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US Makes A High-Priority Of Lowering Drug Prices

Drugmakers have sharply boosted prices of some older, low-cost prescription medicines amid supply shortages and recalls—in some cases, by threefold and more. US Makes A High-Priority Of Lowering Drug Prices

Patients and pharmacies grapple with sharply higher costs for certain generic drugs..

The increases are leading to higher costs for hospitals, pharmacies and patients on what are generally cheaper generic drugs, including some widely used medicines.

A Study Published Last Year In The Journal Value In Health Found That Average Prices Rose About 14% For Drugs In Shortages Lasting At Least 18 Months, And 6% During Shortages Of Less Than Six Months.

At least three sellers of a popular blood-pressure medication, valsartan, have lifted prices since a series of safety-related recalls of the drug by other manufacturers began last summer.

Virtus Pharmaceuticals in May raised the U.S. price of a bottle of a muscle relaxant that has been in short supply, methocarbamol, to $105 from $8.49. The 1,137% increase was the biggest for a prescription medicine in 2018, according to a new analysis of pricing data.

Of the nearly 120 drugs listed by the Food and Drug Administration as currently or recently in shortage, about one-third had price increases after the shortages started, according to a Wall Street Journal review of pricing data provided by RELX Group’s Elsevier health-information unit. Virtus didn’t respond to requests for comment.

Drugmakers say the price hikes reflect higher costs they have incurred to help fill supply voids that have become relatively common in recent years.

Supply And Demand

Drugmakers have raised prices for several older, low-cost medicines that face supply shortages or product recalls.

Several valsartan-based medications have been subject to recalls since last summer, after the FDA said an active ingredient from a supplier in China contained a potentially cancer-causing impurity. The agency restricted imports from the company, Zhejiang Huahai Pharmaceutical Co. Companies including Mylan NV and Teva Pharmaceutical Industries Ltd. have collectively recalled millions of bottles or cartons of valsartan.

The drug is still available from companies that haven’t been subject to recalls, and some of these have raised prices significantly.

Alembic Pharmaceuticals Ltd. of India raised the prices of several valsartan products by between 340% and 469% in July. Alembic’s price for a bottle of 90 valsartan 80-milligram tablets jumped to $155.11 from $29.98, according to Elsevier.

In August, India-based Macleods Pharmaceuticals Ltd. boosted valsartan prices by 216% to 306%. The same month, AmerisourceBergen Corp.’s American Health Packaging unit of Columbus, Ohio, raised prices for valsartan products by 57% to 63%, according to Elsevier.

A spokesman for AmerisourceBergen said its prices are affected by prices of bulk product that it purchases and repackages for health-system pharmacies. Macleods and Alembic didn’t respond to requests for comment.

In October, Alembic managing director Pranav Amin told analysts on a conference call that “one of our roles is to create a nimble supply chain that can react quickly to market opportunities,” according to a transcript. “So we could respond very fast to the valsartan opportunity, and we could ramp up our supplies and we could get on the market at a high price.”

The prices reflect so-called list prices, and drugmakers contend the ultimate price is often lower because of discounts and rebates negotiated by pharmacy-benefit managers and other purchasers. But the average price that U.S. community retail pharmacies pay for valsartan tablets has also risen—to 31 cents a tablet from 10 cents in July, according to a Wall Street Journal review of data from a Centers for Medicare and Medicaid Services survey of pharmacies.

And many patients with high deductibles often wind up paying full list price or a share of the cost derived from the list price.

David Behrman, a Houston retiree, said he used to pay about $13 out-of-pocket for a 90-day supply of valsartan to treat his high blood pressure, under a Medicare prescription plan. But he had to switch to a different company’s version because of recalls, and his cost has jumped to more than $108.

“It’s always been pretty reasonable until recently,” Mr. Behrman said. He said he emailed a complaint to the manufacturer of his new valsartan, Endo International PLC.

A spokeswoman for Endo said the Dublin-based company hasn’t increased the price of valsartan recently, and it is possible the previous supplier of Mr. Behrman’s valsartan was charging a lower price. Mr. Behrman couldn’t recall the supplier.

Overall, manufacturers of older generic drugs have come under heavy pricing pressure, as buyers including pharmacies and group-purchasing organizations consolidate and negotiate lower prices.

When shortages arise, health regulators such as the FDA sometimes ask other suppliers to boost production.

If a company incurs costs to boost production, it might choose to pass that along to customers, or “just have prices rise as a function of capitalism,” said Rena Conti, associate professor of markets, public policy and law at Boston University’s Questrom School of Business. “More limited supply meeting inelastic demand should give a producer pricing leverage should they choose to exert it.”

A study published last year in the journal Value in Health found that average prices rose about 14% for drugs in shortages lasting at least 18 months, and 6% during shortages of less than six months.

Another drug in shortage for more than a year has been hydromorphone hydrochloride, an injected opioid for pain relief, partly because one of the main suppliers, Pfizer Inc.’s Hospira unit, experienced production delays, according to the FDA.

The FDA asked another supplier, Fresenius Kabi AG, to increase production, Matt Kuhn, a spokesman for the German company, said. In late December, Fresenius boosted prices for various versions of hydromorphone, including a 15% increase for a box of 10 vials, to about $90.

Mr. Kuhn said the price increase reflected costs to boost production. “We have to make a decision to meet customer demand and shift our prioritization,” he said. Fresenius has reduced prices for other drugs, he added.

In October, Fresenius Chief Executive Stephan Sturm told analysts on a conference call, “Our various investments are meant to put us in pole position to fill any rising shortage situation.”

Mr. Kuhn said that while some price increases for generic drugs are large in percentage terms, they remain relatively inexpensive compared with brand-name drugs. This month, Pfizer, Johnson & Johnson , Allergan PLC and other drugmakers are raising list prices on many brand-name drugs that generally cost more than generics.

Updated: 7-25-2020

Trump Signs Executive Orders Aimed At Reducing Drug Prices

Critics say pegging U.S. drug costs to lower prices overseas amounts to price controls, while allowing imports from Canada raises safety concerns.

President Trump signed executive orders Friday aimed at reducing drug prices.

The moves revived a signature part of his health-policy agenda before the 2020 election after his earlier efforts to combat rising prescription costs stalled.

One of the executive orders focuses on pegging the cost of drugs in the U.S. to lower drug prices overseas, and another concerns speeding imports of drugs from Canada. The pharmaceutical industry and some Republicans have criticized the first order, saying it amounts to price controls, while opponents of the second initiative say it raises questions about product safety.

Another would require community health centers to pass on negotiated discounts on insulin and epinephrine-injector devices to consumers. And a fourth would attempt to undercut “middlemen” whom Mr. Trump described as profiting from deals with drugmakers and don’t pass along discounts to consumers.

“We’re standing up to the lobbyists and special interests and fighting back against a rigged system,” said Mr. Trump, who also said he would push for drugs to be purchased at the same prices offered to other countries.

The moves are unlikely to result in immediate changes. The White House said they represent the administration’s policy and begin a rule-making process. That process can be arduous and face legal challenges.

Mr. Trump said he would meet Tuesday with drug executives to hear their proposals on how to cut costs. “Maybe they have an idea that’s good,” Mr. Trump said. “But it’s got to be very substantial.”

The actions build on earlier White House initiatives focused on lowering health costs.

Mr. Trump is seeking re-election this fall as voters are increasingly concerned about the price of care amid a worsening coronavirus pandemic. The president has lost ground among older voters to Joe Biden, the presumptive Democratic nominee, in Wall Street Journal/NBC News polls this year, adding to his overall woes in the polls.

The president also faces criticism from Democrats who say his support for a lawsuit to undo the Affordable Care Act threatens coverage for millions of people as the virus surges in parts of the country. A growing number of voters distrust his handling of the pandemic, according to public opinion polls.

Pharmaceutical industry groups have argued the administration’s plan could threaten patient safety by letting in substandard or counterfeit drugs. Canadian officials have also expressed concern over the move, saying they don’t want the U.S. raiding their medicine supply.

Some Democrats said the idea would do little in the near term and fall short of Mr. Trump’s more aggressive campaign promise on drug prices. Drugmakers have said it would reduce investment in research and that it wouldn’t work for drugs that are developed but not yet sold overseas.

The National Association of Manufacturers on Friday announced a six-figure television and digital-ad campaign aimed at potential rules to address drug pricing through international price indexing and drug importation.

The Trump administration has had some successes in its efforts to combat prescription-drug costs, including a faster-paced approval of new generic drugs that can drive down prices. A federal judge last month upheld a rule requiring hospitals disclose the rates they negotiate with insurance companies.

But key parts of the administration’s plan have been blocked by courts, dropped by the administration or delayed. One initiative launched in May 2018 called for drugmakers to put list prices in television ads. But the move was blocked by a federal court in July 2019 after Amgen Inc., Merck & Co. and Eli Lilly & Co. sued. Another aimed to end drug rebates to middlemen in Medicare. The administration dropped that idea in July 2019 because it would cost about $200 billion over a decade.

Updated: July 20, 2019

Drugmakers Sue To Block Federal Rule Requiring Drug Prices In TV Ads

Lawsuit says rule will create unnecessary confusion, may discourage patients from seeking treatment or medical information.

Drugmakers Sue To Block Federal Rule Requiring Drug Prices In TV Ads (#GotBitcoin?)

Three pharmaceutical companies sued the federal government Friday to block a proposal requiring drug manufacturers include the list price of prescription drugs in television ads, the latest volley by the industry as it faces criticism over escalating cost of its products.

The lawsuit against the U.S. Centers for Medicare and Medicaid Services, filed jointly in U.S. District Court by Amgen Inc., Merck & Co., Eli Lilly & Co. and the Association of National Advertisers, alleges that the proposed rule violates the First Amendment by compelling drugmakers to communicate list prices in TV ads.

The companies and trade organization allege the agency lacks the authority to enact the mandate, according to the complaint. And they say the rule will create unnecessary confusion among patients and may discourage them from seeking treatment or medical information. The complaint says that few of the 65 million Americans on Medicaid pay more than an $8 copay for prescription drugs.

The proposed rule was finalized in May by the U.S. Department of Health and Human Services and is set to take effect in July. It is among the efforts by the Trump administration to make health care more affordable in the U.S. Officials also want to stop billions of dollars in annual rebates that drugmakers give middlemen in Medicare that are known as pharmacy-benefit managers.

The government has said the proposed rule would increase transparency around prices and allow patients to make informed decisions based on cost. Government officials also have said the rule could spur drug companies to reduce prices.

President Trump and Health and Human Services Secretary Alex Azar are committed to providing patients the information they need to make their own informed health-care decisions, agency spokeswoman Caitlin Oakley said in response to the lawsuit. “If the drug companies are embarrassed by their prices or afraid that the prices will scare patients away, they should lower them,” she said.

The lawsuit wasn’t entirely a surprise given the resistance the industry signaled last year when the rule was proposed. The Pharmaceutical Research and Manufacturers of America—the industry’s main trade group, or PhRMA— had said the rule could lead some patients to think they have to pay the full list price, rather than a copay or coinsurance if they have insurance.

The trade group announced its own initiative in which major drugmakers would voluntarily include price-related information in television ads by directing consumers to websites where they can find information on list prices and costs. Few patients pay “list” prices, which don’t take into account rebates, discounts and insurance payments, but some pay the full price at times, such as when they haven’t met their deductible.

Johnson & Johnson , the world’s largest health-care company, adopted the PhRMA principles but went a step further. The New Brunswick, N.J.-based firm has been airing a television ad for its Xarelto blood thinner by briefly showing its list price at the end of the ad.

Pharmaceutical ads on television have become a common occurrence since they began airing two decades ago. The spots have also become a lightning rod in attacks on the drug industry, its marketing and pricing. Critics say the commercials encourage use of expensive medicines, when less-costly generics may suffice.

Indianapolis-based Lilly said in a statement that it has already taken steps in its TV ads and website to share more pricing information. It said focusing on the list price “creates confusion because it’s not the price most patients will pay.”

Merck, which is based in Kenilworth, N.J., said in a statement that the new requirements may cause patients not to seek treatment because of a perception they can’t afford treatments.

Drugmakers, Worried About Losing Pricing Power, Are Lobbying Hard

Pharmaceutical industry attacks proposals in Washington that could cut deeply into companies’ sales.

Worried drugmakers are stepping up efforts to blunt proposals in Washington that they view as some of the most serious threats to their pricing power in recent years.

Pharmaceutical industry trade organizations and outside groups are spending millions of dollars on advertisements attacking the proposals, which would peg drug prices in the U.S. to prices paid overseas and force companies to pay rebates if a drug’s price increases by more than the rate of inflation. For instance, one trade group’s radio ad decries “foreign price controls” imposed by European bureaucrats.

Industry executives and lobbyists are urging friendly lawmakers to pass legislation blocking the plans. They are also pushing administration officials to pursue measures that would pressure industry middlemen such as pharmacy-benefit managers to provide some relief on patients’ costs without directly curbing drugmakers’ pricing power.

The pricing proposals, if enacted, could reduce companies’ sales by billions of dollars, analysts say. The industry is trying to hold off passage of the plans it opposes through the end of this year, people familiar with the matter say, as it is unlikely that Congress would be able to act during election campaigning next year.

Yet drugmakers don’t have the political clout they used to largely because of rising public dismay over high drug prices. Even some Republicans, who typically have been more sympathetic to the industry, have joined criticism of high prices.

The industry lost a key ally when Utah Sen. Orrin Hatch, a Republican, retired last year. Also, Iowa Sen. Chuck Grassley, long a skeptic of the pharmaceutical industry, returned to the chairmanship of the Senate Finance Committee last year.

In July, the Finance Committee approved a bill that would require drugmakers to rebate to the federal Medicare program any list price increases that exceed the rate of inflation. Mr. Grassley was a co-sponsor of the bill along with Sen. Ron Wyden of Oregon, the top Democrat on the committee.

The Trump administration last October proposed basing how much Medicare pays for cancer, eye and certain other drugs on the prices charged in other countries, including in Europe, where drugs are less expensive.

And House Speaker Nancy Pelosi, a Democrat, introduced legislation Thursday that would allow the government to directly negotiate prices for up to 250 expensive drugs that don’t have generic competition.

“We’re facing the stiffest political headwinds in the history of the industry,” James Greenwood, president of the trade group Biotechnology Innovation Organization, said in an interview. BIO’s member companies include Amgen Inc., Johnson & Johnson and Pfizer Inc.

In response to the drug-pricing efforts, Mr. Greenwood, a former Republican congressman from Pennsylvania, said he and his staff have visited dozens of members of Congress, White House adviser Joe Grogan, who formerly lobbied for drugmaker Gilead Sciences Inc., and deputies to Health and Human Services Secretary Alex Azar, a former Eli Lilly & Co. official.

“We want to be proactive in terms of making sure our position is heard down in Washington,” Pfizer Chief Financial Officer Frank D’Amelio said at an investor conference this month. “And many of us, including myself, get down there and make sure we have the conversations that need to be had.”

The drug industry does support one key provision of the Senate bill—capping annual out-of-pocket prescription expenses for people covered by the Medicare Part D drug benefit.

And companies are willing to negotiate on certain other legislation such as a bill pushing makers of pricey brand-name drugs to share samples with rivals developing lower-cost copycat versions, people familiar with the matter say.

However, the industry is opposed to the more far-reaching pricing measures, arguing such steps would restrict patients’ access to medicines, and could reduce funding to research and develop future drugs.

Analysts say the Trump administration’s international pricing proposal poses an especially strong threat because it would lower the prices paid by the Medicare Part B government health-insurance program with private health insurers possibly following suit. The proposal, if put into effect, would reduce Medicare spending on the affected medicines by 30%, or $17.2 billion, over five years, the administration estimates.

Aside from forcing companies to pay rebates on above-inflation price increases, the Senate bill would raise the maximum for rebates that drugmakers already pay to federal-state Medicaid programs for insulin and certain other drugs.

“Potentially we would be selling to Medicaid at a negative price. It’s not reasonable to expect companies to sell at a negative price,” AstraZeneca PLC Chief Executive Pascal Soriot said in an interview.

Together, the Medicare inflation-based rebate and increased Medicaid rebate would save the government programs about $70 billion in spending over 10 years. Much of the sum would be lost revenue for industry, according to Moody’s Investors Service.

The industry’s biggest trade group, the Pharmaceutical Research and Manufacturers of America, has spent $16.3 million on lobbying during the first six months this year, after spending $28 million for all of 2018, according to the Center for Responsive Politics, which tracks lobbying spending. BIO spent $6 million on lobbying during the first half of 2019, after spending $9.9 million in 2018.

Outside groups supportive of the drug industry are also weighing in. Americans for Tax Reform, which advocates for lower taxes, has run newspaper ads in some states either thanking or opposing senators for their votes on the Senate Finance bill.

One ad thanked Sen. Pat Toomey, a Pennsylvania Republican who proposed an unsuccessful amendment to block the inflationary rebate, “for leading the charge to stop price controls and protect the free market in Medicare.” A spokesman said Mr. Toomey supports reducing out-of-pocket drug costs for seniors, but that the inflationary rebate would cause high launch prices for new drugs.

PhRMA, the trade group, provided funding to Americans for Tax Reform in 2015 and 2016, according to tax records. PhRMA declined to say whether it provided more recent funding.

Conservative-leaning advocacy group American Action Network launched a $2.5 million advertising campaign in August that targets 35 congressional districts and attacks what the group calls “socialist price controls” in the Medicare Part D program. A mailer from the group warns about House Speaker Pelosi’s “Rx Drug Takeover Plan.”

In 2017, the most recent year for which tax records were public, PhRMA provided $1.5 million to American Action Network. Both groups declined to comment on whether PhRMA has provided donations more recently.

To counter the pro-industry ads, groups such as AARP—which has endorsed the Senate Finance Committee bill—are running their own ad campaigns. AARP’s “Stop Rx Greed” campaign includes a red van emblazoned with slogans attacking high drug prices and a TV ad showing people walking around with over-sized images of $100 bills covering their faces, while the narrator says: “The big drug companies don’t see us as people. They see us as profits.”

Updated: 10-3-2019

Trump Administration Drops Plan To Curb Drug Rebates

The proposal had aimed to drive down the prices consumers pay for prescriptions.

The Trump administration dropped a major piece of its plan to curb drug prices, the latest sign that central planks of President Trump’s proposal are faltering amid legal challenges, high costs for taxpayers and feuds between the White House and government agencies.

The White House said Thursday that the administration won’t proceed with a proposal to curb industry rebates that drugmakers give to middlemen in Medicare. It comes after a federal judge blocked on Monday a separate rule that required drugmakers to put list prices in television ads. Both proposals aimed to tamp down sharply rising drug costs for consumers and the federal government.

President Trump championed the rebates rule starting in spring 2018, but it fizzled over many months. White House policy aides sparred with the Department of Health and Human Services over the scope and timing of the rule. Some congressional Republicans and key consumer advocacy groups worried it would raise Medicare premiums. And a recent report on the projected cost to the federal government—about $200 billion over a decade—largely knocked the wind out of the idea.

“Based on careful analysis and thorough consideration, the president has decided to withdraw the rebate rule,” said Judd Deere, a White House spokesman.

Health care remains a top concern of U.S. voters headed into the 2020 election. Taken together, the recent setbacks could leave Mr. Trump vulnerable to Democrats’ attacks that he isn’t following through on his promises to lower drug prices. Seeking to regain momentum, the Republican president sought to shift the focus last week, promising an executive order on drug pricing. He has also pledged to deliver a new GOP health plan and issued an executive order to require hospitals and doctors to better disclose pricing to patients.

“President Trump’s rhetoric on drug prices has been quite strong and has the potential to neutralize an issue that long favored Democrats,” said Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation. “The president has had challenges backing up the rhetoric with action.”

The drug-rebate effort could have upended the way drugs are priced. Under the current system, pharmacy-benefit managers, or PBMs, negotiate confidential rebates and discounts on many branded prescription drugs. Those deals aren’t always passed along to customers at pharmacies. Shares of companies that own PBMs rallied Thursday, with Cigna Corp. up 9.2% and CVS Health Corp. rising 4.7%.

The now-scuttled rebate plan would have curtailed the deals worked out between drugmakers and third parties that manage benefits for Medicare as well as Medicaid managed care, where states contract with insurers to deliver benefits. The government sought instead to redirect those discounts toward patients.

“Our plan will end the dishonest double-dealing that allows the middleman to pocket rebates and discounts that should be passed on to consumers and patients,” Mr. Trump said last year in a Rose Garden speech.

HHS Secretary Alex Azar was tasked with delivering on Mr. Trump’s drug-pricing blueprint. The former pharmaceutical executive strongly backed the rule to curb rebates. He peppered his speeches with references to the proposal and called on Congress to introduce legislation also targeting drug rebates.

The rebates that drug manufacturers pay to Medicare plans have long been permitted because they aren’t barred under statutes prohibiting kickbacks to secure federal business. The new rule would have eliminated that protection by potentially subjecting the rebates to review under anti-kickback statutes. Critics of rebates said they give incentives to pharmacy-benefit managers to pick drugs with high prices and high rebates.

“This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever,” Mr. Azar said earlier this year.

But Mr. Azar clashed with Joe Grogan, a fiscal conservative and key adviser to Mr. Trump who heads the White House Domestic Policy Council. Mr. Grogan and Mick Mulvaney, the White House acting chief of staff, both urged a more cautious approach on initiatives to lower drug prices.

Opponents also lobbied the White House. Pharmacy-benefit managers met with Mr. Grogan and warned him that premiums could rise by double digits. AARP, a high-profile advocacy group, said in an April letter to HHS that the rule could lead to higher drug prices. Some congressional Republicans also began to worry about the cost of the rule and how to pay for it, Hill staff said.

In May, the Congressional Budget Office released an analysis that showed the drug-rebate rule would boost federal spending by about $177 billion between 2020 and 2029. Medicaid spending was also projected to increase, which would have required states to contribute more of their own funding. The findings emboldened critics, including White House advisers, and the rule was pulled.

The decision was made because it would be too disruptive and could complicate bipartisan legislation progressing in Congress, a senior White House official said.

A proposal from Sen. Lamar Alexander (R., Tenn.) and Patty Murray (D., Wash.) contains a number of initiatives to lower health-care costs. The official dismissed assertions that the rule died because of internal disagreements or personality clashes.

The president is already pivoting. He surprised some members of his own administration last week when he said would issue an executive order aimed at getting the U.S. to pay the same price for drugs as other countries.

Two people familiar with the White House dismissed the idea of an executive order, saying Mr. Trump was referring to a coming proposal linking some Medicare drugs to the average costs in other countries.

But on Monday, after a judge derailed the drug prices in TV ads, agency officials were told to get to work on the executive order, according to two people outside the White House.

The pharmaceutical industry, which has faced its own criticism for setting high prices for new drugs, has argued that opaque practices, including rebates, help push up the overall cost of its medicines. The PhRMA industry group called the withdrawal of the rule “a blow to seniors who could have paid less for their medicines at the pharmacy counter.”

Drugmakers in July initiated a new round of increases in their drug prices. All told, 20 companies increased the list prices of over 40 prescription drugs by an average of 13.1%, according to Rx Savings Solutions, which sells software to help employers and health plans choose the least-expensive medicines. On July 1 of last year, 16 companies raised the list prices of dozens of drugs by an average 7.8%.

Matthew Borsch, an analyst with BMO Capital Markets, wrote in a research note that it seems likely there will be a shift in focus in the Trump administration’s regulatory efforts to the pharmaceutical companies and away from PBMs.

Updated: 7-20-2021

U.S. Proposes Raising Penalty For Hospitals That Don’t Publish Prices

Larger hospitals would have to pay as much as $2 million annually if they don’t make their prices public under the proposed rule.

The Biden administration on Monday proposed sharply higher penalties for larger hospitals that don’t make their prices public.

The proposal would also clamp down on the use of special coding embedded in hospital webpages that prevents Alphabet Inc.’s Google and other search engines from displaying price pages in search results.

The Wall Street Journal reported in March that hundreds of hospitals had embedded code in their disclosure webpages that kept them from being indexed by the search engines.

Under the proposal, the Centers for Medicare and Medicaid Services, the federal agency responsible for enforcing rules requiring hospitals publish their prices, is seeking to raise penalties as high as $2 million a year for large hospitals that fail to make prices public. Large hospitals are those with more than 30 beds.

The proposed penalty is a sharp increase from the $109,500 maximum a year per hospital under existing rules. For hospitals with 30 or fewer beds, penalties remain the same.

The proposed provision comes after many hospitals failed to publish their prices as required by federal rules that took effect this year, undercutting policy makers’ goal of boosting competition and choice through transparent pricing.

As of Monday, data from price-transparency startup Turquoise Health Co. shows no usable pricing data from 32% of 4,885 acute care, children’s or rural primary-care hospitals.

The company’s database includes another 10% of these hospitals with prices that fall short of requirements.

“With today’s proposed rule, we are simply showing hospitals through stiffer penalties: Concealing the costs of services and procedures will not be tolerated by this administration,” Health and Human Services Secretary Xavier Becerra said.

Hospital trade groups pushed back on the proposal. “More stringent penalties for noncompliance with rules whose potential effects even the administration cannot quantify is the wrong direction for this policy,” said Bruce Siegel, chief executive of America’s Essential Hospitals, a trade group of hospitals in underserved communities.

The American Hospital Association said interpretation of the rules is uncertain and higher penalties were concerning.

CMS issued the proposal after the Journal reported spotty compliance with publishing prices, including hospitals embedding code in their websites to conceal prices from searches. Some hospitals said the code was an error and removed it.

The proposed rules said hospitals used various methods, including so-called blocking codes, to make it harder for people to search for and download pricing data. The proposal would require hospitals to ensure that prices can be accessed by automated searches and that files can be directly downloaded.

Federal regulators in April issued similar guidance for health-insurance companies, which must comply with price-transparency rules in 2022. The guidance said insurers shouldn’t use website coding that omits healthcare-pricing data from search results.

Where hospitals do post prices, the Journal has found wildly different prices for the same service in the same hospital, with the uninsured often paying the highest prices.

‘Concealing the costs of services and procedures will not be tolerated by this administration’
— Health and Human Services Secretary Xavier Becerra

The proposed rules said hospitals used various methods, including so-called blocking codes, to make it harder for people to search for and download pricing data. The proposal would require hospitals to ensure that prices can be accessed by automated searches and that files can be directly downloaded.

Federal regulators in April issued similar guidance for health-insurance companies, which must comply with price-transparency rules in 2022. The guidance said insurers shouldn’t use website coding that omits healthcare-pricing data from search results.

Where hospitals do post prices, the Journal has found wildly different prices for the same service in the same hospital, with the uninsured often paying the highest prices.

The price-transparency rule, which took effect Jan. 1, required hospitals for the first time to disclose the confidential prices negotiated with health insurers.

The Trump administration, which issued the rule, said that greater transparency would boost competition and help control rising U.S. health spending.

Hospitals opposed the rule from the start, losing a legal challenge last year to block it.

Some healthcare experts said the rule’s initial penalty—$300 a day for each noncompliant hospital—may not be enough to convince large, well-financed hospital systems to make prices public.

Cheryl DeMars, chief executive of a nonprofit group of 285 employers in Illinois, Wisconsin and Iowa called the Alliance, said hospitals haven’t been motivated to comply by existing penalties, leaving employers without valuable information to hold hospitals and insurers accountable for prices they negotiate for consumers.

“This is information that employers will be able to use to better understand not only the price differences between hospitals, but also how good a job their health plan is doing negotiating on their behalf,” Ms. DeMars said.

The White House this month called for HHS to support the rule. A CMS spokeswoman said the agency has sent about 125 warning letters since April 20 and will continue to enforce the rule as necessary.

Under the proposal, hospitals with more than 30 beds would face penalties of $10 a day, per bed, with a maximum daily penalty of $5,500.

Of the 2,037 hospitals that appear to be out of compliance, 1,441 have 30 or more beds and would be classified as large under the proposed regulation and subject to higher penalties.

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Updated: 11-20-2019

Hospitals Push Back on Price-Disclosure Rule

Industry groups vow to challenge Trump administration proposal requiring disclosure of secret payment rates.

Hospitals are pushing back against the Trump administration’s new health-pricing disclosure rule, with the industry planning a legal challenge to block it.

The final rule, released Friday along with a proposed rule aimed at insurers, would require hospitals to disclose the secret rates they negotiate with insurers for all services, including supplies and care provided by doctors who work for the facility. If they take effect, the requirements would be a major change for the health industry, where the negotiated prices are generally kept confidential and can vary widely, even within the same market.

A coalition of hospital-industry groups, along with some individual hospital operators, will go to court in the near future to head off the hospital-focused regulation, said Tom Nickels, executive vice president of the American Hospital Association.

“What they’re doing is illegal,” he said. It goes well beyond language in the Affordable Care Act that was cited as backing the rule, he said. The rule also forces hospitals to reveal trade secrets, and violates their First Amendment rights by hurting their ability to negotiate freely with insurers, he said.

Insurers, too, criticized the move, while an employer group offered a more mixed view. Brian Marcotte, CEO of the National Business Group on Health, said companies want their employees to know the real cost of the care they receive. But, he said, he worries that revealing all the rates might be counterproductive and potentially push them higher.

A spokeswoman for the Department of Health and Human Services referred to earlier comments by Secretary Alex Azar, who said the department was on “very sound legal footing for what we’re asking. And we certainly hope that America’s hospitals will want to respect their patients’ right to know what the price of the service is before they’re asked to purchase it.”

The Trump administration has argued that its transparency push will bring down costs, as consumers become better able to shop around for care. But the full effect is unclear. Some industry experts have said costs could go up, if hospitals demand that insurers grant them higher rates won by their competitors.

Zack Cooper, a health economist who is an associate professor at Yale University, suggested that the likely outcome of transparency around negotiated rates was for the wide range of health-care prices to tighten, as both insurers and hospital systems see the results of their rivals’ negotiations and push to match them. “The range of prices will go down,” he said. The mean price may go up, he said, but the effect is likely to vary in different markets.

Revealing health-care rates may also help employers to decide which hospitals and doctors to include in their health plans and which insurers to select, said John Barkett, senior director of policy affairs at benefits consulting firm Willis Towers Watson. “It will be easier to see who the good and bad actors are, and who the effective and ineffective negotiators are,” he said.

Hospitals worry that making the rates public could push them down, Mr. Nickels said. “It would be a race to the bottom,” he said, posing a particular risk to rural hospitals and others that are already financially strapped. He said in other instances, the regulation could lead to increased rates.

Hospitals also worry about the potential cost of the regulation, they said. In a survey of hospital executives this summer by health-care consulting firm Advis, the biggest concern about the then-proposed rule was uncertainty about its implementation, followed by the cost of compliance and concern about revealing secret rates.

“It’s an increased burden on hospitals and other providers,” said Ali Santore, vice president for government affairs at Providence, a 51-hospital system based in Renton, Wash. Like other hospital-industry officials, she suggested that consumers most need to know their out-of-pocket costs for health-care services, and the new rule would create more confusion.

Updated: 7-7-2021

Sanders, Progressives Face Split With Centrists Over Plan To Cut Drug Prices In Medicare

Those seeking bipartisan measure say empowering Medicare to negotiate for lower prices could hurt innovation.

Democrats are debating whether to fold an effort to cut drug prices—by allowing Medicare to negotiate—into a budget package or try to pass the measure on its own.

Both parties have prioritized lowering prescription-drug prices for years, but haven’t been able to pass a bipartisan agreement. Many Democrats now see a budget package, which could clear the evenly divided Senate with just a simple majority, as their best shot at overhauling the system.

But intraparty divisions over policy issues could complicate that path, and some lawmakers are advocating for making more modest changes with GOP support. Democrats can lose no more than four votes in the House and none in the Senate on legislation opposed by all Republicans.

“I want something that passes with bipartisan support and the country needs a win here,” said Rep. Kurt Schrader of Oregon, a centrist Democrat who said he was working with a bipartisan group of lawmakers on a narrower agreement.

Mr. Schrader said he met recently with Sen. Chuck Grassley (R., Iowa), who has long been involved in the issue.

Senate Budget Committee Chairman Bernie Sanders (I., Vt.) has said he hopes to include provisions allowing the federal government to negotiate prices for certain costly drugs in Medicare in a sprawling package Democrats plan to advance through a process tied to the budget, known as reconciliation. Mr. Sanders said he hopes to use savings from that to expand Medicare benefits to include dental, vision and hearing and lower the eligibility age to 60 from 65.

That process would allow Democrats to skirt the 60-vote requirement most bills face in the Senate and pass legislation without the support of Republicans. GOP members in both chambers have traditionally opposed giving Medicare the power to negotiate prices, saying it would cut into drug companies’ budget for research and development.

House Speaker Nancy Pelosi (D., Calif.) said in June she also hoped to include lowering drug prices in a budget package and to expand Medicare benefits.

A Congressional Budget Office analysis of a similar bill that passed the House in late 2019 estimated that the price-negotiation provisions would lower spending by about $456 billion over 10 years. The bill wasn’t taken up in the Republican-controlled Senate.

But some House Democrats, including Rep. Scott Peters (D., Calif.), whose San Diego district is home to several life-science and pharmaceutical companies, oppose the way the most recent House Democratic bill would structure those negotiations: allowing Medicare to pay less by indexing prices of some drugs to their lower costs in other countries. Mr. Peters said recently that he would have a hard time voting for a budget package that included that provision.

Mr. Peters said he was working with other lawmakers “to come up with something that would really address out-of-pocket costs, maintain the ability to develop cures and keep American jobs.”

Some Democrats want a separate vote on lowering drug prices, which they believe would direct attention to the issue and pressure Senate Republicans, given wide public support for reducing drug prices.

“People would understand what we’re voting for, so there’s real advantages to having each of us have to say yes or no on continuing the free ride for pharma or protecting consumers,” said Rep. Peter Welch (D., Vt.).

The risk to Democrats of separating the issue from the budget package is that it would then need bipartisan support in the Senate, making it harder to pass the provision allowing Medicare to negotiate. One possibility is to hold a stand-alone vote in the House, then fold it into the budget package in the Senate, said Mr. Welch.

“It will destroy drug innovation,” said Rep. Gary Palmer of Alabama, a member of House GOP leadership. “It would be devastating not just to the drug industry, but to patients who wouldn’t have access to drugs that could save their lives or prolong their lives.”

Republicans say revenue losses for drugmakers would lead to fewer medications coming to market. CBO’s analysis of the 2019 bill projected eight to 15 fewer drugs coming to market over the following decade.

Democrats still have to resolve some policy points, including how many drugs would fall to Medicare to negotiate. That has been an issue for Democrats since they first sought to allow Medicare to negotiate drug prices, even before the 2003 creation of Medicare Part D, which helps cover prescription-drug costs.

Liberal Democrats pressed to expand the 2019 bill’s list from 25 to 50 drugs. That legislation and the version reintroduced this year would require 25 drugs to be negotiated in the first year, followed by at least 50 drugs each year after that.

Some Democrats have said most of the savings would come from reducing prices on a smaller group of expensive drugs.

“You can identify 20 to 25 drugs where you would get the vast majority of savings,” Mr. Welch said.

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