Health Policy Report – June 13, 2023

Merck Brings Lawsuit to Halt Medicare Drug Negotiation 

Global drugmaker Merck is suing the Biden administration over Medicare’s new powers to negotiate drug prices. The lawsuit, filed in federal court in Washington on June 6, marks the drug industry’s most significant pushback against the Medicare drug negotiation program, passed last summer as a provision of the Inflation Reduction Act (IRA). 

Merck’s lawyers argue that by requiring the company to provide its products at government-set prices, the drug negotiation program violates part of the Fifth Amendment which requires the government to pay compensation for private property taken for public use. Additionally, they argue the program would violate Merck’s free-speech rights by forcing the company to sign an agreement stating that the government-set prices are “fair” and the result of a “negotiation.” In a company statement announcing the lawsuit, Merck leadership noted that with the increased adoption of cancer screenings, an inflection point is being reached altering the trajectory of the societal burden of cancer and the IRA makes further investments in treatments for earlier-stage cancer and screening far more difficult. 

In response to the lawsuit Xavier Becerra, Secretary of the Department of Health and Human Services, stated that the Biden administration would “vigorously defend” the law.

Medicare is scheduled to choose the first Part D drugs to be selected for the program by September 1.  Merck anticipates Januvia, its Type 2 diabetes drug, will be included in that first list of Part D drugs. It also expects that its blockbuster cancer immunotherapy treatment, Keytruda, and diabetes drug, Janumet, will be subject to the negotiation program in the future. Though Merck’s lawsuit is the first to challenge the IRA’s drug pricing provisions, analysts and industry members predict that more will follow. 

To read the lawsuit, CLICK HERE.

To read Merck’s company statement, CLICK HERE.

Senate Committee on Finance Holds Hearing on Health Care Mergers

On Thursday, June 8, the Senate Committee on Finance convened for a hearing on the impact of consolidation on health care access, quality, and costs. During the hearing, lawmakers discussed vertical and horizontal consolidation of hospitals and insurers, as well as the role of private equity in increasing health care costs.

Chairman Ron Wyden (D-OR) opened the hearing by stating that PBM consolidation, hospital mergers, and insurer mergers are increasing healthcare costs and not improving quality. In his opening statement, Ranking Member Mike Crapo (R-ID) said, “alignment of payment rates for certain services could provide patients with flexibilities and lower costs, in addition to advancing competition,” but any reforms must preserve patient safety and bolster access, especially in rural areas. He also said efforts to curb consolidation must address the “unsustainable” Medicare physician payment system, “which has made independent practice untenable for far too many frontline providers,” and noted, “the trend of uncertain eleventh-hour stopgap measures accelerates untimely acquisitions, even for those who would prefer to remain in private practice.”

Zack Cooper, Ph.D. of Yale University, a witness at the hearing, testified that mergers of hospitals that are geographically close can lead to extreme price increases for patients. In his written testimony, Cooper pointed to the 340B program and site-of-service payment differentials as factors that contribute to vertical consolidation amongst hospitals. Meanwhile, R. Shawn Martin, Executive Vice President and Chief Executive Officer of the American Academy of Family Physicians urged lawmakers to advance site neutral payment and transparency legislation to address incentives that undermine independent practices.

To watch the hearing and read witness testimony, CLICK HERE.

Bilirakis, Cárdenas, Murphy, and Davis Introduce the Providing Relief and Stability for Medicare Patients Act (H.R. 3674)

On June 1, Representatives Gus Bilirakis (R-FL), Tony Cárdenas (D-CA), Greg Murphy, MD (R-NC), and Danny Davis (D-IL) introduced the Providing Relief and Stability for Medicare Patients Act (H.R. 3647), which aims to ensure patients’ continued access to office-based specialty care providers who incorporate high-tech medical equipment for in-office procedures. 

The bill specifies protections for specialists disproportionately affected by recent Medicare Physician Fee Schedule changes implemented by the Centers for Medicare and Medicaid Services (CMS). Specifically, the bill provides targeted relief funds for specialist providers who have been most adversely affected by clinical labor cuts and would require the Government Accountability Office (GAO) to analyze the impact of reimbursement cuts on patient access, health system consolidation, and care quality.

“My primary goal is to ensure all Medicare patients have access to quality care in a setting that maximizes their opportunities for a successful outcome,” said Rep. Bilirakis (R-FL) said in a press release. “Continued year-over-year cuts have taken a toll on many specialty care providers’ ability to participate in the Medicare program and provide care to seniors in need.”

To view the bill, CLICK HERE.

To read a press release on the bill, CLICK HERE.   

Radiation Oncologists Report Troubling Staff Shortages

A new study from the American Society for Radiation Oncology (ASTRO) found that radiation oncology clinics have been hit especially hard by the clinical staffing shortage, with more than 90% of clinics facing detrimental shortages. According to the study, over half (53%) of clinics are experiencing delays in treatment while just under half (48%) have had to reduce patient support services leading to increased patient anxiety. The study also found operating costs for clinics have increased by 23% from before the pandemic.

Radiation oncologists from across the country recently met with members of Congress to voice their concerns and discuss the need to implement Medicare payment reform, reduce burdensome prior authorization requirements, and increase federal funding for cancer research. The radiation oncologists highlighted that without these changes, patients will continue to face obstacles accessing radiation therapy, which is utilized by more than one million Americans annually. 

To read the ASTRO study, CLICK HERE.

To read the ASTRO press release, CLICK HERE.

New Study Reveals Nonprofit Hospitals’ Charity Spending Drops as Profits Grow
According to a recently published Health Affairs report, nonprofit hospitals have reduced funds allocated for charity care, even while their operating incomes and cash reserves have grown. The report outlined that between 2012 and 2019, hospitals’ operating profits grew from $43 million to $58.6 million, but spending on charity care dropped from $6.7 million to $6.4 million.

“With operating profits for nonprofit hospitals growing, the share of community health benefits they provide should also be growing to justify their favorable tax treatment,” the authors wrote.

The study is the latest in a string of research on how hospitals are benefitting from the latitude they have been given regarding charity care spending. These trends have led many to assert that nonprofit hospitals are abandoning their obligation to supply adequate charity care, which justifies their tax-exempt status.

In a statement, the American Hospital Association (AHA) refuted the study, stating that it neglects to recognize uncompensated care provided by hospitals through discounted services and financial assistance programs.
To read the full Health Affairs Report, CLICK HERE.

To read AHA’s statement, CLICK HERE.