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This Week in Health Care Reform - July 25th, 2014

Estimates project that Sovaldi will overwhelm state budgets, as its manufacturer releases its latest earnings; meanwhile, a new report details how the Affordable Care Act’s cuts to Medicare Advantage will play out in each congressional district; a CBO analysis offers a bit of good news/bad news on health care spending and the economy; and, conflicting federal appellate court decisions on exchange subsidies offer more questions than answers.


Week in Review

Sovaldi Overwhelms: Irrespective of where you come down on the issue of pricing mechanisms and their relationship to innovation in the pharmaceutical industry, two figures from this past week bring the debate into alarming focus.  The first figure is $55 billion.  This is how much states are projected to spend on treating the more than 750,000 Americans with chronic hepatitis C who depend on state-funded health care.  To put that into perspective:

·Thirteen states may spend more on hepatitis C medications than they spent last year on transportation.

·Utah and Arizona are projected to spend 10 times more on providing medication to a hepatitis C patient than they spent last year educating a public school student.

·In Florida, Georgia, Illinois, and Nevada, anticipated Medicaid spending on hepatitis C medications is equivalent to 9 percent of each state’s annual Medicaid budget.

The second figure is $3.5 billion.  This is how much Gilead Sciences – manufacturers of the breakthrough HCV drug, Sovaldi – reported in Q2 sales of the drug, alone, putting it on pace to become a blockbuster.  At $1,000-a-pill, it’s not hard to see why.  Already, Gilead has seen Sovaldi add to its coffers – to the tune of $5.8 billion in just the first six months of 2014 – prompting the manufacturer to double its sales forecast for the year to as much as $23 billion.  While no one is impugning upon Gilead’s right to capitalize on a drug that’s been hailed as a cure for the liver-destroying disease, there’s growing unrest over the unsustainable path that Sovaldi is taking the country down.  Clearly, state budgets are in very real danger of being overwhelmed as they struggle to cover the cost of Sovaldi for their afflicted populations.  Now, doctors find themselves faced with hard choices of their own as they’re forced to decide which patients are most urgently in need of the drug.  With the pipeline filling up with newer and even more expensive treatments, there’s no shortage of concern over where we go from here.   

MA Cuts:
Earlier this year, we exhaustively covered the perpetual threat under which Medicare Advantage operates.  Curious, some would argue, given the overwhelming levels of satisfaction the program boasts amongst beneficiaries.  Still, each year sees changes to the underlying payment structure for Medicare Advantage plans, and that’s not even accounting for the cuts imposed upon the program by the Affordable Care Act (ACA).  A new report, though, seeks to focus a spotlight on how those cuts will play out…by tying them to congressional districts.  Released by the conservative American Action Network, the report provides a district-by-district breakdown, comparing pre-ACA projections on Medicare Advantage spends next year to what is actually playing out for beneficiaries across the country.  Just how this resonates with voters come November is unclear, as a separate analysis shows varying levels of concern over how the health care law impacts Medicare Advantage depending on respondents’ party affiliation.  Nevertheless, lawmakers continue to keep the issue front-of-mind, as yesterday, the House Ways & Means Committee held a hearing examining the future of the Medicare Advantage program.    

CBO Report:
A new report released last week by the Congressional Budget Office (CBO) has led to a fair amount of gear-grinding.  At first blush, the report seemed to indicate that the country’s finances are on solid footing and that cost control measures in the Affordable Care Act will continue to reduce future growth in health care spending over the next 25 years.  When taken at face value, all signs point to the health care law doing exactly what so many hoped it would do.  Unfortunately, some don’t see it that way.  They believe that any number of factors could be contributing to the slowdown in health care cost growth.  While eliminating inefficiencies in the system is certainly worth celebrating, who’s to say that the trend can’t instead be attributed to a slowdown in innovation or a reflection of broader growth trends in the economy?  Regardless, the report goes on to project that if current laws remain unchanged, in 2039 federal debt held by the public would exceed 100 percent of GDP.  And that’s something no one should be happy about.

Subsidy Rulings:
In what’s being hailed as one of the most climactic days in the health care law’s nascent trajectory since the Supreme Court upheld the individual mandate back in 2012, this week a pair of federal appellate courts handed down conflicting decisions governing one of the main tent poles upon which the Affordable Care Act is built.  This past Tuesday, the U.S. Court of Appeals for the D.C. Circuit upheld a legal challenge to tax subsidies being made available in the states that failed to set up their own exchanges.  Hours later, the 4th Circuit Court of Appeals came to the opposite conclusion in a separate case, ruling that the IRS did, indeed, have the authority to issue subsidies on the federally-run exchange.  In both cases, the dispute centers around the specific language of the health care law, which makes numerous references to the premium assistance subsidies being made available to taxpayers enrolled in exchanges established by their state.  What’s clear in the aftermath of the diametrically opposed decisions, apart from neither having any immediate impact on implementation, is that this legal knot will take some time to untangle.  Whether or not, the road to clarity takes the country back to the steps of the Supreme Court remains to be seen.  Until then, you can be sure that both Republican and Democrat political operatives are already hard at work factoring these new variables into their midterm calculus.

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