What do you mean, control drug prices? We can’t do that

The latest fight over Medicare rules shows why American healthcare costs are so high

Update, 1:44 pm: CMS has backed off the proposed rule changes, The Hill reports.

Want to understand why American healthcare costs are so high? It has something to do with the fact that while everyone’s in favor of saving some taxpayer cash in theory, no one welcomes that budget adjustment or regulatory tweak in their own backyard. And when interest groups are fighting off rule changes that threaten their slice of the health spending pie, it doesn’t hurt that they can count on getting their message out there in the press. While some journalists have set their sights on the factors that keep prices high across the system, media coverage of particular regulatory battles tends to follow a familiar template: The squeaky wheel—that is, the special interest group who’s complaining loudest—gets the lead.

Both of these patterns, the political response and the media coverage of the response, have been on display following Medicare’s latest attempt to save some cash—upwards of a billion dollars over a five-year period, according to the federal Centers for Medicare & Medicaid Services (CMS), which administers the program—through various changes to Medicare Advantage and the Part D prescription drug benefit. From the start, coverage has been framed around opposition from key industry “stakeholders”—drug companies; pharmacies; pharmacy benefit managers; health plans; disease advocacy groups, which are often funded by Big Pharma; and the politicians who’ve listened to their pleas. An alternative frame—how the rules aim to address the high price of American healthcare and other problems—gets relegated to the bottom of the stories.

Reporters shouldn’t just accept the agency’s reasoning at face value, of course, and organized opposition to beat back a rule change is news. But given that controlling “entitlement” spending has been high on the political agenda for years now, and that the president’s new budget proposal asks for higher contributions from senior citizens to help shore up Medicare’s finances, a plan that aims to cut drug prices should get a full hearing—and the motives of the groups opposing it should draw scrutiny, too.

So far, that hasn’t really happened here. The first substantial coverage of the proposed rule change, from The Associated Press on Jan. 10, the day the proposal was published in the Federal Register, began:

WASHINGTON (AP) — In a move that some fear could compromise care for Medicare recipients, the Obama administration is proposing to remove special protections that guarantee seniors access to a wide selection of three types of prescription drugs.

Advocates for patients are sharply criticizing the idea, but the Medicare prescription benefit’s first administrator says greater availability of generic drugs nowadays may allow for some protections to be safely eased.

Scary! The main rationales for the change, cost savings and curbs on improper prescriptions, don’t even get mentioned until the sixth graf. That’s followed by a long discussion of criticisms by patient advocacy groups, a few grafs outlining the thinking of CMS, and a kicker from an industry analyst who raises patient-protection concerns again. Not mentioned at all: drug industry support for the National Alliance on Mental Illness and the National Kidney Foundation, the two patient advocacy groups quoted in the article.

In late February and early March, the opposition kicked up a notch. Members of Congress and a broad range of stakeholders started sending letters to CMS, and Jonathan Blum, an official at the center, was called to testify before a House subcommittee. That sparked a new wave of coverage, and though it was a bit more balanced than the initial AP account, that’s a low bar. Opposition from PhARMA, NAMI, and the Leukemia & Lymphoma Society got plenty of play in The New York Times’ account; the acknowledgment that “many groups back some aspects of the proposal while opposing others” gets tucked in at the end. A Wall Street Journal piece five days later, pegged to some resistance in the Senate, was slightly different in focus but similar in emphasis. A Kaiser Health News piece by Mary Agnes Carey, which was picked up by USA Today and The Washington Post, was the best of the bunch: It opened with a long treatment of the criticisms but followed with a full discussion of CMS’ rationale, and the article was paired with a sidebar outlining three key changes in the proposed rules in more detail.

Reporters who want to dig deeper into this story might look at Carey’s story and sidebar as a starting point. In the same vein, here is a brief summary of what Medicare has proposed and what the dispute is about:

• CMS is proposing to remove some categories of drugs—immunosuppressants, antidepressants, and, in 2016, antipsychotics—from a “protected” classification, which has meant that all insurance company formularies had to include every drug in each class. The center argues that without the mandate, beneficiaries would still have plenty of drugs to choose from but manufacturers would have to negotiate to make sure their drugs are offered, so benefit plans could bargain for better prices. CMS also says the change would support broader efforts to crack down on inappropriate prescriptions that could harm patients, following a report by the Office of the Inspector General and a story last year by ProPublica that highlighted concerns.

If it works, this move would restrain drug prices the same way “narrow networks” might control other costs—increasing insurers’ negotiating power by allowing them to restrict consumers’ choices. And like narrow networks, it will be important to watch closely what happens if the rule goes into effect. When a patient really does need a drug that’s not offered on the plan, for example, how smoothly does the appeals process work?

But it’s important to remember that there’s not always a lot of distance between patient advocacy groups and drug manufacturers. Drug manufacturers, of course, have pretty clear reasons to oppose a change that costs them bargaining power.

• A separate provision in the new regulations would limit the number of stand-alone prescription benefit plans that insurers can offer—which may explain why they’re also upset, even if they’ll be gaining some negotiating power. In 2013 beneficiaries on average had a choice of 31 stand-alone drug plans in a region. Consumer advocates believe that’s too many for the average person to compare, and most beneficiaries don’t switch plans once they’ve made an initial choice, even as terms change. The proposed rule says insurers can offer only one basic and one enhanced drug plan in each region. CMS says the additional enhanced plans that insurers sold offered few meaningful differences, and they’ve become largely irrelevant with the gradual closing of the “donut hole” for seniors who have large drug expenses.

The Journal story mentioned above featured the head of a benefits-plan trade group, who said that the proposed rules “would eliminate or significantly change about half of the Medicare drug plans that are currently available.” Another blow to consumer choice! But Raymond Thorn, a CMS spokesman, told me the change would affect only two percent of the beneficiaries enrolled in stand-alone drug plans, or about 550,000 people of the more than 22 million beneficiaries who have them. And those people, of course, would still have access to the remaining plans.

• The new rules also seek to ensure that beneficiaries really do get the lowest prices for their medications when they use so-called “preferred networks” within a pharmacy’s general network. Pharmacies negotiate lower prices for these networks, which in theory is supposed to mean savings for consumers, but “sometimes preferred networks are not getting the best prices,” Thorn says. CMS would require all price concessions from pharmacies to be reflected in negotiated prices, and health plans could not incentivize the use of selected pharmacies if the pharmacy charges higher rates than its competitors. The rule would also require insurers to allow any retail pharmacy willing to take a lower negotiated reimbursement to participate in the insurer’s preferred pharmacy network. The idea is to save money for beneficiaries as well as the taxpayers who help fund the drug benefit.

A few years ago Murray Ross, a vice president of the Kaiser Foundation Health Plan, spoke to a group of journalism students in New York City. He laid out what he called the “tools of the trade” for stakeholders to get their way whenever Medicare threatened to control costs: making campaign contributions, co-opting patient groups, dressing up fairness as an issue, claiming to promote innovations, and suppressing information. Journalists should certainly cover opposition to the proposed rule changes and provide independent scrutiny of Medicare’s plans. But these “tools of the trade” provide another important frame for thinking about, and covering, what’s happening.

Related content:

America’s healthcare prices are absurd. So, now what?

Big Pharma’s army of messengers

Cut to: Medicare cuts

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman. Tags: , ,