Monthly Archives: August 2015

Trade Secrecy and Public Payers

By: Marcus J. Hopkins, Blogger

This past month, I attended the Hepatitis Appropriates Partnership (HAP) and National Viral Hepatitis Roundtable (NVHR) meeting, as well as the National Alliance of State and Territorial AIDS Directors (NASTAD) Technical Assistance (TA) conference in Washington, D.C. To both of these events, I went as a representative of the Community Access National Network (CANN), but I also went as “myself.”

Going as “myself” is a complicated task, no matter the location, as I have several informational gaps in my knowledge about the finer points of crafting policy, and going to these conferences often leaves me feeling like something of a fraud. I haven’t finished my education (and at this point, don’t really have the time to do so), and even then, I wasn’t going to school to study public policy – I was going for Health Communication in an effort to better increase my ability to adequately assist lower- and middle- income people living in Appalachia to access comprehensive healthcare for HIV.

So, when it comes to these meetings, I often find myself nodding along and saying, “Absolutely,” a lot, even when I have no idea what the heck the person is talking about; in the performing arts world, we call this, “Fake It, Until You Make It.” And so, I often leave sessions and conferences with more questions than when I entered, because in order to keep up, I have to almost immediately figure out what’s going on around me.

Perhaps, that is why I was tapped to serve in my capacity with CANN – I’m not just a very good writer (if I do say so, myself), I am also a patient. As such, I can safely say that, despite being a very knowledgeable and informed patient, I still have several information gaps – like many patients. There are some very basic pieces of information that I, as both a patient and a consumer, feel that I should know – that everyone should know – so that I can better advocate for myself.

The one thing that stuck out to me more than anything else during these meetings (in the context of “myself”) was that there is virtually no transparency when it comes to the world of pharmaceutical pricing. As an advocate for open governance, I’ve always been a firm believer that if my tax dollars are being used to pay for something, I have a right to know how they’re being used. This is the basic tenet of public governance –“How’s the money being spent, and how much of it is being spent on what?”

This is where things become interesting. As I reported in the last HEAL Blog, “Behind the Scenes at Hepatitis, Inc.,” certain laws prevent the Centers for Medicare and Medicaid Services (CMS) from discovering the actual price being paid by the 59 AIDS Drugs Assistance Program (ADAP) and 56 Medicaid programs for Hepatitis C (HCV) medications. Furthermore, beyond a single Federal statute, each state may or may not have its own statute that prevents those programs from discussing with any other state the price they’re paying for drugs.

Basically, we have a system in which private companies (in this case, pharmaceutical companies) have the right to enter into negotiations with both privately and publicly funded payers and enter into pricing and rebate agreements with them in total secret, and all of this is legally protected as a Trade Secret, making that information not only invisible to the public, but invisible between the states. This is, according to Pratap Khedar, a principal at pharma marketing consultancy ZS Associates, “…a very efficient free market…between the insurance company and the pharma company” (Herper, 2012).

For the private insurance companies, this seems fair – they are two privately held entities who can and should be able to enter into bargaining proceedings as manufacturer and buyer. This is the cornerstone of the free market – “I have a good to sell; let’s negotiate on the price.” These entities absolutely should be allowed to keep the amount that they pay per unit confidential.

It is, however, with the public payer/private manufacturer secrecy that I have a serious problem. With any other government office, whenever a deal is struck between a private company and the government, the amount the government has agreed to pay, as well as a breakdown of that agreement, are generally subject to public records and Freedom of Information Act (FOIA) requests. With pharmaceutical companies, however, this is not the case.

“Congress has created a system so that even the states, which buy tens of millions of dollars worth of these drugs, have no idea what we pay on a per-unit basis,” said the Democratic former Montana Govenor, Brian Schweitzer (Cross, 2011).

“Actually, Schwierzer does know what the state pays – but, before acquiring the information last summer, had to have his chief counsel sign a written agreement not to disclose it publicly,” reported Mike Dennison of the Billings Gazette (Cross).

Schweitzer came across the information in the summer of 2010, when he was attempting to compare what Montana’s Medicaid program was paying for drugs compared to the cost in Canada (Cross), but discovered in the process that, while he, as the governor of the state of Montana, could access that information, he could not share what his state’s Medicaid was paying at a price-per-unit level – he could only give very broad estimates based on Wholesale Acquisition Costs (WACs) or Acquisition Wholesale Prices (AWPs).

For those readers who are unfamiliar with those two measures, either the AWP, the WAC, or occasionally the Direct Price (DIRP) is the price that is published for the public. Whenever someone says, “Sovaldi (Gilead) costs $87,000 for twelve weeks of treatment,” they are quoting one of those numbers.

What most consumers – particularly those with lower incomes, knowledge levels, healthcare knowledge, or interest in the information – don’t know or understand is that those prices are practically meaningless, as virtually no payer (insurers, private or public) actually ever pays those prices. Instead, they negotiate with pharmaceutical companies and drug manufacturers in order to pay a lower, undisclosed amount, achieving those low numbers either by direct pricing agreements, or by entering into rebate programs.

Rebate programs in the pharmaceutical world operate much as they do in the commercial retail world – the payer pays the pharmacy to fill the prescription, the pharmacy fills the prescription and reports back to the payer, the payer submits a rebate form to the manufacturer, the manufacturer receives the rebate forms and cuts a check for an undisclosed dollar amount, and that check is sent back to the payer.

With both the agreements and the rebate programs, the idea is volume – those states/payers who pay to fill more prescriptions than other states/payers are more likely to receive much more generous pricing and rebate arrangements. For national private insurance companies and pharmacies (Wal-Greens and CVS, for example), this is a great deal, as they can pay to fill several thousands or millions of prescriptions each month.

The rub comes with public payer options, like Medicaid and Ryan White, Part B (ADAP). Ostensibly, this type of closed loop free market should benefit them, as well; instead, the states who are in the direst circumstances – primarily those states that are largely rural, an Appalachian state, are in the South, or are lower-income – end up with the worst pricing arrangements.

Take the example of Stribild (Gilead):

When I lived in California, my ADAP coverage lapse, and there was a period of time where I had to wait for my application to be approved for the new year, during which I ran out of medications. I asked my AIDS Healthcare Foundation (AHF) pharmacy if I could purchase the pills from them, individually, out of pocket, and they agreed to do so at the price of $68 per pill.

So, I did the math:

  • $68/pill x 30 pills/bottle = $2,040/bottle
  • $2,040/bottle x 12 months/year = $24, 480/year

When I first moved to West Virginia, I had to apply for ADAP in my new state. In the application process, they inquire as to how much my current prescriptions cost, which led me to ask the pharmacy for the cost of my prescriptions. After needling them for over an hour, they finally gave me an estimated price of $37,000/year.

Again, I did the math:

  • $37,000/year / 12 months/year = $3,083.33/bottle
  • $3,083.33/bottle / 30 pills/bottle = $102.78/pill.

Did you catch that trick?

The state of California, whose economy is comparable to that of the entire nation of Brazil, pays $68 per unit, while West Virginia, whose economy is comparable to that of the landlocked Eastern European nation of Belarus (best known for its Stalinist architecture and the KGB Headquarters overlooking Independence Square), pays an estimated $102.78/pill (Tippett, 2015).

“But, this,” one might say, “is the nature of business. States who don’t purchase as much of any good will ultimately end up paying more that those states who do.”

This argument does and should hold true for private payers; for public payers, however – particularly Federally-funded public payers – this should never be the case.

Yet again, we are faced with the dual realities of an insurance-based healthcare market and Federally-funded, but state-administered public health programs. The richest states are more likely to benefit, while the poorest states end up paying a higher price for access to treatments than those who live in more urban areas. In a nation where all citizens in all fifty states and the outlying territories are supposed to have equal access and opportunity, there is little parity.

So, what does this mean for poor states’ Medicaid and ADAP budgets? Basically, they get screwed, because, even though they ostensibly have fewer overall clients to serve, they end up paying more for medications than their richer counterparts.

Why I bring up the public payer issue relates to a recent initiative sponsored by AHF in the state of Ohio that would require Ohio agencies and publicly-funded entities from buying prescription drugs at higher prices than what the U.S. Department of Veterans Affairs pays (Associated Press, 2015).

The way this legislation is worded leads voters to think, “Well, the VA must be getting a great price on these drugs! We wouldn’t skimp on healthcare for our nation’s veterans! THIS IS AMERICA!”

As such, it is likely to achieve the adequate number of signatures to force a vote in the Ohio legislature, and potentially go directly to voters if the legislative body fails to act within four months.

The reality, however, is that, because payers cannot legally reveal, either to the public or to each other, how much they actually pay for medications, certain entities may, in fact, pay less than the VA through their own negotiations. This means that the initiative could, in effect, mean that Medicaid and OhDAP could be paying more, if they’re forced to pay the VA price.

The sponsors of the initiative, AHF and its president Michael Weinstein, fully know that this is the case, which makes this proposal a rather open attempt to force a single pharmaceutical company – Gilead – to reduce its drug prices, as well as to enter into pricing negotiations with ADAP programs.

Gilead, the maker of the popular drugs Stribild (HIV), Truvada (HIV, PrEP), Sovaldi, and Harvoni, have weathered a fair amount of criticism in the last few years, mostly in relation to its drug pricing practices. While they have, in the past, attempted to allay the fears of lower-income patients who were denied coverage, the company went forward with a plan to strictly tighten the qualifying requirements for their HCV Patient Assistance Program (PAP), Support Path, in July of this year. This was largely in response to the continued, yet unofficial, practice by insurance companies of sending their client to Support Path to get their medications for free, straight from Gilead, after agreeing to reduced prices and rebates.

What frustrates me the most about this entire situation is my belief that every publicly-funded entity should be held accountable for how our money is spent, up to and including the specific prices these organizations pay for goods and services. Instead, pharmaceutical companies with virtually limitless resources, all but write Federal and state Trade Secrets statutes themselves; they should just start sending their bought and paid-for elected officials out onto the floor wearing their company logos on their backs. As a result, it’s very unlikely that we’ll see any forward momentum on this issue.



Disclaimer: HEAL Blogs do not necessarily reflect the views of the Community Access National Network (CANN), but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about Hepatitis-related issues and updates. Please note that the content of some of the HEAL Blogs might be graphic due to the nature of the issues being addressed in it.


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Behind the Scenes at Hepatitis, Inc.

By: Marcus J. Hopkins, Blogger

The Hepatitis Appropriations Partnership (HAP) and the National Viral Hepatitis Roundtable (NVHR) hosted a panel discussion on Wednesday, July 29th, 2015, in Washington, D.C. to discuss the burgeoning Viral Hepatitis crises in the United States. The purpose of the roundtable was bring together Hepatitis advocacy groups, national organizations, drug manufacturers, and government officials to help attendees gain a better understanding of the political, medical, and social landscapes upon which the Hepatitis game is played.

If that last statement sounds glib and slightly nefarious, it should – the meeting, at times, became quite contentious, as these roundtables frequently do. Any time you put a large number of people together in one room, each of whom answer to different stakeholders, tempers tend to flare, emotions run high, and civility can take a backseat. This is the nature of the high stakes game of addressing infectious disease action plans, policies, and expenditures.

Perhaps the biggest issue that faces those attempting to address Viral Hepatitis (VH) is one of clarity – virtually every representative in the room made some argument that their biggest hurdle was the lack of comprehensive information of one sort, or another.

From the Centers for Disease Control and Prevention (CDC) Division of Viral Hepatitis’ perspective, the information gap centers primarily around the lack of consistent surveillance techniques, data, and reporting:

Each state collects data about Hepatitis differently…if they collect data, at all. Because the CDC has yet to specifically define how to track VH, each state has its own interpretation of how they monitor and account for the virus. Some states track acute Hepatitis, others track chronic cases, and some simply don’t track the virus at all. As a result, attempting to gain a realistic and accurate understanding of the breadth and scope of the epidemic is incalculably difficult.

From the perspective of the Centers for Medicaid and Medicare Services (CMS), the information gap centers around the cost of treatment:

What differentiates Medicaid from Medicare is that the latter is a national federal program, making it much easier to plan for the cost of treatment. Because Medicare is legally prohibited from bargaining for better drug prices, the cost of drugs is stable, across the board – it is easily quantifiable and expenditures can be accurately tracked.

Medicaid, however, does not benefit from a national infrastructure – it is 56 different programs, each of which has its own negotiated pricing agreement with pharmaceutical companies. This means that there could ostensibly be 56 different prices being paid for the same drug. This makes quantifying the cost the Medicaid on a national level much more difficult.

Complicating the process is the fact that publicly releasing the prices being paid by each Medicaid program is prohibited by law. As a direct result, Federal monitoring of drug costs must rely on antiquated pricing averages – Average Wholesale Cost (AWC), Wholesale Acquisition Cost (WAC), and National Average Drug Acquisition Cost (NADAC) – which do not accurately reflect the prices that are actually being paid.

An additional frustration for CMS is the lack of transparency on the part of pharmaceutical companies. These private entities are extremely secretive about the formulas they use to determine the price of their drugs. This lack of clarity has become a hot topic, in recent years, thanks in no small part to the high price of HCV therapies.

Participants at the meeting, when attempting to ask why releasing the actual prices being paid by Medicaid programs, were met with the argument, “Well, the pharmaceutical companies aren’t being transparent about why their drugs cost so much.”

These types of non-answers leave everyone with a bad taste in their mouths. The CMS is unhappy, because advocates and organizations keep needling them for information they cannot legally release;

Advocates are frustrated, because no one will explain why it’s illegal to release this information to the public, as Medicaid is a taxpayer-funded program, and this information should be made available without filing a Freedom of Information Act (FOIA) request.

Hepatitis organizations are frustrated by the lack of accountability this type of answer exemplifies. CMS’ response attempts to take the onus of responsibility and place it directly upon pharmaceutical companies, despite the argument made by pharmaceutical companies that, as private entities, they are entitled to their proprietary information. As a result, HCV organizations find themselves attempting to get specific pricing answers from both private and public entities, both of whom redirect those requests to the other.

A big issue that kept resurfacing throughout the roundtable was the lack of clarity around why the Medicaid Prior Authorization (PA) requirements are more rigorous for HCV therapies than for virtually every other disease or condition. Again, because there are 56 different Medicaid programs, each program has its own set of PA requirements, some of which have come under heightened scrutiny.

One of the more onerous requirements involves behavioral or lifestyle prerequisites in order to receive approval for treatment. According to several representatives present, some of these requirements include abstinence from alcohol consumption and/or intravenous drug use. The apparent thinking behind these restrictions is that treatment is too expensive to “waste” on clients who will simply be re-infected at a later date.

This places HCV in the unique position of being one of the only conditions for which treatment is predicated upon whether or not those infected are exhibiting certain behaviors. Perhaps the best comparison made by one of the participants was to HIV treatment – how would the conversation go if receiving treatment for HIV was predicated upon whether or not the client abstained from sexual activity?

From the Office of Management and Budget (OMB), the lack of clarity revolved around the disparity in funding levels between HIV and VH:

In a very informative set of slides, the OMB representative provided estimated infection rates – HIV – 1.17 million; VH – 3.6 million – versus the funding levels for those respective diseases. Funding for HIV far outstrips that for VH, despite the cost of a curative treatment being lower (meaning a one-time cost, for most patients, versus a lifetime expenditure for many Medicaid/Ryan White clients).

What the OMB rep also accurately pointed out is that, in the world of disease funding, every cause is very protective of the money funneled to their particular cause, and HIV advocates, in particular, are loathe to even discuss the possibility of reallocating HIV funds for us in VH initiatives.

From my own perspective, the incredulity expressed over the spending disparity between HIV and VR is somewhat misplaced. We’ve been dealing with HIV for almost 35 years, and for the first half of those years (at least), HIV was seen as a death sentence for anyone unfortunate enough to become infected. It should, therefore, come as no surprise that more funds are allocated for HIV, than for VH.

Additionally, the viruses have fundamentally different “infection-to-death” timelines, when left untreated. HCV, as an example, is a relatively slow-acting disease – as one person so aptly phrased it, “When someone is diagnosed with HCV, the narrative is, ‘They’ve got maybe another 30 years.” HIV, however, poses far greater risks to patients who go untreated, as the nature of the virus leaves its host highly susceptible to death by way of secondary infection.

This explanation, however, rarely provides a true sense of urgency and understanding to people who are not infected with HIV, not involved in the community, aren’t as educated about the virus, or who are only looking at numbers on a page. As many times in as many ways as people can explain the peril, until HIV actually has an impact upon someone, it’s very difficult to comprehend the nature of the threat.

All of these issues of clarity boil down to one significant sticking point – resources are scarce. Neither the Federal nor state governments has the money or the manpower to actively pursue a comprehensive plan of attack on VH issues.

Surveillance is bad, data is incomplete, and, realistically, that situation isn’t likely to change any time soon. Testing, reporting, and tracking all cost money – money that just isn’t there to spend.

Programs tasked with treating or paying for HCV treatments are focused more on immediate, short-term costs, rather than looking at early, fast-acting, easily tolerate curative treatment in terms of long-term savings. With Conservative austerity policies being the flavor of the week, that’s unlikely to change in the current political environment.

Those austere spending policies in place, everyone’s “piece of the pie” is what it is – if you give more money to VH, it has to come from somewhere else, and no one’s willing to forego their own dollars. And, regardless of how many people say we “…need to ask for a bigger pie,” the political reality is that we’re more likely to get a smaller pie, after the dust settles. That is unlikely to change.

It’s a sad reality to face, but the big issue is money, on every front, and no one has a clear picture of how to get more of it; moreover, without transparent pricing information, we’re unlikely to wind up with a clear strategy for how to spend what money is there.

Lest one think that I left this roundtable feeling enervated and hopeless, that’s not the case. Rather, I find myself more dedicated to continuing the course of my research efforts, and doing my best to refine them; to finding better ways to get around the CDC’s lack of clear reporting requirements in order to provide a hopefully clearer picture of the “real” state of the HCV epidemic in the U.S. For those of us who have dedicated our lives to serving the HIV community, transitioning over to HCV is a natural step, resources be damned.


Disclaimer: HEAL Blogs do not necessarily reflect the views of the Community Access National Network (CANN), but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about Hepatitis-related issues and updates. Please note that the content of some of the HEAL Blogs might be graphic due to the nature of the issues being addressed in it.

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