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Reporter’s Notebook: In Health Care, A Good Price (Or Any Price) Is Hard To Find

Kaiser Health News:Marketplace - September 14, 2017

A recent story about why Northern California is the most expensive place in the country to have a baby began as a tip from an obstetrician. Dr. Sarah Azad told me that insurers were paying her just a third of what they pay doctors employed by large hospital systems in her town of Mountain View, Calif.

Unfortunately, she explained, she could speak only in general terms. She couldn’t share her actual payment rates with me because she was barred from doing so by a gag clause in her contracts with insurers.

So, I called the insurers who pay her, and the hospital systems that employ most of the other obstetricians in Mountain View. They all had the same answer: It would be illegal for them to tell me the dollars and cents.

Use Our ContentThis KHN story can be republished for free (details).

As it turns out, the vast majority of contracts between doctors or hospitals and insurance companies are subject to a gag clause, which prohibits either party from disclosing negotiated rates. That means it’s almost impossible for consumers, researchers or journalists to find actual, accurate numbers, despite the fact that cost differentials among doctors can be so stark. And it’s particularly problematic for the growing number of people who have insurance plans with deductibles that can run more than $10,000 for a family.

The underlying problem of our health care system — beyond the corrosive partisan politics — is its high cost. I have long understood that the lack of price transparency is one reason our system stays so expensive. It was a surprise, though, to find out that this opacity is cemented by legally binding contracts.

Think about what this would look like for a mundane purchase, say, a gallon of milk. Advertisements and price tags would disappear, so you couldn’t compare prices at different stores. And you wouldn’t even know how much you had paid for the milk until you got a bill in the mail weeks or months later. On top of that, the store and the dairy farmer would be barred from telling a journalist or an economist what you had paid.

It’s absurd, but I wasn’t going to let the absurdity kill my story.

I started by asking all of the health policy analysts, researchers and economists I could find, “How can I find these rates, by physician, for an uncomplicated vaginal delivery?” Everyone told me the same thing: You can’t get that.

I searched online, but most of the websites claiming to offer health price transparency offered only “average costs” for specific services in your area. Not much help if you’re trying to compare the costs of individual doctors.

Next, I asked Castlight, a “transparency tool” that gathers payment data and allows employees of certain companies to estimate the costs of their medical care. But Castlight told me that as a journalist, I wasn’t allowed to have access to the exact pricing information of individual providers. It, too, was subject to the gag clause.

So I turned to the consumers who might have access to those tools. I asked friends and colleagues, and put out social media requests: Would anyone be willing to share the information from the cost estimators they got from their employers or insurers? I found a few willing sources and was able to mine the results of their inquiries to find out the basic cost differentials between independent doctors and those employed by large systems, including Sutter Health.

Unfortunately, these estimators are difficult to use and often provide incomplete data. And when I tried to confirm that information, I ran up against the gag clauses again.

Finally, I found out about a health data company called Amino that was willing to send me the claims data it had been gathering. At last! The Holy Grail! It had hundreds of claims for vaginal births performed by obstetricians in the Bay Area. KHN data correspondent Sydney Lupkin helped me decipher a Medicare provider database to determine where each doctor worked. In cases where the doctor’s employment status was unclear, I called the health system or physician directly. We then calculated the median billing amount, on average, for a routine vaginal birth for each health system.

Weeks of digging and data analysis confirmed the imbalance Dr. Azad had told me about at the start of my quest. The few independent doctors left in the Bay Area receive a median amount of $2,408.45 for a routine vaginal delivery, which includes prenatal and postnatal visits. That compares with $5,238.13 for the same bundle of services provided by Stanford physicians and $8,049.84 when the doctors are employed by University of California-San Francisco — a fourfold difference.

Hard data, hard won.

The database we built gave us a strong sense of the cost variation between doctors who work at other health systems and those who have remained independent. But it did not include enough claims from the largest hospital system in the region, Sutter Health. For Sutter, I used the data from the online cost estimators, and found that obstetricians employed by the system are reimbursed about $6,452 for a vaginal delivery.

It’s no accident that data on physician costs are so hard to find. Its inaccessibility allows hospitals to keep raising their prices. It’s simply not in their interest for the public to know how much they’re charging. And insurers don’t want other doctors or hospitals to see the high prices they’ve agreed to pay, for fear they would demand the same.

In the end, all of us — through our insurance premiums and our taxes — pay a price for non-transparency.

FDA Moves To Guard Against Abuse Of ‘Orphan Drug’ Program

Kaiser Health News:Marketplace - September 13, 2017

The Food and Drug Administration is changing the way it approves medicines known as “orphan drugs” after revelations that drugmakers may be abusing a law intended to help patients with rare diseases.

In a blog post Tuesday, FDA Commissioner Scott Gottlieb said he wants to ensure financial incentives are granted “in a way that’s consistent with the manner Congress intended” when the Orphan Drug Act was passed in 1983. That legislation gave drugmakers a package of incentives, including tax credits, user fee waivers and seven years of market exclusivity if they developed medicines for rare diseases.

A KHN investigation earlier this year, which was published and aired by NPR, found many drugs that now have orphan status aren’t entirely new. Of about 450 drugs that have won orphan approval since 1983, more than 70 were drugs first approved by the FDA for mass-market use. Those include cholesterol blockbuster Crestor, Abilify for psychiatric disorders and rheumatoid arthritis drug Humira, the world’s best-selling drug.

Gottlieb announced plans to close a loophole that allows manufacturers to skip pediatric testing requirements when developing a common-disease drug for orphan use in children. He also signaled that bigger changes are being considered, announcing a public meeting to explore issues raised by scientific advances, such as the increase in precision medicine and biologics.

This KHN story also ran on NPR. It can be republished for free (details).

“We need to make sure our policies take notice of all of these new challenges and opportunities,” he wrote. Gottlieb, through his agency, declined multiple requests for interviews.

Over the years, drugmakers have fueled a boom in orphan drugs, which often carry six-figure price tags. Nearly half of the new drugs approved by the FDA are now for rare diseases — even though many of them also treat and are marketed for common diseases.

Gottlieb became commissioner in May, a few months after three key Republican senators called for a federal investigation into potential abuses of the Orphan Drug Act, and the Government Accountability Office agreed to investigate.

The GAO has yet to begin its investigation, saying it doesn’t expect to start work until late this year, when staff is available. Regardless, in late June, Gottlieb announced what would be the first in a series of updates that shift the way the FDA handles orphan drugs.

Those include:

  • Eliminating a backlog in drug applications for orphan designation or status. Getting a “designation” is a critical first step if a company wants to win orphan incentives once the drug is approved for treatment use. And, much like the rise in approvals, the requests by companies to get drugs designated with orphan status has also skyrocketed. Gottlieb said in June that he wanted to get rid of the backlog; on Tuesday, he said the effort was complete. About half of the 200 applications from drugmakers won orphan status.
  • Mandating that drugmakers prove their medicine is clinically superior before getting the market exclusivity that comes with being an orphan. The agency had lost a lawsuit in which a company said it was owed the exclusivity period regardless of whether its medicine was better. And two more lawsuits had been filed by Eagle Pharmaceuticals and, more recently, another by United Therapeutics. The FDA Reauthorization Act, which passed last month, made it law that a drug has to be clinically superior to get the incentives.
  • Closing the loophole for pediatric orphan drugs by requiring all drugs approved for common adult diseases, like inflammatory bowel disease, undergo pediatric testing when getting approval as a pediatric orphan drug. Pediatric testing is not required for orphan drugs, and last month Congress mandated that orphan drugs for cancer be tested for children. Still, the American Academy of Pediatrics celebrated the proposed change but warned it was only a “first step.” Dr. Bridgette Jones, chair of American Academy of Pediatrics Committee on Drugs, said late Tuesday that orphan drugs are “still mostly exempt from pediatric study requirements … children deserve access to safe, effective medications.”

Dr. Martin Makary, who wrote a critical 2015 paper on orphan approvals, said the changes at the agency indicate that Gottlieb seems “concerned about all the right things.”

“The government does a lot of lip service in general,” Makary said. “This is not lip service.”

The restructuring has been swift in some ways.

Sandra Heibel, a senior consultant at Haffner Associates, a firm that helps companies submit orphan drug applications, noted that the approval process for designations definitely sped up over the summer, and “we are absolutely getting responses from the FDA back in 90 days. That has come through.”

Other changes to the agency, though, will evolve slowly. For example, the orphan drug office has begun reaching across the FDA’s divisions for help in reviewing drugs. In May, the FDA’s orphan reviews began to work with the office of pediatric therapeutics to review pediatric applications — ideally increasing the expertise applied when considering a company’s request for orphan drug use in children.

In an emailed note Tuesday, the agency confirmed that Gottlieb’s orphan modernization plan is part of a larger effort to increase competition and decrease drug prices. One focus is on targeted drugs — especially those that affect rare diseases or diseases for which there is no effective therapy, the agency said.

“Such drugs present some of the biggest opportunities in medicine to treat and cure debilitating and very costly diseases,” the agency stated.

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Podcast: ‘What The Health?’ Health Plans Busting Out All Over

Kaiser Health News:HealthReform - September 13, 2017

In a busy health week for Congress, Republicans and Democrats on the Senate Finance Committee agreed on a proposal to fund the Children’s Health Insurance Program for five more years, while Republicans and Democrats at the Health, Education, Labor and Pensions Committee continued to pursue a joint plan to stabilize the individual health insurance market.

Meanwhile, a growing group of Democrats, led by liberal standard-bearer Sen. Bernie Sanders (I-Vt.), unveiled a “Medicare for All” single-payer health care bill. But the apparent groundswell of support could overstate what might happen when details come out and people see who wins and loses. And Republicans continue to pursue one last-ditch effort to pass a bill to “repeal and replace” the Affordable Care Act in the Senate under rules that let the bill pass with a simple majority.

In this week’s episode of “What the Health?” Julie Rovner of Kaiser Health News, Joanne Kenen of Politico, Margot Sanger-Katz of The New York Times and Stephanie Armour of The Wall Street Journal discuss all these issues. Plus, for “extra credit,” the panelists recommend their favorite health stories of the week they think you should read, too.

Julie Rovner: The New York Times’ “How Single-Payer Health Care Could Trip Up Democrats,” by Margot Sanger-Katz.

Joanne Kenen: Reuters’ “Doctors who take pharmaceutical money use Twitter to hype drugs,” by Ronnie Cohen.

Margot Sanger-Katz: Vox’s “Once Obamacare repeal is dead, the GOP has no Plan B,” by Dylan Scott.

Stephanie Armour: Vox’s “Single-payer isn’t the only progressive option on health care,” by Ron Pollack.

To hear all our podcasts, click here.

And subscribe to What the Health? on iTunesStitcher or Google Play.

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