By Jad Chamseddine, CQ Roll Call

July 21, 2016 -- In the Obama administration's most significant decision on antitrust, the Justice Department is seeking to halt further health insurance industry consolidation by trying to block a pending merger between Anthem Inc. and Cigna Corp. and Aetna Inc.’s proposed acquisition of Humana Inc.

The Justice Department brought suit in federal court to prevent Anthem from pursuing its agreement last summer to buy Cigna for about $54.2 billion, a move made within a month of Aetna reaching a deal to acquire Humana for $37 billion. While the insurers immediately said that they plan to fight the lawsuit, businesses in these situations typically embark on an analysis of whether it makes more financial sense to scrap the deals.

"If allowed to proceed, these mergers would fundamentally reshape the health insurance industry," Attorney General Lynch said in a Thursday press conference.

The deals would reduce the number of large national health insurance providers to three from five, and "drastically" constrict competition in key markets at the "expense of consumers" through increased premiums and lower quality care, Lynch said.

Speaking after Lynch, Principal Deputy Associate Attorney General Bill Baer, who was promoted a few months ago from his role as head of the antitrust division, said the mergers would have a negative effect on "seniors, working families and individuals, employers" and would be problematic for doctors and hospitals.

The transaction would hurt innovation by taking out two important industry participants, Cigna and Humana, Baer said. He added the mergers would "reduce competition for the many Americans who obtain health insurance through public exchanges" established by President Barack Obama’s signature legislation, the health law PL 111-148 , PL 111-152), also known as Obamacare.

The merging parties made repeated assurances their transactions would aid consumers because the combined entities could negotiate better prices by "forcing cost concessions from doctors and hospitals." But Baer said the Justice Department rejected that notion because it failed to take into consideration the effect it would have on the quality of care.

"The antitrust laws don’t work that way. You don’t get to buy a competitor, and eliminate substantial competition, just to increase bargaining leverage with health care providers," Baer said.

He also ruled out potential divestitures, which are often used to restore competition by forcing the merging companies to sell assets to a third party. The remedies the businesses offered were "incomplete and impractical," Baer said. "We’ve seen nothing to suggest they can salvage the merger."

When announced, the mergers faced almost immediate criticism from consumer advocacy groups, lawmakers and health professionals who argued the combinations would hurt competition by eliminating rivals.

Sen. Richard Blumenthal, D-Conn., was one of the first lawmakers to criticize further consolidation in the health industry, and was quick to praise the Justice Department on Thursday for taking a stand against the mergers.

"I am pleased that the Department of Justice heeded my call to preserve competition and consumer choice in the health insurance market, along with pleas from other consumer advocates," Blumenthal said in an emailed statement. "Such mammoth mergers threaten jobs, hike prices, lessen choice, and lower health care quality."

Amy Klobuchar, D-Minn., who is ranking member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, said Thursday the mergers deserved "close scrutiny" by the antitrust enforcement agency. She lauded the Justice Department’s "aggressive defense of competition," calling it the "best medicine to control health insurance premiums." The subcommittee held a hearing last year, grilling the CEOs of Anthem and Aetna over the effect of the proposed mergers on health insurance.

Besides lawmakers, the health industry itself was apprehensive about the proposed deals. The merger agreements led to an uneasy alliance between the American Hospital Association and the American Medical Association (AMA) in opposing the health insurance merger proposals, a rare accord between two groups that have been at odds over the pace of hospital consolidation.

The AHA called the Justice Department’s decision to file suit "good news for consumers" and warned against reduced competition in the insurance market, adding that resulting price increases would reduce "availability of coverage for all Americans."

The AMA similarly lauded the government for "fighting to protect patients and physicians from a health insurance system dominated by a few corporate Goliaths with unprecedented market power."

Not all organizations praised the government’s actions. America’s Health Insurance Plans, a trade association for health insurance providers, said some mergers among health insurers can deliver "significant benefits by combining complimentary areas of expertise," adding that several state insurance regulators across the country approved the transactions.

The decision is a blow to Anthem, which called the Justice Department’s announcement "unfortunate and a misguided step backwards" for those seeking access to affordable health care. Anthem alluded to the fact it may fight the suit in federal court, but said it would continue speaking with the DOJ over a possible fix.

Aetna was more forceful in defending its acquisition of Humana in its statement: "Aetna and Humana look forward to making this clear in court, where a judge will review the transaction based on its merits."

But mergers often fall apart after the government makes it clear it will block the transaction. Halliburton Co. also vowed earlier this year to fight the government's decision to block its acquisition of Baker Hughes Inc., only to walk away from the deal a few weeks later.

By Marissa Evans and Erin Mershon, CQ Roll Call

July 20, 2016 -- Most insurance companies lost money participating in the new insurance marketplaces in their first year, according to a study released Wednesday by The Commonwealth Fund.

Insurers fared poorly in part because they set their premiums too low when they entered the new marketplaces established by the law (PL 111-148, PL 111-152). Medical claims were about 5.7 percent higher than insurers initially projected, across the market.

Some did much better than others at the guessing game: the 25 percent of insurers whose projections were farthest off missed the mark by 35 percent on average. The best guessers were off by about 4 percent.

The results highlight challenges for the Obama administration, which hopes to keep insurance companies participating in a fluctuating and complicated marketplace as a way to increase competition and keep premiums low. Already this year, the nation's largest insurer, UnitedHealth Group, announced it will exit more than 30 state marketplaces in 2017.

However, a federal program played a major role in limiting insurers' losses. Reinsurance payments provided funding for insurers with a large number of high-cost patients. After taking reinsurance payments into account, medical claims were only about 2 percent higher than insurers first projected.

The federal government offset insurers' underestimates on high-cost patients by $7.9 billion. Reinsurance credits were almost 50 percent higher than insurers had originally estimated, the study found. While the program has prevented steep losses for insurance companies, researchers noted that the program is slated to phase out reinsurance protections for insurers.

The study authors also noted that insurers will develop more accuracy over time with their rate estimates, and that the market would likely stabilize once policyholders transition from plans that did not have to adjust to new rules because they were grandfathered in.

The study found that insurers struggled in the first year to create rates as they "lacked actuarial experience" with the federal health law’s changes.

"All well-functioning markets have winners and losers, so it should be no surprise that some health insurers failed to succeed in the ACA’s reformed market, especially during the first year," researchers wrote.

Researchers used premium rate data from the Centers for Medicare and Medicaid Services to look at projected 2014 medical claims from health law plans.

By Kerry Young, CQ Roll Call

July 22, 2016 -- Employers and insurers might benefit if Democrat Hillary Clinton were to win the presidency and persuade Congress to expand Medicare, policy experts say. Clinton supports allowing people to buy into the federal health program for senior citizens and those with disabilities at age 55, a decade earlier than usual.

The potential for corporate backing for a Medicare expansion likely would depend on how a future president and Congress shaped such a proposal. Clinton’s platform doesn’t spell out the details. America’s Health Insurance Plans declined to comment, saying trade group officials are waiting for more information.

Any expansion of Medicare could provide another source of customers for the rapidly growing insurer-run Advantage plans, said Tricia Neuman, director of Medicare policy at the nonprofit Kaiser Family Foundation. Advantage plans next year may cover almost 20 million people, or about one in three people enrolled in Medicare, up from 6.9 million in 2000, according to the most recent report from the program’s trustees.

"It’s hard to see how it could not result in a boost in Medicare Advantage enrollment" if the Clinton proposal were to become reality, Neuman said. "To opine further gets difficult because it’s not clear who would be eligible to enroll, what the circumstances are, whether they would receive subsidies."

A Medicare expansion also might appeal to companies struggling with the health costs for their older workers and younger retirees, said Geoffrey Joyce, director of health policy at the University of Southern California’s Schaeffer Center. Some firms might offer less generous coverage, seeking to shift these costs toward an expanded federal program, he said. And some older workers might opt to leave jobs that they would otherwise remain in due to the prohibitive cost of buying insurance on their own.

"Employers are the ones who would benefit the most," Joyce said. "They would be the big winners in this."

A Medicare expansion could trigger a "dramatic change" for employers, workers and retirees, agrees Scott Harrington, a professor who studies health insurance at the University of Pennsylvania’s Wharton School.

"The details would be very, very important" in making a serious assessment of a Medicare expansion, Harrington said, citing concerns about how much this could cost the federal government. "It all gets very complicated."

However, the odds against a Medicare expansion have risen with the creation of health insurance exchanges through the 2010 overhaul (PL 111-148, PL 111-152). Democrats for many years floated ideas for expanding Medicare, including ultimately unsuccessful discussions held during the crafting of the 2010 law. Clinton was the co-sponsor of a 2001 Senate bill that would have let certain people opt into Medicare at age 62. In 1998, the administration of her husband Bill Clinton proposed allowing uninsured people as young as 55 to buy into Medicare.

"It’s a different context because the world has changed quite a bit," Neuman said. "The goal then was to provide health insurance to people who had no other source of coverage."

USC's Joyce said Clinton's Medicare proposal appears to be a response to her rival for the Democratic presidential ticket, Sen. Bernie Sanders, I-Vt. Sanders pitched a "Medicare for all" approach, calling for a federally administered single-payer health program.

Republicans, in contrast, support a shift toward a system in which the federal government provides capped subsidies to help older Americans buy insurance. And the 2016 GOP platform suggests setting "a more realistic age for eligibility in light of today’s longer life span," while sparing those nearing retirement from sudden changes.

Effect of Exchanges

Joyce said the only reason for Democrats to push for lowering the Medicare age would be a grim outlook for the new health exchanges. Insurance giant UnitedHealth Group on Tuesday confirmed that its losses on policies will lead it to participate in no more than three marketplaces next year. The company, which already has announced plans to scale back its participation in exchanges, cited concerns about the health of these customers.

But Joyce he expects insurers to adapt to the new market.

"The industry will work out the kinks and find ways to make more money" on the exchanges, Joyce said. "It’s a viable market that will stabilize over time."

Still, the experience with the exchanges may make some companies leery of a Medicare expansion, despite the growth opportunities, said insurance industry consultant Robert Laszewski, president of Health Policy and Strategy Associates. Companies could look to sell more supplemental Medigap policies as well as Advantage plans if younger people could participate in Medicare, he said.

But insurers "would be very worried that only the sickest people would buy into the new program," which would lead to "a poor profit picture more like Obamacare than the over-65 market now," Laszewski said.

Wharton's Harrington contended an expanded Medicare program might actually attract wealthier participants, those who don't get financial aid if they purchase insurance through exchanges.

"I don’t see why it would necessarily produce a lousy risk pool," Harrington said. "It could be a nice option probably for higher-income people who aren’t eligible for subsidies."

Allyson Y. Schwartz, president and chief executive of a coalition of supporters of insurer-run Medicare Advantage plans, said middle-aged consumers might gain through an expansion.

"Preventive, coordinated care, and enhanced benefits offered under Medicare Advantage would be an attractive option for those between 55 and 65 who are not currently eligible," said Schwartz, a former Democratic congresswoman from Pennsylvania, who leads the Better Medicare Alliance. "There is a lot more we would need to know to determine the impact and how this would practically work within Medicare Advantage."

By Kerry Young, CQ Roll Call

July 18, 2016 -- The Obama administration is working to take advantage of one of its final opportunities to put its stamp on the nation's health care. Officials are seeking to use the annual update of Medicare’s physician payment rule to make significant changes that would affect diabetes treatment, other chronic care, and information about insurer-run Advantage plans.

"It’s a last chance to put different sorts of policies in place that would support primary care," said Adam Borden, a vice president at the consulting firm Avalere Health, about the draft 2017 payment rule released July 7.

Health care has been a marquee issue for the Obama administration, even beyond the implementation of the 2010 overhaul. Medicare officials in March announced that they had reached a goal ahead of schedule of tying 30 percent of its payments to newer models of care that link reimbursement to judgments about the quality of the service provided. Unlike the health overhaul, which remains a highly divisive topic, attempts to shift away from the fee-for-service payment model for Medicare have enjoyed strong bipartisan support from Congress.

Several of the proposed initiatives in the physician fee rule mirror ideas being considered by the Senate Finance Committee’s chronic care working group, led by Sen. Mark Warner, D-Va., and Sen. Johnny Isakson, R-Ga. In a December white paper, the Senate Finance group called for new payments specifically for the management for patients with a greater complexity of chronic conditions and for comprehensive assessment and care planning for patients with Alzheimer’s disease or dementia. The physician fee rules include proposals for both.

The rule also proposes the release of more Medicare Advantage pricing data and information about how much insurers spend on health care claims from Medicare health and Part D drug plans.

Perhaps the most popular provision tucked into the physician fee rule is an expansion of diabetes prevention efforts, another aim shared with Senate Finance’s working group. In the draft payment rule, CMS says that diabetes "is at epidemic levels in the Medicare population." More than 25 percent of senior citizens may have diabetes.

CMS is considering a program that would start with 16 counseling sessions on topics such as nutrition and exercise. People would attend these sessions in groups that may meet in classrooms. There then would be monthly follow-up meetings to help people maintain healthier lifestyles. The primary goal of the program is at least 5 percent average weight loss among participants, the agency said.

Diabetes occurs when the body doesn't produce enough insulin, which helps with transport sugar into cells for use as energy. The condition can cause heart and kidney disease and blindness and lead to the amputation of feet and legs.

CMS aims to kick off the diabetes prevention effort in January 2018. The agency said it hasn’t yet decided whether to make this a national program in its first year or phase it in more slowly. Consumers would qualify for the program if they had a body mass index of 25 or greater. Asian beneficiaries would be eligible if they have a BMI of 23 or more. People in Medicare also would have to have blood sugar test readings indicating a potential risk for diabetes in order to qualify.

CMS will accept comments on the proposed physician fee rule until Sept. 6. The American Diabetes Association expressed quick support for Medicare's proposal for teaching people how to avoid the disease through changes in diet and exercise habits.

"Providing people with prediabetes with effective tools to prevent diabetes is a win for all of us," said Robert E. Ratner, the chief scientific and medical officer for the American Diabetes Association, in a July 8 statement.

By Andrew Siddons, CQ Roll Call

July 19, 2016 -- An advisory committee to the Food and Drug Administration last week recommended the approval of generic versions of two expensive arthritis drugs, which if approved by the agency could be good news for health care spending and patients burdened by high drug prices.

But the action served as a reminder that the agency still must issue key guidelines on how to evaluate whether generic drugs in this class are fully interchangeable with their original products.

And these two new generics could be delayed because of questions over the patents for the original products.

The original drugs, Humira and Enbrel, are biologics, treatments derived from cells and living cultures, instead of small chemical molecules common in most drugs. Biologics are difficult to develop and as a result are very expensive. Doses of each drug can cost thousands of dollars a month, and Humira, which has more than $12 billion in annual sales around the globe, is the best-selling drug in the world.

The drugs are important because they treat a variety of conditions including rheumatoid arthritis, an immune disorder that causes joint damage, and plaque psoriasis, a skin condition.

For Medicare, which spent $1.2 billion on 50,000 patients using Humira in 2014, a generic version could mean some relief. Jeremy Schafer, a vice president at healthcare economics consultancy Precision for Value, said that these kinds of drugs will continue to be a big part of health care spending.

"They are very meaningful because this is a category that’s been growing year over year not only in price but in utilization as well. More patients have been using them and the price of many of the products has been going up," he said.

Because of their complexity, the generic versions of biologics are known as biosimilars, a name meant to emphasize that even slight changes in their production could result in a product that’s similar, but not exactly the same.

The advisory committees last week recommended that the FDA approve both biosimilars for use on the same conditions that the original drugs are used to treat. It might seem obvious to state that a generic drug can be used for the same conditions as the original, but for biosimilars the FDA has still not put out guidelines for determining whether the drugs are indeed fully interchangeable with the original product.

There are so far only two biosimilars approved by the FDA, and the arthritis drugs considered this week would represent the third and fourth. Even though the market is still very small, the lack of guidance on interchangeability could have a real impact.

Seth Ginsburg, co-founder of an arthritis support organization called CreakyJoints, said that patients will likely be reluctant to switch to a generic treatment if they are already using the original product.

"Patients are indeed concerned about switching because there have not been substantial or sufficient studies or evidence about what happens when you switch," he said in a phone interview.

The uncertainty around biosimilars has also concerned lawmakers. After establishing the FDA’s authority to approve biosimilars in 2010 in the health law (PL 111-148, PL 111-152), lawmakers are frustrated that so few have hit the market.

"Numerous products are waiting to proceed through the approval process and many physicians, patients and concerned individuals like myself are concerned with the lack of progress," Rep. Joe L. Barton, R-Tex., who was heavily involved with giving the FDA the authority, said at a hearing in February.

In recent years, Congress tried to prod the FDA into action through report language accompanying the measure that funds the FDA. This year, committee reports from both chambers request that the agency work to educate patients and doctors about biosimilars. Senate appropriators also requested that FDA provide timelines for publishing the outstanding draft guidances.

FDA officials have said they want to publish the draft guidance on interchangeability this year. Regarding the guidance on naming, Sandy Walsh, an FDA spokesperson, said "the FDA continues to review comments and work on a final version of the guidance."

David Rosen, a former FDA official who is now at the law firm Foley and Lardner, said in an interview that it’s important for the FDA to use the applications it's currently considering as a model to ultimately get the guidance right. He said that the quality of the data that the companies have provided should still give doctors and patients confidence that the products work, even if they aren’t yet considered interchangeable.

"The companies are finding that they can still have a market for biosimilars without having an interchangeability rating," he said.

Even if the drugs are approved by the FDA in coming months, it still might be years before the generic versions come to market, because of the threat of lawsuits from makers of the original drugs. The patent life of biologic drugs is 12 years, but there are outstanding legal questions about whether the patents can be extended based on the approval of the drug for new uses.

For instance, Humira’s patent is set to expire this year, but it was approved to treat Crohn’s disease in 2007, making some observers wonder whether Amgen, maker of the proposed generic version, will wait several years to put its drug on sale and avoid the threat of a lawsuit. Executives from AbbVie, the company behind Humira, have said they think that biosimilar versions shouldn’t come to market before 2022.

By Erin Mershon, CQ Roll Call

July 21, 2016 -- The pharmaceutical industry's main lobbying arm dropped $5.8 million on its lobbying efforts in the second quarter of this year, $1 million more than in the same period the year before. The group is the third-largest lobbying spender in the nation this quarter.

The bump in spending at the Pharmaceutical Research and Manufacturers of America follows a record $5.9 million spent in the first quarter of this year. The influx comes as spending across other health care industry sectors, including providers and insurance companies, spent noticeably less overall than during the same time last year and as Congress is more focused on the campaign season than on legislating.

PhRMA is defending its member companies against rising concerns about the cost of medicines, including cancer treatments and generic drugs. Prescription drug spending in the United States is estimated to have risen 8.1 percent last year to $321.9 billion, after a gain of 12.2 percent in 2014, according to an Obama administration report released earlier this month.

The group also strongly supported the Senate's effort to draft a medical research companion to the House-passed 21st Century Cures bill (HR 6). This year, the group also has been pushing Congress to block a new regulatory proposal that would change the way Medicare pays for cancer drugs and other treatments administered in doctors' offices.

PhRMA declined to comment on its spending.

The Biotechnology Innovation Organization also increased its lobbying spending, as did many major pharmaceutical companies. Amgen Inc. dropped nearly $1 million dollars more this quarter than in the year prior, as did Pfizer Inc. Some companies, including Bayer Corp., Johnson & Johnson, and Merck & Co., Inc., dropped their spending slightly.

In contrast, the major lobbying arms for the insurance industry and for doctors and hospitals all saw a lull in spending, despite activity in Washington affecting their financial outlooks. The decline came as insurers continued pushing for major changes to the 2010 health law (PL 111-148, PL 111-152) to make the new markets set up by the law more attractive and financially sustainable. Doctors are busy focusing on the implementation of a new Medicare payment system, and hospitals have been working with lawmakers on legislation that would tweak a 2015 budget provision on payments to outpatient facilities.

But America's Health Insurance Plans spent just $1.7 million in the second quarter, down from $2.3 million in the same quarter the year before. Most major insurers individually spent about the same amount as in 2015, though the Blue Cross Blue Shield Association did shell out $2.1 million, up from $1.9 in the same period the year before.

The American Medical Association, often a major force in Washington lobbying, spent $4.3 million this quarter, down from a whopping $12 million in the same quarter in 2015, when it successfully won a permanent repeal of the so-called "doc fix."

Spending at the American Hospital Association, the American Association of Medical Colleges and the American College of Cardiology was all lower this year than in the second quarter last year. The American College of Radiology Association was an outlier; it spent $1.3 million, up from $1.1 million in the same quarter the prior year.

While major trade association spending was largely lower than last year, health care was still a major focus for groups and companies aiming to influence lawmakers. Lawmakers and lobbyists focused substantial energy between April and June on issues like funding to combat Zika, the opioid crisis and mental health. On Zika alone, more than 200 groups and companies registered it as an issue of interest-- up from just 60 in the first three months of this year.

Nearly 200 groups listed "opioids" as an area of focus this quarter, up from about 50 the same time last year. A bipartisan package (S 524) on that issue was one of the few legislative measures to clear both chambers in an otherwise contentious election year. And more than 300 groups buttonholed lawmakers on mental health legislation (HR 2646) that the House passed earlier this month. Only about 180 groups listed "mental health" as an issue in the second quarter of 2015.