It is time for the latest edition of The Week That Was, our rehash of the real and sometimes surreal moments in healthcare headlines.
This week, we profile how St. Jude’s pacemakers are not up to speed and potentially giving its suitor Abbott Labs heart palpitations. UnitedHealthcare may be using patients’ out-of-pocket copay costs to line “its own pockets.” And finally, new research published in The New England Journal of Medicine argues that copay cards designed to improve the affordability of medicines, are in fact, increasing healthcare costs.
Read on for more, and if you missed us last week, check us out on The Holmes Report.
JUDE PACEMAKERS GOING TICK, TOCK STOP?!
Talk about one battery you really can’t afford to burn out! In very disconcerting news, St. Jude Medical Inc. announced last week a recall of some of its 400,000 implanted heart devices (e.g., “pacemakers”), after premature battery depletion was linked to two deaths in Europe. A patient died after his device’s vibration signal indicated “low power,” but stopped working unexpectedly. The batteries are meant to last seven years or longer, so these premature battery wipeouts are causing significant concern to pacemaker recipients. The FDA said patients should seek immediate medical attention if they get a low-battery alert from the devices. But St. Jude’s own physician advisory board recommended holding off on prophylactic replacements, which could put pacemaker recipients at even more risk than the chance that their battery will give out earlier than expected.
Hundreds of thousands of people with pacemakers are feeling much alarm – and they are not the only ones to have their hearts racing over this news. Abbott Laboratories, who agreed to buy St. Jude’s for $25 billion last spring may also be having palpitations. While Abbott is likely to close the deal, no acquirer likes to learn about an issue mid-deal. And this is not the only crisis St. Jude is dealing with: the company is also defending against allegations that its heart devices contain defects that make them susceptible to cyber hacks. Here’s hoping they get things back in normal rhythm pronto.
DRUG COUPONS: “WOLVES IN SHEEP’S CLOTHING?”
Are medicine co-pay cards “wolves in sheep’s clothing?” “Yes,” says Harvard Business School’s Leemore Dafny. The professor says coupons designed to help consumers bear the cost of branded drugs are actually driving up healthcare spending. New research that Dafny published in The New England Journal of Medicine found an association between the availability of drug co-pay coupons and faster price increases on those medicines. According to the findings, patients were less likely to switch to cheaper, generic medicines when a coupon was available for a branded medicine. Dafny and fellow researchers suggest co-pay coupons can increase the total healthcare spend because insurers pass on rising drug costs to patients in the form of higher premiums. The researchers estimate that coupons for 23 medicines with a generic alternative resulted in an extra $700 million to $2.7 billion in drug spending over a five-year period.
It is a bad sign when the tools designed to make medicines affordable to those who need help are pilloried in the nation’s top medical journal and by politicians like Senator Elizabeth Warren. Remember last spring when Senator Warren criticized former Valeant CEO Mike Pearson for how co-pay programs and charities “masked” costs to the healthcare system for expensive drugs? While medicine makers have traditionally leaned on co-pay cards to address patient affordability concerns, over-reliance on such programs to offset significant price increases is likely to backfire.
UNITEDHEALTHCARE OVERCHARGING CUSTOMERS?
UnitedHealthcare may be relying on patients “out-of-pocket” costs to put money “in its own pockets.” Three customers are suing Minnesota-based UnitedHealth Group Inc., alleging that the health plan overcharged for drug co-payments and pocketed the difference. The lawsuit, which could involve tens of thousands of members, claims that UnitedHealth negotiated rates with pharmacies on a wide variety of low-cost drugs, to then turn around and charge its members co-payments which were significantly higher than the negotiated rates. The lawsuit argues that because the “co-pay” fees cover the cost of the drugs plus a significant margin for UnitedHealth, they are actually “hidden additional premiums.” One example used in the case stated that customers paid $50 co-pays for the contraceptive Sprintec − for which UnitedHealth only paid the pharmacy $11.65—retaining nearly $39 in profit. In 2000, UnitedHealth paid $10 million to settle a similar suit.
For the last year, health plans have played cost containment “heroes” and positioned biopharmas as culpable in the drug-pricing debate. But payers need to be careful how strongly they push their “good guy” claims. Recent Congressional hearings have started to shine a light on how costs added during the pharmaceutical supply chain are ultimately passed on to patients. Claims of overcharging patients, combined with high-profile coverage denials — such as Anthem’s recent coverage denial of Sarepta for Duchene’s diseases — may start calling into question payers’ sterling intent. Coupled with other financially driven decisions to pull out of health exchanges, the public and policymakers may soon be asking payers like UnitedHealth whether it is using its clinical data and negotiating power to keep system costs down, or to keep its own profits high.
That is all until next week.
– The Issues Management Practice @inVentiv Health PR
If you missed us last week, find The Week That Was by clicking here.