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This Week in Health Care Reform: May 10th, 2019

A bipartisan bill is proposed in the House taking aim at an unpopular health care tax; the proposed rule targeting drug rebates is shown to not lower prices; meanwhile, specialty drug spending soars in Part D; and, a new analysis shows striking variability of service costs depending on region.

Week in Review

House HIT Bill: Last week, bipartisan legislation was introduced in the U.S. House of Representatives calling for the elimination of the increasingly unpopular health insurance tax (HIT).  Proposed by Reps. Anthony Brindisi (D-New York) and Kenny Marchant (R-Texas), the bill seeks to forestall the threat of rising health care costs that would result should the HIT – currently suspended for 2019 – be allowed to return next year.  Stakeholders were quick to applaud the lawmakers’ efforts, pointing out that nearly 150 million Americans will be impacted by rising costs and diminished access unless lawmakers act quickly to eliminate the HIT.

CBO Rebate Rule Analysis: Also last week, the nonpartisan Congressional Budget Office (CBO) released its latest analysis of the proposed rule targeting rebates in Medicare’s Part D prescription drug program and in Medicaid managed care plans.  That rule would effectively eliminate the drug price rebates that pharmacy benefit managers use to negotiate with drugmakers on behalf of consumers and other payers (such as the government).  However, reaction to the proposed rule was near universal, as stakeholders pointed out that doing away with rebates would only serve to take away one of the only tools available in drug price negotiations.  CBO’s analysis confirms how misguided the proposed rule is, showing that, rather than lowering costs, it would actually increase spending in both Medicare and Medicaid by $187 billion and $7 billion, respectively, over the next decade.

Part D Specialty Rx Spending: Elsewhere, spending on specialty drugs in Medicare Part D has increased dramatically this decade.  In fact, from 2010 to 2015, alone, spending on these drugs nearly quadrupled from $8.7 billion to $32.8 billion.  (Over that same period, Medicaid spending more than doubled from $4.8 billion to $9.9 billion.)  Alarmingly, despite only accounting for 1 percent of all prescriptions dispensed in both programs in 2015, specialty drugs actually accounted for roughly 30 percent of net spending on prescription drugs.  To get a sense of just how much prescription drug spending is increasingly being driven by specialty drugs, one need look no further than last year when 39 of the 59 new drugs brought to market belonged to this category

Regional Cost Variations:
As our focus on health care costs grows, so, too, does our understanding of what’s driving them.  A new analysis shines a light on the impact that geography can also have on rising health care prices.  Performed by the Health Care Cost Institute, researchers analyzed insurance claims for a handful of common procedures, such as blood tests, C-sections, and mammograms.  The results were striking, as wide variations in service prices were found across metro areas, by as much as 25-fold.  But, even more alarming was the wild swings they found within a given metro area, reaching a staggering 39-fold price difference.      

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