Editor's Note: This is a complimentary research note published by Healthcare Policy analyst Emily Evans. CLICK HERE to get COVID-19 analysis and alerts from our research team and access our related webcasts.
"I'm shocked, shocked to find that gambling is going on in here"
- Captain Louis Renault, Casablanca
On Thursday, President Trump announced that, as part of recent Executive Orders, the Centers for Medicare and Medicaid would be issuing $200 drug discount cards to Medicare beneficiaries. The announcement was met with some puzzlement and the usual election year accusations about bribing the electorate, especially the vote-rich over-65 crowd.
Far be it from us to defend such short range initiatives but it is not as crazy as it sounds.
To start, punishing friends and rewarding enemies and investigating same is a time honored political tradition. Medicare has an antiquated claims paying system today because the Texas Medical Association feared "socialization of medicine" and appealed to fellow Texan, Lyndon Johnson, a man who knew a trade when he saw one.
Most recently President Obama's administration expanded bonuses to Medicare Advantage plans beyond what was contemplated by the ACA. Investigations ensued led by the memorable Rep. Darrell Issa. In the end, the bonuses were necessary to shore up MA plans hard hit by ACA "pay fors."
The objections to President Trump's discount card plan are a little like being shocked there is gambling in Casablanca.
Secondly, drug cards may, at least temporarily, address a major problem with the Part D benefit; its design, enshrined in statute, does not contemplate the market distortions created by overlapping and interlocking incentives. Insulin, a 40 year old drug, has become the most egregious example. Out-of-pocket spending quadrupled between 2007 and 2017, from $286 million to $984 million. Average out-of-pocket spending per prescription has risen from $39 to $57 during the same period.
President Trump's drug deal amounts to about 3-4 months of cost-sharing relief for Part D beneficiaries dependent on insulin, as an example.
It seems that the drug discount cards would not be particularly good news for GDRX. The aforementioned benefit design, dependency of Medicare Advantage plans on rebates to supress premiums and the prohibition on co-pay assistance cards make cash payment an often attractive alternative to using the Medicare Part D insurance card.
While GDRX does not disclose, and probably doesn't know, how many of its customers are Medicare beneficiaries, most drug utilization occurs with people over 65. Of the $335 billion in prescription drug expenditures in 2018, $107 billion was paid for by Medicare, or about $2,100 per person. Private health insurance paid about $134 billion or $767 per person. It stands to reason that some of their revenue is derived from the Medicare population opting to pay cash.
And Donald Trump plans to make the federal government a competitor, if just for a little while.
Not that it matters. Every bank in America is on the cover of the S-1, coverage is being assigned to tech analysts who are learning what a PBM is and GDRX benefits from that all important factor, profitability.
ILMN appears to be the first to recognize the value of CMS's recent proposal to automatically permit Medicare coverage of devices that have been approved through the FDA's breakthrough pathway.
In May 2019, Grail was granted breakthrough designation by the FDA for its investigational blood test for multiple cancers in people 50 years and over. The breakthrough pathway, finalized in Dec. 2018, is designed to get new devices, as the FDA defines it, to market quickly. The criteria for breakthrough designation are:
- Provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions; and
- Represents breakthrough technologies
- For which no cleared or approved alternatives exist
- Offer significant advantages over existing approved or cleared alternatives, such as reducing or eliminating hospitalization, improving quality of life, improving disease management or establishing long-term clinical efficiencies; or
- The availability of which is in the best interest of patients
(The breakthrough device would need to meet both the first criteria and one of the second subcriteria)
Through something known as the Medicare Coverage of Innovative Technology, CMS will automatically cover a breakthrough device cleared by the FDA. The MCIT coverage would correct a significant problem for innovative technologies like genetic testing; uncertain reimbursement.
Price is still TBD but Grail's test, conveniently performed on ILMN's massive installed base, but will probably be set by ILMN initially as provided for under PAMA.
The overwelmingly male-ness of the U.S. Senate will make confirmation of Amy Coney Barrett to the Supreme Court a delicate matter. Pointed questions about religion, adoption and other matters of personal choice are likely to go down poorly when originating from the older gentlemen of the Senate Judiciary Committee, which is most of its membership.
Fortunately, there is health care.
Barrett arrives at her confirmation hearing just weeks before the court she aspires to hears a challenge to the ACA. While she has been critical of Chief Justice Roberts' opinion, she will no doubt assure the Senators that she will give the case a fair hearing. We would not expect otherwise.
However, the case's pendency gives Democrats the first opportunity in a while to remind voters of their primacy on the health care issue. The questions will focus the public on Republicans's challenge to the law, the peril in which guaranteed issue finds itself and the end to subsidies that may result in sudden and massive disenrollment.
Historically, these matters have been winners for Democrats. It was attempts at repeal of the ACA that paved the way for Democrats to take control of the House. Until February, health care was listed as a top issue for Americans in the Kaiser Family Foundation tracking poll. Of late, however, it has lost some of its potency.
With limited lines of attack for Democrats, it appears poised rise once again to the top beginning in mid-October.