Huge Investigation Uncovers Possible Generic Drug Pricing Cartel
An investigative report by the Washington Post has uncovered an alleged cartel among generic drug manufacturers to fix the price of some 300 medications, adding new fuel to the debate about raging price increases in the pharmaceutical industry.
While a number of name-brand drug makers have been named and shamed for their massive price increases – sometimes hundreds or thousands of percent higher – the article looks at how something similar has been going on in the generic drug market.
A case that started as an antitrust lawsuit brought by two states has spurred a massive investigation into alleged price-fixing by at least 16 companies that make 300 generic drugs. Now 47 states are party to the lawsuit, seeking to recoup perhaps billions of dollars.
In addition, pharmacies and other businesses have filed their own lawsuits against the generic drug makers. One such suit documents huge price hikes – like a 3,400% increase in the price of an anti-asthma medication – and investigators believe that generic drug producers colluded to raise prices in tandem or not make their products available in some markets or through specific pharmacy chains.
The scale of the alleged collusion was summed up by Joseph Nielsen, an assistant attorney general and antitrust investigator in Connecticut, whose office has taken the lead in the investigation: “This is most likely the largest cartel in the history of the United States,” he told the Washington Post.
If the allegations are true, the parties affected run the gamut from consumers, who have high copays or high deductibles for their pharmaceuticals, to hospitals and insurance companies. And many health industry observers were surprised to learn the news, considering that generics are supposed to be a safety net for patients to ensure access to quality medications at a reasonable price.
Two former executives of one generic drug maker, Heritage Pharmaceuticals, have pleaded guilty to federal criminal charges. They are now cooperating with the Justice Department.
The article describes the coziness among executives from competing generic drug makers and how they would allegedly collude to raise prices.
There has been no estimate of how much the generic drug companies allegedly overcharged over the years, but even if it’s a fraction of the annual sales of $104 billion a year, it would be substantial.
The drug makers that the Washington Post was able to reach denied the allegations.
Coordinated price hikes ‘almost routine’
The generics industry used to be highly competitive, according to the story, but over the years, things changed and suddenly allegedly “coordinated price hikes on identical generic drugs became almost routine,” the Post wrote.
The alleged price-fixing affects 300 generic drugs, according to the report. Generics account for 90% of the prescriptions written, however they only account for 23% of the total drug spend in the country, according to the Association for Accessible Medicines.
And still, the prices of on a benchmark set of older generic drugs in the Medicare prescription-drug program dropped 14% between 2010 and 2015.
But, for the 300 drugs in question, prices went up, according to the lawsuits. That’s why pharmacies have also come to the fore to sue. They were on the front lines when they started noticing marked increases of hundreds of percent in the prices of some generic medications.
If the collusion turns out to be true, it essentially reverses the possible gains when a generic drug enters the market. According to the Federal Drug Administration, prices fall up to 50% when a second generic enters the market. And once there are six or seven companies making the same generic drug, the price usually falls 75% from the original cost of the brand name pharmaceutical.
Health Care Most Pressing Issue for the U.S., Workers Say
What is top of mind for your employees? Most likely it’s health care.
A new study by the Employee Benefits Research Institute and market research firm Greenwald & Associates found that workers rank health care as the most important issue facing the country.
The survey found that 26% of workers ranked health care as the most important issue in the nation, followed by immigration at 18%, the role of government (16%) and jobs (13%).
Here are some other findings that employers should take note of:
- 74% of workers cited health insurance as one of the top three most important benefits that they consider when looking for work.
- 52% of workers cited a retirement savings plan as one of the top three most important benefits that they consider when looking for work.
- 47% of workers said they were extremely or very confident about their ability to get the health treatments they need today.
- 34% of workers said they were confident about their ability to get needed treatments over the next 10 years.
The fact that workers ranked health care the top problem in the country should give employers pause before they consider tinkering with benefits and shifting more of the cost burden onto their employees. And overall, it shows workers are concerned about their own ability to get the treatment they need under their current health plans.
What this means for you is that you should work with us to explore the latest options available in the marketplace to reduce costs while not cutting into the quality of care.
And as an employer, you should consider the current mindset of employees about their current health plans and how they are using their health benefits:
- 20% of workers surveyed were extremely or very satisfied with the cost of their health insurance plan, as well as the costs of health care services not covered by insurance.
- 48% reported experiencing a rise in health care costs over the past year, (that’s less on average than what was found in previous surveys).
- 63% said higher costs had prompted them to exercise more and eat healthier foods.
- 51% said higher costs had prompted them to choose generic drugs more often.
- 45% of workers said they had delayed going to the doctor for symptoms that arise.
- 50% said they only went to the doctor for more serious conditions or symptoms.
Despite those findings, many workers are happy with the quality of the health care they receive under their health plans:
- 82% of workers said they were extremely, very or somewhat satisfied with the quality of the medical care they receive.
- 50% of workers said they were extremely or very satisfied with their current health plan, and more than a third are somewhat satisfied.
The takeaway for employers
What you can take away from this survey is that in order to retain and keep talent, you need to ensure you have a solid health plan that doesn’t saddle your workers with too much of the cost burden. You should work with us to find the most cost-effective plans with good networks for your employees.
As the job market remains hot, it’s imperative that you don’t go with the same plan year after year. There are options to consider that can provide your workers with better care and less expensive services, such as telemedicine and health clinics.
Are You Familiar with the Affordable Care Act’s Anti-retaliation Rules?
Are you familiar with Fed-OSHA’s regulations on whistleblowing and employer retaliation under the Affordable Care Act.
The rules set forth procedures and time frames for reporting and processing whistleblower complaints by employees against their employers and expand the instances in which an employee can sue their employer for retaliation under the ACA.
OSHA has set a low bar for what it considers retaliation in these regulations.
The biggest threat to an employer is if they have employees who may file complaints if they feel slighted after their employer change their health plans or greatly increase the cost-sharing burden on them.
The rules
The ACA whistleblower regulations prohibit employers from retaliating against employees for, among other things:
- Receiving a subsidy for a marketplace plan;
- Raising concerns regarding employer practices that the employee believes violate the ACA;
- Reporting ACA violations;
- Cooperating with a federal investigation;
- Participating and/or cooperating in a proceeding associated with an alleged or actual violation;
- Refusing to participate in a policy or practice that would violate the ACA; and
- Receiving a premium tax credit or a cost-sharing reduction for enrolling in a qualified health plan.
An employee who believes that he or she has been retaliated against in violation of Title I of the ACA has 180 days after the alleged retaliation to file a complaint with OSHA.
What constitutes retaliation?
Retaliation can include several types of action, such as:
- Firing or laying off
- Reducing pay or hours
- Blacklisting
- Demoting
- Denying overtime or promotion
- Disciplining
- Denying benefits
- Failing to hire or rehire
- Intimidating
- Making threats
- Job reassignment that affects prospects for promotion
OSHA has published the “Filing Whistleblower Complaints under the Affordable Care Act” factsheet on the complaint process. As an employer you should read it to understand the rules. You can find them here: https://www.osha.gov/Publications/whistleblower/OSHAFS-3641.pdf
Employer best practices
Make sure that managers and HR personnel ensure strict confidentiality for employees’ ACA-related information and do not share it with other managers and supervisors.
Cover the regulations in your training and meetings for HR personnel, who in turn should train managers to ensure they understand the consequences of taking actions that may be construed as retaliatory.
Train managers on how to respond if an employee complains about their health insurance in light of the ACA. In such cases, the manager should refer the complaint to the HR or benefits personnel responsible for the company’s health insurance plan.
Retaliation scenario
Your HR department is notified by the Department of Health and Human Services that an employee has purchased coverage on a public insurance exchange and received tax subsidies to help pay for it.
An HR manager goes to the employee’s manager to complain, saying that it could cost the company a $2,000 penalty. The manager finds an excuse to reduce the employee’s hours and reassign him to a lesser position.
First Association Plans Comply with ACA and Offer Lower Premiums, Report Finds
As the first association plans start gaining traction, trade journals are reporting that many of the plans they are offering are not as skimpy as many had predicted they would be.
The rules enacted for these plans allow them to skirt certain requirements of the Affordable Care Act, specifically that they cover 10 essential benefits, and still qualify as plans that satisfy the requirement that employers provide their staff with coverage.
Under the new rules, association plans can be formed across state or nationwide by letting employers band together (and act like one large employer) based on:
- Geography (all have a principal place of business in a state [or portion of a state, such as a city or county] or in the same metropolitan area, even if the metropolitan area spans more than one state).
- Industry (be from the same trade, industry, line of business, or profession).
The old Obama-era regulations made it difficult for association plans to meet ERISA’s large-employer insurance requirements. The Department of Labor estimates that some 4 million people could be covered under association plans in the coming years.
A surprise development
Yet, despite these plans having fewer restrictions on them, most of the new association plans are actually compliant after all and are not skimping on benefits as many pundits had predicted, according to press coverage.
The trade journal Modern Healthcare reports that most of the first association plans that are being formed are not charging people different premiums based on their health conditions or barring people with pre-existing conditions from enrolling.
It also notes that plan sponsors report that the plans cover all of the essential benefits outlined under the ACA, and even provide broad networks of doctors. The ACA also requires that plans do not impose annual or lifetime limits on coverage, and the plans coming out of the gates also comply with that aspect of the law.
Modern Healthcare’s reporting also found that despite all that, the plans’ premium levels are lower than what individuals can buy on government-run exchanges.
Farmer-owned cooperative Land O’Lakes, several Nevada chambers of commerce, and the National Restaurant Association have formed association plans this year and are expanding them now.
Modern Healthcare reported on Land O’Lakes farmer-owned cooperative’s self-insured association plan, which now covers two states (Nebraska and Minnesota) and is continuing to expand into other states.
The co-op said that its plans cost 25% to 35% less than comparable exchange plans in Nebraska, and about 12% less than plans on the exchange in Minnesota.
The magazine reviewed the plan documents for Land O’Lakes’ eight Nebraska plans, comprising a platinum-level plan, one gold plan, and three silver and three bronze options.
“They feature a range of deductibles and appear to provide coverage for each category of essential health benefits including prescription drugs, maternity care and mental health and substance abuse treatment,” it reported.
The Nebraska Farm Bureau is also rolling out an association plan for its members starting in 2019, and based on early figures, its premiums are 25% less than comparable individual plans on the state’s insurance exchange.
These plans also cover all of the essential benefits and do not charge more for people with pre-existing conditions, Modern Healthcare reported.
Also, a number of local chambers of commerce banded together in Nevada to form a fully insured association HMO plan with premiums that are about 20% less than similar plans on the exchange.
Help Your Employees Save Money on Drugs
Most employers are doing all they can to keep their employees’ health insurance and health care outlays to a minimum.
And while most of those efforts are focused on the upfront cost of insurance, co-pays and deductibles, many employers fail to help their employees control the very costs they actually have the most control over and one of those areas is medicine.
Helping your employees become wise consumers of health services can also cut your overall insurance costs as well as help your employees conserve more of their own funds if they have high co-pays and deductibles.
The cost of drugs can vary greatly between pharmacies to a shocking degree. And while your employees may have low co-pays for some drugs, if they go to the most expensive option when the insurance is covering the tab, it basically adds to the cost drivers for your insurance plan.
Here’s how wild the price swings can be. Consumer Reports recently surveyed pharmacies to price out a basket of five popular generic prescription drugs and here are the prices:
- Healthwarehouse.com: $66
- Costco: $150
- Various independents: $107
- Sam’s Club: $153
- Walmart: $518
- Kmart: $535
- Grocery stores: $565
- Walgreens: $752
- Rite Aid: $866
- CVS/Target: $928
It also pays to shop around from store to store and ask for discounts.
“A Rite Aid store near our headquarters in Yonkers, N.Y., was able to get the price of atorvastatin, the generic version of Lipitor, down to just $18 from $300 through a combination of in-store and external discount programs,” the report states. “But at another Rite Aid, we were told the cost could only be lowered to $127.”
Consumer Reports recommends that your employees:
- Use online discounts. There are a number of websites that can provide you with discount coupons or vouchers for drugs, including:
- GoodRx
- Blink Health
- WeRx.org
On these sites you enter the name of the drug, dosage and quantity and where you live and it will provide coupons or vouchers and identify which pharmacies you can use them at.
- Expand your shopping horizons. As you can see on the list above, prices vary tremendously. And combining shopping around with a good plan for using coupons and your employees can save themselves and your health plan boat loads of money.
They should also check out their local warehouse discount store as both Costco’s and Sam’s Club’s pharmacies were also quite reasonable.
Not to be outdone, neighborhood pharmacies and grocery store pharmacies were also much cheaper than the large regional drug store chains. “The absolute lowest prices we found in each city we called were almost always at these kinds of stores,” Consumer Reports wrote. - Ask pharmacies if they will honor online coupons. Pharmacies will almost always honor them, Consumer Reports found. But Consumer Reports mystery shoppers had to be persistent in getting the pharmacies to use them, since they often run prescriptions through insurance automatically, even when paying the retail cash price and using discount coupons would cost less.
One last thing
Consumer Reports recommended that once someone settles on pharmacy that consistently gives them good deals on pharmaceuticals, they should fill all of their prescriptions there.
That way it’s easier for them to spot “potentially dangerous interactions and other safety concerns.”
But if your employees notice that their pharmacy bills start rising noticeably, it may be time for them to start shopping around again. To stay on top of this requires regular checks to make sure that they are not seeing prices creep up.
Proposed Rule Would Allow Employers to Reimburse Staff for Health Premiums
The Trump administration is moving ahead with new regulations that would make it easier for employers to enter into health reimbursement arrangements (HRAs) with their employees, a practice that can be severely penalized under the Affordable Care Act.
Under the proposed regulations – issued by the departments of Labor, Treasury and Health and Human Services – employees would be allowed to shop and pay for their own coverage using tax-free HRAs that are set up by their employers.
Under the proposed rule, employers that offer traditional health insurance would be allowed to fund an HRA with up to $1,800 per year. The money in the HRA could be used to reimburse employees for certain medical expenses, as well as for premiums for health insurance policies or stand-alone dental benefits.
And offering HRAs used to help employees pay for individual health insurance premiums would count as an offer of coverage to satisfy the employer mandate under the ACA.
More options, lower costs
Administration officials said expanding HRAs would give employees more options in terms of health coverage, and it also would reduce costs and administrative burdens on employers.
If enacted, the new regulations would undo Obama administration guidance (as it was not actually written into the regulations) barring employers from paying into HRAs to help workers pay for health insurance premiums from policies they buy on the open market or on government-run exchanges.
Companies that were caught in such arrangements faced a hefty fine of up to $36,000 a year.
The employer mandate would stay intact but the proposed rule would allow an employer to satisfy the mandate by funding HRAs for its workers. Under the employer mandate, organizations with 50 or more full-time or full-time-equivalent employees are required to purchase “affordable” health coverage that covers at a minimum 10 essential benefits as outlined under the law.
HRAs must be affordable
The key is that the HRA must also be affordable under the proposed rules. That would depend in part on the amount the employer contributes to the HRA.
The agencies proposing the new regulations said in an announcement that they would provide further guidance on the HRA-specific affordability test.
Funds going into HRAs would be exempt from federal income and payroll taxes. Additionally, employers would be able to deduct the amount they put into HRAs from their taxes.
The proposed rule would also require employers that offer HRAs to allow a worker to opt out and instead claim a federal premium tax credit to purchase coverage on the individual exchanges.
This is the early part of the rule-making. The proposed regulations will have to go out for public comment before final rules are written and implemented.