The New Pharmacy Price Transparency Rule Put Forth by President Trump

The New Hospital Price Disclosure Rule Is Important, But Only A First Step,” Health Affairs, James C. Capretta, August 26, 2019

The new proposed regulation on hospital price transparency is an important step toward consumer-friendly price information. The regulation introduces into federal price transparency, requirements such as the concepts: of service standardization, consumer-friendly organization and terminology, and bundling of which all of are crucial for a marketplace to become price competitive.

As the administration acknowledges, this regulation by itself will not fully address the opacity of today’s market. Additional disruptive changes will be necessary to give consumers usable pricing information. Among which, meaningful transparency requires stricter standardization of the services being priced and “all in” pricing matching how consumers think about the services they need.

Additionally, the reform of the nation’s insurance payment system must be integrated into the price transparency effort to ensure consumers are price sensitive across a wider range of services. Suppliers of services will only compete on price when significant numbers of consumers have strong incentives to seek out low-cost alternatives.

Me: To which I would add there is a big difference between price and cost and it is not being acknowledged.

The Trump administration on Friday put forth two long-anticipated rules that increase price transparency for both hospitals and insurers.

The CMS’ hospital price transparency requirements finalize changes that require health systems to make their standard fees available on-demand and online. The “transparency in coverage” proposed rule would require health plans, including employer-based plans, and group and individual plans, to inform participants, beneficiaries and enrollees about price and cost-sharing information ahead of time.

The agency hopes increased price transparency will boost competition among hospitals and insurers to drive down healthcare spending.

Under the new price transparency rule, hospitals must publish their standard charges online in a machine-readable format. They will need to create at least 300 “shoppable” services, including 70 selected by the CMS.

Under the rule, hospitals would have to disclose the rates they negotiate with third-party payers, which some experts say could be illegal.

Hospitals get ready to fight CMS in Court over Transparency,” FierceHealthcare, Robert King, November 15, 2019

More after the leap!

On Friday, the Center for Medicare and Medicaid released its anticipated rule requiring hospitals to post or list in a searchable format payer-negotiated rates for 300 “shoppable” services in 2021. Additionally, consumers must have access to the raw data of the payer -negotiated rates. CMS will also require insurers to divulge real-time cost sharing and rates for in and out-of-network charges from hospitals and clinics alike.

Federation of American Hospitals President and CEO Chip Kahn: “The fact is that this regulation exceeds the administration’s authority, and we plan on joining with hospitals to file a legal challenge.”

Me: That hospitals would sue due to government perceived interference is not a surprise and it was expected to be the reaction. Healthcare insurance companies will sit back and watch.

As left by me on Health Affairs

– The ICER released a report on the pricing of drugs recently. Seventy-seven of 100 drugs were shown to have pricing increases at or greater than Medical CPI over a 2-year period from 4th quarter December 2016 to 4th quarter December 2018. From that list of 77, the ICER chose nine drugs experiencing the highest percentage of price – increases to evaluate. Of the nine, two drugs were dropped due to presenting evidence of new and supposedly greater value in treatment thereby having a basis for a higher price. The ICER did not take on the task of an economic evaluation of the two drugs in question.

Using the GRADE format, the other seven drugs were said not to have adequate evidence provided to justify a price increase, the decision of which has been disputed by the manufacturers. The ICER usually analyzes new drugs for pricing.

– Hospital Inpatient care pricing grew at 42% from 2007 – 2014 and outpatient care pricing grew 25% over the same period (Health Affairs). Of course, some care was more expensive than other care. Kocher and Berwick in another Health Affairs article pointed to increased hospital care pricing as being the biggest drivers of increased healthcare insurance premiums. With the formation and promotion of ACOs, market competition has diminished (HHI) in various areas of the country as has care as smaller providers are bought up and subsequently closed.

– World Health Organization released its technical paper on the pricing of cancer drugs. In the report and looking at the costs of R&D, it arrived at this conclusion:

The median time to generate revenue to fully cover risk-adjusted R&D cost of US$794 million was 3 years (range: 2 years; 5 years, n=73). For the maximum estimated risk-adjusted cost of R&D (US$2.827 billion), the time to cost recovery was 5 years (range: 2 years; 10 years, n=56).

The time of recovery is far less than the exclusivity granted by US patents. The argument for the need to recoup R & D costs and incentivize for future R & D costs is weaker than patients are led to believe.

– For a patient to shop around strictly based upon price is difficult to do if in need of immediate care. Transparency takes a back seat in such of a case of need. The question is, what is a fair price?  And then, how does an agency of buyer know what a fair price is when it is offered? Today’s healthcare is based upon a fee for services model. There is little questioning of price.  It gets more complex when the supply chains, middlemen, rebates by manufacturers, discounts, etc. are taken into consideration.

Chasing a fair price is the same as looking for unicorns when if comes to healthcare. We hear of fair pricing from the healthcare industry based upon recouping the costs of R & D or value  offered to the patient, etc.  but, we can not prove such exists as there is no way to measure them or compare them to cost. It is opaque to the consumer and the government. It becomes more-so when the purveyors of healthcare use value analysis to set pricing based perceived care savings from a new drug, supply, or care. In the end, the effort promotes profit/rent taking based upon perceived value given. There is no clear path or way of matching what is gained against real cost. We need to get back to acknowledging costs, assessing it, and setting a fair price.

My opinion and it will continue to be so, chasing list of prices does nothing for you without knowing the cost. You can not judge whether a price is fair without knowing costs.

Trump administration unveils new price transparency rules,” ModernHealthcare, Michael Brady, November 15, 2019

Run75441 (Bill H)