that the Democrats don’t want. It’s a merry-go-round. It’s taking a long time. We’re either close to something or we’re not. I don’t know.”

– Sen. Richard Shelby (R-AL), chair of the Senate Appropriations Committee, on negotiations over a disaster aid bill stalled by differences over funding for Puerto Rico, as quoted by Roll Call. Prospects for the package have been further complicated by the Trump administration’s request that it include an additional $4.5 billion in border-related funding, Roll Call reports, adding that Shelby indicated that failure to reach a bipartisan agreement on disaster aid would signal problems for talks on setting 2020 spending levels.

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Chart of the Day: The Explosive Growth of the EITC

The Earned Income Tax Credit, a refundable tax credit for low- to moderate-income workers, was established in 1975, with nominal claims of about $1.2 billion ($5.6 billion in 2016 dollars) in its first year. According to The Tax Policy Center, by 2016 “the total was $66.7 billion, almost 12 times larger in real terms.”

Number of the Day: 47.4%

For the first time, more American doctors are employees than owners, according to a new report from the American Medical Association. In 2018, 47.4% of physicians were employees, while 45.9% had an ownership stake in their own practices. The remaining 6.7% were independent contractors. In 1983, 75.8% of doctors in the U.S. were owners.

This shift toward employee status for doctors is part of a long-term trend, although it’s not clear how far that trend will go, the AMA said. Axios’s Caitlin Owens said the move away from physician-owned practices could raise costs, at least to the extent that doctors become employees of hospitals systems. “Health insurers pay significantly more for routine patient visits when they are in a hospital-owned practice instead of an independent clinic — even though the services are the same,” Owens wrote.

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