The total could grow as four states and Washington, D.C. continue enrollment through Jan. 31.
The Affordable Care Act is more popular than ever, with a record 21.3 million people signing up on the landmark law's Health Insurance Marketplace during the federal open enrollment period, the Centers for Medicare & Medicaid Services says.
The latest enrollment figures represent a 31% increase over the 16.3 million people enrolled in 2023. That record participation could grow within the next week because enrollment in four states and the District of Columbia continues through Jan. 31, CMS says.
Total plan selections so far include more than five million new enrollees, representing about 25% of total plan selections this year, and 16 million people who renewed coverage, CMS says.
HHS Secretary Xavier Becerra says the record enrollment shows that "the ACA continues to be a successful, popular, and important federal program to millions of people and their families."
"For decades, when it came to federal programs we could depend on to keep Americans covered, three were always top of mind — Medicare, Medicaid, and Social Security, but now it's crystal clear that we need to add a fourth — the Affordable Care Act," Becerra said.
The Biden Administration is crediting subsidies and policies provided in the Inflation Reduction Act and the American Rescue Plan that keep premiums affordable. Because of that, HHS says, "four in five HealthCare.gov customers were able to find health care coverage for $10 or less per month for plan year 2024 after subsidies."
Compared to the 2023 open enrollment, nearly 4.2 million more people with household incomes less than 250% of the federal poverty level (about $75,000 per year for a family of four) enrolled in 2024 coverage. As of December 31, 2023, CMS data show that 2.4 million plan selections in states that use HealthCare.gov, or approximately 15%, were made by people previously enrolled in Medicaid or Children's Health Insurance Plan.
The federal open enrollment period ran from Nov. 1, 2023, to Jan. 16, 2024, for states using the HealthCare.gov platform. Although the open enrollment has ended, people who qualify for Medicaid or CHIP can enroll year-round. For those no longer eligible for Medicaid or CHIP, a special enrollment period is available to enroll in Marketplace coverage.
Additionally, people with household incomes less than 150% of the federal poverty level ($22,000/year for a person and $45,000/year for families of four) can enroll in Marketplace coverage anytime through a special enrollment period. Consumers who experience a change of life circumstance — such as marriage, birth, adoption, or loss of qualifying health coverage — may also be eligible for a special enrollment period.
President Barak Obama created the ACA and signed it into law in 2010.
Red States Embrace 'Obamacare'
The biggest enrollment growth so far has been in Republican-leaning states, some of which have rejected Medicaid expansion and / or cut their Medicaid rolls, CMS data show.
West Virginia saw the largest year-over-year enrollment increase of 80.2%, followed by Louisiana (75.9%), Ohio (62.2%), Indiana (59.6%) and Tennessee (59.5%). In addition, Mississippi, Arkansas, Alabama, South Carolina, Georgia, Arizona and Texas saw enrollment growth of at least 50%. In Florida, 4.2 million people signed up for health insurance, up from one million in 2023 and the most of any state. Only Maine ( -2.6%) and Washington, D.C. ( -1.4%) saw enrollment drop this year.
Despite the popularity of the ACA, it continues to be a hot button political issue. Former President Donald Trump, the likely GOP presidential nominee, failed to kill the ACA during his term in office, but he has pledged repeatedly to replace the ACA, which he has called "a disaster."
"I don't want to terminate Obamacare, I want to REPLACE IT with MUCH BETTER HEALTHCARE. Obamacare Sucks!!!" Trump wrote in a November 2023 post on Truth Social.
However, Trump has never provided details on what his plan would look like.
Senate HELP Committee mulls subpoenas if J&J, Merck CEOs refuse 'invitation' to testify.
(Updated to include responses from Merck and J&J)
Firebrand Senator Bernie Sanders is calling three pharma CEOs to Capitol Hill, pressing them to explain before lawmakers – and possibly under oath -- why their drugs sold in the United States cost hundreds and thousands of dollars more than in other countries.
The big question: Will the CEOs show up?
Sanders (I-VT), chairman of the Senate Health, Education, Labor and Pensions Committee, is incensed that Johnson & Johnson CEO Joaquin Duato and Merck CEO Robert Davis ignored the Nov. 21 request by committee Democrats to appear voluntarily. Sander says that he will ask his colleagues to subpoena the pair when the committee next meets on Jan. 31.
"It is absolutely unacceptable that the CEOs of Johnson & Johnson and Merck have refused an invitation by a majority of members on the HELP Committee to appear before Congress about the outrageously high price of prescription drugs," Sanders says.
Chris Boerner, CEO of Bristol Myers Squibb, has agreed to testify.
In letters responding to the "invitation" to testify, however, attorneys for Merck and J&J raised concerns that the hearing would "not serve a valid legislative purpose," but would instead devolve into a "broad-ranging public spectacle" that would subject the CEOs to "retaliation" for their lawsuit challenging drug price controls put forward in the Inflation Reduction Act.
"It is neither lawful nor appropriate for you to try to use the Committee's investigative powers to chill pending litigation or to punish the Companies for exercising their First Amendment right to raise constitutional challenges to congressional enactments," Jennifer Zachary, general counsel for Merck & Co. Inc., wrote in a Jan. 12 letter to Sanders.
If subpoenaed, Duato and Davis may be required to provide sworn testimony or risk fines or even jail time for contempt of Congress if they fail to show.
"These CEOs may make tens of millions of dollars in compensation. The pharmaceutical companies they run may make billions in profits," Sanders says. "That does not give them a right to evade congressional oversight. It is time to hold these pharmaceutical companies accountable for charging the American people the highest prices in the world for the medicine they need."
If the committee votes to subpoena, it would be the first time it has done so since 1981. It could create a juicy photo op with CEOs raising their hands to deliver sworn testimony, reminiscent of photos taken when the CEOs of Big Tobacco were called to Congress in 1994.
‘Outrageously High'
Sanders offered a handful of examples that he says demonstrate the gaping chasm between drug prices in the United States and those charged in other countries.
Merck sells diabetes drug Januvia for $6,000 in the U.S., $900 in Canada and $200 in France. Merck also sells cancer drug Keytruda for $191,000 in the U.S., and $89,000 in Germany.
J&J's blood cancer drug Imbruvica sells for $204,000 in the U.S., $46,000 in the U.K., and $43,000 in Germany. J&J's HIV drug Symtuza sells for $56,000 in the U.S., and $14,000 in Canada.
Bristol Myers Squibb sells its blood thinner Eliquis for $6,700 in the U.S., $900 in Canada, and $650 in France.
Sanders also noted that J&J made $17.9 billion in profit in 2022 and Duato made $27.6 million in compensation. That same year, Merck made $14.5 billion and Davis made $52.5 million, Bristol Myers Squibb made $6.3 billion and former CEO, Giovanni Caforio made $41.4 million in compensation.
The two holdouts notwithstanding, big pharma has otherwise complied with lawmakers' requests to appear. CEOs from Eli Lilly, Moderna, Sanofi, and Novo Nordisk have voluntarily testified before the HELP committee, albeit with a little prodding.
Last February, for example, just hours after being invited before the HELP Committee to explain a proposed $130 list price for COVID vaccines, Moderna CEO Stéphane Bancel announced that the drug maker would offer the vaccine for free, which Sanders sarcastically called "an amazing coincidence."
Eli Lilly CEO David Ricks told the committee in May that his company would not raise prices on existing insulin products, following public outrage over the skyrocketing costs of the century-old biologic.
'Retaliatory Motives'
In a Jan. 12 letter to Sanders, J&J attorney Brian E. Smith said his client "has two prinicpal concerns with the hearing."
"First, you and your staff have stated that the hearing will examine pharmaceutical pricing in the United States as compared to the rest of the world... a Johnson & Johnson representative is not an appropriate witness for these topics," Smith notes, adding that J&J does not hold the New Drug Application or FDA registration for Imbruvica and does not control the price in the United States, and that J&J has "only has the right to commercialize Xarelto in the United States and does not control the price outside of the United States." In addition, he noted that Stelara will have biosimilar competition in early 2025 from company that will set its own price.
"Second, and more importantly, your staff and your public comments have indicated that the hearing is intended to focus on the Inflation Reduction Act and, specifically, the companies that pursued litigation challenging certain aspects of the statute," Smith wrote. "Indeed, the Committee has chosen to invite the CEOs of three select companies that are currently engaged in such litigation."
"This targeting seems unlikely to be coincidental," Smith wrote, "and it raises significant concerns that the hearing is intended as retribution for the companies' decisions to exercise their rights to challenge a statute that inappropriately infringes on constitutionally protected freedoms. Moreover, these litigations are ongoing, and the issues raised in the litigation should be properly resolved in a courtroom, not in a Committee hearing."
Smith noted that the committee's insistance on hearing from Duato, and its refusal to hear from a expert on drug pricing offered by J&J "unfortunately elevates our concerns that the hearing is being called to punish the companies who have chosen to engage in constitutionally protected litigation... Compulsory process intended as retribution for pursuing constitutionally protected litigation would also exceed Congress’s authority under applicable Supreme Court precedent."
Merck General Counsel Zachary echoed those concerns, and suggested that any attempt to subpoena Davis would be challenged in court.
"The only companies that were called to testify were the three that had filed lawsuits–lawsuits that you have roundly criticized," she wrote. "That fact says much about the likelihood of retaliatory motives."
Inhaler Costs Leave Bernie Gasping
In a related action earlier this month, Sanders and Democrats on the HELP Committee sent letters to the CEOs of AstraZeneca, Boehringer Ingelheim, GlaxoSmithKline, and Teva, -- the four largest makers of asthma inhalers -- telling them that the HELP Committee is "launching a major investigation into the extremely high prices these companies charge for inhalers that 25 million Americans with asthma and 16 million Americans with chronic obstructive pulmonary disease (COPD) rely on to breathe."
"There is no rational reason, other than greed, as to why GlaxoSmithKline charges $319 for Advair HFA in the United States, but just $26 for the same inhaler in the United Kingdom," the letters say. "It is unacceptable that Teva is charging Americans with asthma $286 for its QVAR RediHaler that costs just $9 in Germany. It is beyond absurd that Boehringer Ingelheim charges $489 for Combivent Respimat in the United States, but just $7 in France."
"Those prices are only possible in the U.S. because these companies have manipulated regulations to boost their bottom lines," the letters say.
The letters note that inhalers have been on the market since the 1950s and that most of the drugs within the inhalers have been around for more than 25 years. Yet, in the past five years alone, the four companies have reported making more than $25 billion from inhalers, and that between 2000 and 2021, manufacturers of all inhaler products in the U.S. raked in more than $178 billion in revenue.
Specifically, the letter asks the CEOs to explain:
How they decide to add new features to old inhalers or to move patients off of old products and onto new products, tactics that keep lower-cost generics off the market.
Whether the companies have evidence that their new products have any real clinical benefits compared to the old products.
The costs involved in manufacturing their inhalers and information about their patient assistance programs – which provide free or discounted inhalers to patients – including how much the companies deduct from their corporate taxes for operating those programs.
How much the drugmakers spend on research and development for asthma and COPD.
...year-over-year still short of pre-pandemic levels.
Hospital operating margins continue to grow and stabilize, although the gap between high- and low-performing hospitals remains wide, a new report shows.
The median calendar year-to-date operating margin index for hospitals in November was 2%, reflecting an ongoing improvement. However, the margins have yet to return to levels seen in pre-pandemic 2020 and 2021, according to Kauffman Hall’s latest National Hospital Flash Report.
Year-over-year inpatient and outpatient revenues for November 2023 increased by 5% and 9%, respectively, total expense adjusted discharges fell, and revenue per adjusted discharge grew—all indicators of financial recovery, according to the KH report, which relies on data from more than 1,300 hospitals.
These favorable trends reflect the efforts that hospitals have taken to deliver care in the most effective settings and reduce reliance on contract labor when possible.
Erik Swanson, senior vice president of Data and Analytics with Kaufman Hall says "hospitals should take advantage of the relative stability and re-embrace strategic growth if they hope to see continued success in 2024."
"Growth strategies may vary from hospital to hospital, but all leaders should ensure that they are supporting goals beyond just profitability and scale, including business model transformation and diversification," he says.
In addition, average length of stay fell indicating a shift towards more normal patient acuity. Swanson says that hospitals that have adopted value-based and bundled payment models will benefit further as they transition and provide care at the appropriate clinical setting.
The 38,000 job gains in December was below the monthly average 54,000 jobs healthcare created over the past 12 months.
Healthcare job growth continued to be an economic driver in 2023, creating 653,000 jobs over the 12-month span and accounting for 24% of all jobs created in the overall economy last year, preliminary federal data show.
The 38,000 new healthcare jobs created in December was down from the sector's 54,000 monthly average in 2023, but still accounted for nearly 40% of the 215,000 new jobs created in the United States in the last month of 2023.
The 653,000 new jobs in 2023 is a 17% increase year-over-year from the 557,000 healthcare jobs created in 2022, and the healthcare sector accounted for 17.2 million jobs in 2023, up from 16.6 million jobs at the end of 2022, the Bureau of Labor Statistics reported Friday.
Within healthcare, ambulatory care services continued to lead in job creation, accounting for 19,000 new jobs in December, and half (320,000) of all healthcare jobs in 2023. Hospitals accounted for 15,000 jobs in December and 183,000 jobs for the year, and nursing and residential care accounted for 3,200 jobs in December and 151,000 for the year.
The unemployment rate in the larger U.S. economy held fast at 3.7%, BLS says, with 6.3 million people reporting as unemployed, unchanged from November.
Big job gains also were seen in government (52,000) and leisure and hospitality (40,000).
The average hourly earnings for all employees on private nonfarm payrolls in November rose by 15 cents, or 0.4%, to $34.27. Over the past 12 months, average hourly earnings have increased by 4.1%. The average hourly earnings of private-sector production and nonsupervisory employees rose by 10 cents, or 0.3%, to $29.42.
December and November job numbers are considered preliminary by BLS, and subject to revisions.
This latest preliminary injunction is the commission's fourth successful healthcare sector merger challenge within a one-month span.
IQVIA Holdings' proposed acquisition of rival Propel Media has been temporarily enjoined by a federal judge while the Federal Trade Commission works to permanently block the consolidation of the two healthcare advertising platforms.
During a two-week hearing in November and early December before U.S. District Court Judge Edgardo Ramos, the FTC had sought a preliminary injunction for the deal, arguing that consolidating IQVIA's Lasso Marketing and PMI's DeepIntent -- two of the three largest providers of demand-side advertising platforms -- would give IQVIA an anticompetitive edge for a service that targets ads for pharmaceuticals and other healthcare products to physicians.
Regulators had argued that the merger would incentivize IQVIA – described by the FTC as "the world's largest healthcare data provider" -- to withhold information that would kneecap competition from rivals and discourage newcomers from entering the emerging industry.
Ramos agreed with regulators and in a December 29 ruling said "the FTC has shown that there is a reasonable probability that the proposed acquisition will substantially impair competition in the relevant market and that the equities weigh in favor of injunctive relief."
The FTC will argue for a permanent injunction at an administrative hearing that begins January 18.
FTC Bureau of Competition Director Henry Liu boasted that the injunction is the fourth successful attempt by the commission within the past month to stifle healthcare sector consolidation, which he said has been shown to increase prices and reduce quality for consumers.
"To close out 2023, the FTC secured another significant victory that temporarily blocks an anticompetitive merger that would raise health care prices for consumers," Lui says. "The federal court's order in IQVIA is also a win for the FTC as it continues to challenge anticompetitive deals involving health care and emerging technology platforms."
Durham, NC-based IQVIA issued a statement saying it was "disappointed by the court's decision."
"We are reviewing the decision and evaluating our options. IQVIA's acquisition of Propel Media would make it easier for patients and doctors to obtain the healthcare information they need to make better decisions that lead to better health outcomes. We maintain that the FTC's arguments in this case are inconsistent with the reality of the marketplace and unsupported by the law," the statement read.
In December, the FTC also successfully challenged Illumina's acquisition of Grail, John Muir's takeover of San Ramon Regional Medical Center from Tenet Healthcare, and Sanofi's acquisition of Maze Therapeutics' Pompe disease drug.
The agreement fines Cerebral $200,000 for its illicit practices and returns $540,000 to more than 16,500 affected consumers.
Cerebral will pay $740,000 in fines and restitution and provide a "click-to-cancel" button on its website after New York regulators cited the online mental healthcare provider for an overly burdensome cancellation process.
In a media release Thursday, New York Attorney General Letitia James says an investigation by her office found Cerebral required subscribers to cancel by email, but then forced them to take additional, needless steps such as completing a multi-question survey, before processing the cancellation.
In a media statement, Cerebral noted that it was "pleased" with the settlement and "has not admitted any wrongdoing."
"(This) allows us to move forward with a continued focus on our mission of building a new era of high-quality mental healthcare," the statement read.
Cerebral could cancel subscriptions with the click of a button, the AG reported, but gave itself up to 72 hours to finalize cancellations – and at times took a week or more. Cerebral used the delay to badger subscribers with renewal offers, and when delays crossed a consumer's billing date, Cerebral charged them for another month of service.
The AG's investigation also found that Cerebral charged consumers for its mental health treatment services, even when it had no providers available to provide the treatment.
In addition, the AG's investigation found that Cerebral illegally ordered its employees to anonymously post and "upvote" bogus positive reviews while "downvoting" negative ones. Employees were also ordered to contact customers directly and ask them to remove negative reviews, and to tell them, "We wouldn't want anything online to deter someone from seeking mental health care and that's really why we ask people if they are willing to" edit or remove the review, the AG's report says.
The agreement fines Cerebral $200,000 for its illicit practices and returns $540,000 to more than 16,500 affected consumers and stop its deceptive and burdensome tactics. Cerebral will pay restitution directly to eligible consumers within 90 days, crediting the payment account originally billed for the subscription.
The AG's office opened an investigation of Cerebral's cancellation practices following a rash of consumer complaints. Shortly after the AG launched the investigation, Cerebral streamlined its cancellation process to include a "click-to-cancel" process and implemented other recommendations made by regulators on disclosure and refunds. Cerebral also agreed to make no more than one follow-up attempt to retain former subscribers.
Cerebral Responds
Cerebral sent this statement to HealthLeaders.
"We are pleased to report that Cerebral has reached a settlement with the NYAG to close its investigation into Cerebral's business practices. The Company's continued commitment to evolving and improving its compliance practices, and our clinician-led leadership team's unwavering commitment to patient safety and privacy have been integral to our reaching this resolution with the NYAG. Cerebral has been transparent and cooperative throughout this process and remains committed to providing excellent care for our valued patients while upholding the highest standards in full compliance with all applicable laws."
"As acknowledged by the NYAG, shortly after the NYAG launched its investigation, Cerebral began improving its cancellation process and implementing other recommendations made by the NYAG. Cerebral recognizes that clients who have benefitted from its mental health care services may be ready to cancel their subscription and is committed to honoring those cancellation requests.
We continue our deep commitment to our patients' overall well-being, and we will continue to improve our clinical and business practices to stay compliant with the quickly evolving telehealth regulatory landscape."
"The NYAG settlement, in which Cerebral has not admitted any wrongdoing, allows us to move forward with a continued focus on our mission of building a new era of high-quality mental healthcare. We look forward to continuing to be a trusted mental health partner to all who need care.
The hospital self-reported the breach that affected more than 54,000 people.
New York Presbyterian Hospital will pay a $300,000 fine for a data breach that for six years sent visitors' personal information captured on the hospital's website ads to Meta and other third-party tech vendors, the New York State Attorney's Office said Wednesday.
According to the AG's office, between 2016 and 2022 NYP used unvetted third-party tracking pixels and tags on its website that sent visitors' data back to vendors whenever the website loaded or when a visitor clicked a link, submitted a form, or ran a search.
In some cases, the AG's office says, the data sent back to vendors included personal health information along with users' IP addresses and the URL for the webpage that had been accessed.
"If a user searched for a doctor by specialist or condition, researched a health condition, or scheduled an appointment, information about the user's doctor or health condition were in some cases reflected in the URL," the AG's office says in a media release.
"For example, if a user conducted a search using the words 'spine surgery,' the URL of the search result page would include 'spine-surgery' and the third party would receive that health information about the user."
Some vendors also collected "unique identifiers" stored in the users' devises that allowed the vendors to identify the users they had previously interacted with, including first and last names, email addresses, mailing addresses and gender information, the AG says.
The breach was identified in June 2022 when a journalist reported on the use of the tracking tools on the NYP website. NYP immediately disabled the tracking tools and hired a third-party forensic company to assess the extent of the breach.
In March 2023 NYP formally reported that the breach affected more than 54,000 people.
NY Pres Responds
New York Presbyterian issued the following statement in response to the AG's media release:
"We are pleased to have reached a resolution with the New York State Attorney General on this matter. The privacy and security of our patients' health information is of paramount importance, and the protection of this confidential information remains a top priority. We continually assess our data collection, data privacy, and digital monitoring tools and practices so that they meet or exceed the highest standards."
New Security Procedures
In addition to the fine, NYP will adopt procedures to prevent the disclosure of protected health information through tracking tools, including:
Maintaining appropriate policies and procedures on the use of third-party tools;
Conducting regular audits, reviews, and tests of third-party tools before deploying them to a NYP website or app;
Conducting regular reviews of the contracts, privacy policies, and terms of use associated with third-party tools; and
Instructing third parties to delete any protected health information they received.
The Indianapolis-based nonprofit system has admitted no wrongdoing.
Community Health Network will pay $345 million to resolve allegations that "senior management" knowingly billed Medicare in an "illegal scheme" that relied on illicit physician referrals, the U.S. Department of Justice announced this week.
The alleged violations of the False Claims Act and the Stark Law date back to 2008, and stem from a 2014 whistleblower lawsuit filed by CHN’s former CFO/COO Thomas Fischer.
The DOJ complaint alleges that beginning in 2008 and 2009, senior management at CHN launched an illegal scheme to recruit and hire hundreds of local physicians — including cardiovascular specialists, neurosurgeons and breast surgeons — to capture their downstream referrals.
In exchange, the physicians were paid exorbitant salaries that were sometimes double what they earned in private practices. "Community was well aware of the Stark Law requirements that the compensation of employed physicians had to be fair market value and could not take into account the volume of referrals," DOJ says in its complaint.
To cover their tracks, CHN hired a valuation firm to analyze the compensation it proposed paying to its recruited specialists, but knowingly gave the firm bogus compensation figures to gain a favorable review, DOJ says.
The complaint says CHN ignored repeated warnings from the valuation firm about illegally overpaying physicians, who also were awarded bonuses based reaching a target for referrals, also a violation of the Stark Law.
"Hoosier Medicare patients deserve to know that their care is based on their medical needs, not their doctor’s financial gain," U.S. Attorney Zachary A. Myers for the Southern District of Indiana says in a media release.
"When doctors refer patients for CT scans, mammograms or any other medical service, those patients should know the doctor is putting their medical interests first and not their profit margins."
In addition to the $345 million settlement, CHN will be under a five-year Corporate Integrity Agreement with the Department of Health and Human Services' Office of the Inspector General.
CHN Responds
Community Health Network says in a media statement that the more than one-third-of-one-billion-dollars settlement comes "with no finding of wrongdoing" on its part, and that the settlement will be paid from reserves. CHN had operating revenue of $3.1 billion in 2022.
"This is completely unrelated to the quality and appropriateness of the care Community provided to patients," CHN spokesperson Kris Kirschner says. "This settlement, like those involving other health systems and hospitals, relates to the complex, highly regulated area of physician compensation. Community has consistently prioritized the highest regulatory and ethical standards in all our business processes."
"Community's caregivers and our services will not be impacted by the settlement," said Kirschner. "Community's leadership has ensured the ongoing health and growth of the organization," Kirschner says.
One expert believes that drug price increases will fall in line with inflation as measured by the CPI.
The pharmaceutical sector is a hive of activity these days, buzzing with breakthrough treatments for stubborn diseases such as Alzheimer's and obesity, and with sickle cell anemia, an outfight cure.
These drugs can be very expensive. The gene therapy needed to cure sickle cell anemia, for example, costs almost $3 million per patient. By comparison, the Alzheimer's drug Leqembi, at almost $25,500 per patient, per year, seems like a bargain. The wildly popular weight-loss drug Ozempic, with a cost of merely $900 to $1,300 per month, sounds like a giveaway.
Despite the headlines that conflate expensive new drug treatments with rising drug costs, Eric Tichy, Pharm.D., MBA, vice chair of pharmacy formulary at the Mayo ClinicMayo Clinic, says it's important to make the distinctions between drug costs and drug expenditures.
He offers his thoughts on the topic, and other issues that are expected to confront providers in 2024 in this interview, which has been edited for brevity and clarity.
HL: Do you anticipate big drug price hikes in 2024?
Tichy: There are several things that are going to prevent inflation of drug prices. One of those is the Inflation Reduction Act, which has caps on how much a drug price can be raised year-over-year based on the Consumer Price Index for that given year.
Where we've seen a lot of spend increase over the last couple of years is where there's new drugs developed to treat things that didn't exist before. Think about Alzheimer's disease, where there haven't been effective medications in the marketplace in the last two or three decades. There are some new medications that have been approved to treat Alzheimer's and they're modestly expensive. However, the population of how many people can be treated is very high. That's something that could increase expenditures.
Also, we haven't had effective weight-loss medications until very recently. When you have a therapy that meets an unmet need, there can be huge demand. That's why there's so much uptake of those medications. Those are our biggest drug spends now. Weight-loss drugs will be the No. 1 spend in 2023 once we have all the data.
There's potentially huge downstream savings. We're learning, for example, that some of these medications prevent heart attacks and things like that. But we need time. With some of these savings, we won't see it for 10, 15, 20 years. As we have more of that information over time, it will support the prices of these medications and make the case for why payers should cover them.
HL: What is driving high drug costs?
Tichy: Some of these new drugs treat very rare conditions affecting small populations, and they’re priced to maintain profitability for the manufacturers, despite a low treatment population. If you didn't have these prices, there would not be incentives for manufacturers to develop these products.
The Orphan Drug Act was developed to incentivize production of these rare medications that treat rare conditions, and new developments in medicine have allowed us to get more precise with how we treat these conditions. It's this confluence that's leading to a larger number of high-cost products hitting the marketplace.
There's also an important nuance between drug prices and drug expenditures. I expect the price growth will be close to inflation, maybe even less than inflation. It has been less than inflation for the last couple of years.
People conflate expenditures with prices, and we expect drug expenditures will keep going up. A lot of that's because there are new drugs for things that as of yet don't have treatments, or there are drugs being developed where the current treatment is cheap but ineffective.
HL: How do you see the ongoing drug shortages playing out for hospitals in 2024?
Tichy: Hospitals have had problems with drug shortages for going on two decades and it's gotten worse recently. These shortages are not going to get better unless there are some serious policy changes. I'm optimistic that there's a lot of attention around it, and that Congress is very informed about it.
HL: Have we reached a point where treatments or cures are available – but unaffordable - for diseases such as sickle cell anemia or dementia?
Tichy: The key word is "cure." With sickle cell, for example, you're curing the disease for patients who suffer through a lifetime of illness that might put them in and out of the hospital. They might have to take other expensive medications. Hemophilia patients often spend hundreds of thousands of dollars a year on clotting factor medications. Gene therapies can treat and cure disease in one treatment.
Another challenge is that the healthcare system is designed for chronic therapies. With weight-loss medications, the manufacturer has a patient on that for a lifetime. If they come off the medication they regain their weight. With sickle cell therapy, they do this treatment and they're not going to have symptoms of sickle cell disease for the rest of their lives. How do you pay for that all-in-one, lump-sum upfront? Our healthcare system is not designed to do that.
HL: Didn’t we see that play out with hepatitis C a few years back?
Tichy: That's a great example because about 10 years ago, people were saying, "these hepatitis C medications are going to bankrupt us. It costs $30,000 a month for those therapies." They were $30,000 a month, but for three months of therapy you cured hepatitis C. Now we rarely are treating hep C because we've cured so many people, and by curing hep C we prevent the need for liver transplants and reduce end-stage liver disease and cirrhosis that generates long-term savings.
The financial models are challenging because cost is paid upfront for the medication, rather than like chronic diseases where it spans a patient's lifetime.
HL: Are payers discounting reductions in downstream expenditures?
Tichy: Health insurance companies look at their covered lives and say "the average person that we cover is only with our plan for a few years. The benefits of this medication accrue over a lifetime. When the patient has a heart attack or other complications, they might no longer be on our insurance plan. They're going to be on Medicare by that point."
The benefits of weight-loss medications are paid for by the commercial insurance that they're on now because they're employed, and some benefit is going to accrue to the employer but most of it is going to accrue to Medicare once they're over 65 and not having as many complications in their older age.
That’s one of the challenges. People aren't on the same health insurance plan for their entire lifetime. You could pay for my gene therapy that I got yesterday and a month later I switch companies and that new company gets all benefits and the previous one doesn't.
HL: Are downstream savings a factor in setting the prices for these drugs?
Tichy: Payers and manufacturers are doing those pharma-economic analyses and they're coming up with drug prices based on different models. There may be a disagreement between payers and manufacturers on what that's worth. Obviously, the manufacturer has an incentive to have that be a higher number, and the payer would like it to be a smaller number.
HL: Can this be solved by the market, or will it require government intervention?
Tichy: That has yet to be determined. As the technology gets more effective, these treatments can be brought to market more easily with less cost. Think about the COVID vaccines. These new platforms can bring new vaccines to the marketplace and quickly adapt them to variants. That's how the market, through technological advancements, can bring down costs.
The other thing we need is more competition. When the technological burdens are lower, that creates opportunities for more players to come into the market and leads to downward pressure on prices.
Payers may need to come up with different models and maybe even the manufacturers themselves. Some manufacturers have plans where the cost of the drug is spread out over a number of years and that's a market solution. Instead of having to pay everything up front, you spread it out over three years or more. It gets challenging over the longer term as patients may switch insurance.
HL: How does Mayo Clinic determine who will pay for ultra-high-cost therapies, and what options do you have if insurers won't pay for it?
Tichy: That's a big ethical dilemma. With almost all care that we give, we go through a financial process with the payers to make sure that we have that coverage, because at the end of the day, the patient would be the person who's billed for it. We always work with the patients to make sure that, if their insurance doesn't cover it, we can sometimes look to foundations that can cover the cost of drugs. Sometimes manufacturers have programs that will provide the drug if a patient is not able to afford it.
HL: You say in a recent report that high drug prices "may fundamentally alter how health systems deliver care." How so?
Tichy: Mayo Clinic might see a fair number of patients with rare conditions each year. At other organizations, you might see one patient every couple of years. So, these drugs that cure the disease may not be worth the investment for some smaller organizations. We may end up with a system where there's just a handful of centers across the country that are giving these therapies. The patients get referred to those centers, they get cured from those conditions, and they're no longer a chronic patient at their smaller community hospital.
HL: You talk about collaboration between pharmacy leaders and finance experts to assess financial risk associated with the provision of ultra-high-cost drugs. What would that entail?
Tichy: It's an important part of the treatment process to make sure that you have approval and coverage by the payer before you move forward with therapy. Just the raw cost of gene therapies can create cashflow problems for organizations depending on when they get billed for it versus when they get reimbursed by payers. If I'm going to spend $4 million on one treatment for one patient on a given day, if I do two of those in a month versus 10, that can have a big impact on our finances. Those are the things that we need to coordinate with our finance colleagues.
HL: Could AI help providers address drug expenditures?
Tichy: It could help with medications that have very specific indications and the patients with these conditions are rare. Using a patient's medical record, AI could quickly determine if a patient is eligible for therapy. AI can also alleviate the administrative burden that goes along with pulling all that information together.
AI gains its intelligence through the data that is put into the program, but a lot of clinical trials are done on adult, white males. So sometimes, we don't have the depth and breadth of data for other populations, such as children and minority groups. If there are differences in how patients with different genetic backgrounds respond, we could see harm. Unintentional biases can lead to incorrect treatments.
HL: How do you see the ongoing drug shortages playing out at the hospital level in 2024?
Tichy: Hospitals have had problems with drug shortages for going on two decades and it's gotten worse recently. These shortages are not going to get better unless there are some serious policy changes. I'm optimistic that there's a lot of attention around it, and that Congress is very informed about it.
It requires coordinated action by the government. We need to have industrial policy around generic drugs similar to what we do with food. With the Food and Drug Administration, we don't have food shortages because the Department of Agriculture coordinates and ensures that farms are producing the food that we need. We need something similar around drugs to ensure the continuity of our drug supply.
Scripps Clinical Medical Group says their now-rescinded mandatory retirement age for surgeons complied with California law.
A physicians group affiliated with San Diego-based Scripps Health will pay $6.8 million to resolve a federal age and disability discrimination suit filed with the U.S. Equal Employment Opportunity Commission.
The settlement for violating the federal Age Discrimination in Employment Act and the Americans with Disabilities Act stems from a 2014 mandatory retirement policy enacted by Scripps Clinical Medical Group for physicians ages 75 or older.
SCMC admitted no liability in the settlement, which the group says it accepted to avoid a costly, lengthy legal battle, and issued the following statement:
"In 2014, SCMG enacted a mandatory retirement policy, which impacted physicians age 75 or older. This policy went into effect in 2016, and was entirely consistent with California law, which specifically allows for mandatory retirement of physicians in medical groups at age 70 (Cal. Code Regs. Tit. 2, § 11084)."
"This policy was put in place to enhance patient safety. Thereafter, the EEOC took the position that this policy, while such a policy is expressly legal under California law, it is not allowed under federal law. As a result, SCMG rescinded the policy in 2018, and the policy has not been in place or utilized for over five years. SCMG recently settled with the EEOC, without any admission of fault or wrongdoing, to avoid the continued expense and distraction of litigation."
The physicians group's four-year conciliation agreement with the EEOC includes a $6.8 million payout to the surgeons affected by the retirement mandate, which Scripps rescinded in 2018. Scripps will also inform employees of the recission and clarify that the company does not have any policy in which age is a factor in making employment decisions, including termination, retirement, and terms and conditions of employment, EEOC said in a media release.
SCMG will also review and revise if necessary its policies against age and disability discrimination, and require training on the subject for division managers and other leaders.
"With demographics showing that many people are remaining in the workforce longer, it is critical for employers to understand the ADEA's protections for older workers," EEOC Chair Charlotte A. Burrows says. "For that reason, the Commission has included discrimination against older workers among the priorities identified in its new Strategic Enforcement Plan."