Consumer Power Report: Governor Perry’s Off-Label Therapy

Here’s some good news from The Wall Street Journal regarding a story we covered several times in the past:

The U.S. government dropped efforts to force the resignation of a prominent pharmaceutical-company chief executive, reversing course after protests from the company and major business groups.

The about-face on Forest Laboratories’ longtime leader, Howard Solomon, represents a significant retreat by the Department of Health and Human Services, which has said it wants to step up punishments against drug-company executives when wrongdoing happens on their watch.

Forest agreed last year to plead guilty to misdemeanors involving marketing of its drugs including the antidepressant Celexa, and it paid $313 million to resolve the matter.

Mr. Solomon wasn’t personally accused of any wrongdoing. Nonetheless, the government notified him in April that it was considering excluding him from jobs at health-care companies that sell to the U.S. government. It invoked a little-used clause in the Social Security Act that allows such an action against corporate leaders of companies found guilty of criminal misconduct, even if the leaders had no knowledge of the misconduct.

The exclusion move would have effectively forced Forest to remove Mr. Solomon from office, because Forest and other drug companies rely on business from U.S. government agencies such as Medicare and the Veterans Administration.

In a letter to Mr. Solomon on Friday, the office of the inspector general of the Department of Health and Human Services said, “Based on a review of information in our file, and consideration of the information your attorneys provided to us both in writing and in an in-person meeting, we have decided to close this case.”

The backlash this story prompted doubtless had an effect on HHS’s decision. It’s good for Forest that this has played out this way – but bad if this is only a sign of more such pressurized confrontations to come. Next time, it may just be kept behind closed doors.

The Boston Globe reports on a new hospital in St. Kitts being built by Marriott in a beachside location to serve American medical tourists:

The specialty hospital is part of a growing trend by Americans (and others from economically advanced countries) to combine medical treatment with vacation. In 2008, 1.3 million Americans traveled outside the United States, primarily for elective surgery; the number is expected to triple by 2012.

Americans are going to overseas centers for two good reasons – far lower health costs and high quality of care – not to mention the exceptional personal comfort provided at these centers. Some American health insurers are exploring coverage for their clients for the same reasons.

After all, why should a health insurance company, any more than an individual, pay three times as much for a surgical procedure – to repair a hernia, for example – in a stateside local hospital when it could be done just as well in the Caribbean? And patients could recover with hotel services at their fingertips.

A few health insurers already provide medical tourism coverage, including Blue Cross Blue Shield of South Carolina and Georgia-based BasicPlus Insurance Services. Some US employers are looking into it with an eye on cutting employee health costs. In January 2008, Hannaford Bros., a supermarket chain based in Maine, began paying the entire bill for employees to travel to Singapore for hip and knee replacements, including travel for the patient and a companion. Some unions, however, have raised issues of legal liability and potential job losses in the US health care industry if hospital treatment is outsourced.

The unions don’t like it, you say? Well, then, let’s forget about it.

Mark Duggan and Tamara Hayford offer a report from the National Bureau of Economic Research on this subject:

From 1991 to 2003, the fraction of Medicaid recipients enrolled in HMOs and other forms of Medicaid managed care (MMC) increased from 11 percent to 58 percent. This increase was largely driven by state and local mandates that required most Medicaid recipients to enroll in an MMC plan. Theoretically, it is ambiguous whether the shift from fee-for-service into managed care would lead to an increase or a reduction in Medicaid spending. This paper investigates this effect using a data set on state and local level MMC mandates and detailed data from CMS on state Medicaid expenditures.

The findings suggest that shifting Medicaid recipients from fee-for-service into MMC did not reduce Medicaid spending in the typical state. However, the effects of the shift varied significantly across states as a function of the generosity of the state’s baseline Medicaid provider reimbursement rates. These results are consistent with recent research on managed care among the privately insured, which finds that HMOs and other forms of managed care achieve their savings largely through reduced prices rather than lower quantities.

As I’ve written in the past, managed care is not a real solution, it’s just a more sustainable path than the one Medicaid is currently on.

Here’s an interesting piece of news on Medco’s decision to merge with Express Scripts:

Medco Health Solutions Inc., the parent company of Memphis-based Accredo Health Group, announced Thursday, July 21, it had signed a merger agreement with Express Scripts Inc.

Accredo, a provider of specialty pharmaceuticals that occupies 240,000 square feet at Century Center in East Memphis, employs more than 1,800 people.

Under the agreement, unanimously approved by the boards of directors of both companies, Medco shareholders will receive $71.36 per share in cash and stock, or $29.1 billion, based on Wednesday, July 20’s closing price. Those figures include $28.80 in cash and 0.81 shares for each Medco share owned upon closing of the transaction.

Medco said the merger will combine the expertise of two complementary pharmacy benefit managers to accelerate efforts to lower the cost of prescription drugs and improve the quality of care.

Eric O’Keefe claims it would:

The Health Care Compact would empower states to create their own Medicare and Medicaid programs, free from the arbitrary decisions of unelected bureaucrats in Washington, D.C., including those on the powerful IPAB commission. States participating in the Health Care Compact will be given the authority to design their own health care programs, but will continue to receive their portion of federal health care dollars.

The Health Care Compact is already law in Georgia, Oklahoma, Missouri and Texas, and has been introduced in state legislatures in Ohio, Michigan, Tennessee, Colorado, South Carolina and Louisiana. Once Congress approves the compact, it will carry the full force of federal law and will trump the federal Health and Human Services regulations, as well as the recommendations of IPAB. States that choose to participate in the Health Care Compact will be given autonomy over health care policy.

Empowering unaccountable and unelected officials with expansive authority to legislate – as IPAB does – moves us away from self-governance. The Health Care Compact, on the other hand, will yield greater transparency and accountability by returning decision-making authority to elected officials in the states, and to the people they represent.

Regardless of whether you agree with this assessment of what would happen under a compact environment, it seems to me a strong contrast in support for competitive state innovation and opposition to it. The current administration is uninterested in playing on any field they cannot tilt.

I’ve been asked to pass along an invitation to the Missouri Senate Interim Committee hearing on the creation of a Health Insurance Exchange, which will be held on August 16 at 1:00 pm at Cerner, 2850 Rockcreek Parkway, Kansas City, MO 64117.

Those who oppose implementation of an exchange may find it worthwhile to attend. The floor will be opened for feedback and questions after three speakers, including Attorney General Chris Koster and friend of CPR Beverly Gossage.

If you have any questions about why an exchange should not be implemented, I suggest you read our Research & Commentary on the matter.