As Republicans look to overhaul Medicaid by sending block grants to states in an effort to rein in spending on the program, a side effect could be the rise of health-policy nonprofits that act as pseudo-drug rationing organizations.
The leader in that field is the Boston-based Institute for Clinical and Economic Review, which has already partnered with some states to perform cost-effectiveness research on certain drug treatments and has courted its share of controversy.
If states get less money to spend on Medicaid in exchange for more flexibility in deciding how to spend it, they’ll likely look for ways to cut costs. Enter groups like ICER.
Critics note ICER’s ties to heavy-hitter insurance companies and its propensity for recommending that state governments not cover a number of drugs and treatments.
Last July, a U.S. District Court judge ordered Washington state’s Medicaid program to remove restrictions — developed by ICER — on coverage of innovative hepatitis C treatments. Judge John Coughenour wrote that the evidence “establishes there is a consensus among medical experts and providers that the life-saving [drugs] are medically necessary.”
The primary drug in that case was Harvoni, and another drug that primarily treats hepatitis C called Sovaldi is considered a driver of the left’s battles over price controls. Those top hepatitis C drugs have demonstrated cure rates upwards of 90 percent, with far fewer side effects than other treatments. But they are expensive: Sovaldi costs about $1,000 a pill, and nearly $85,000 for a standard course of the drug. Another effective hepatitis C drug, Olysio, costs $66,000 for a round of treatments.
While patients benefit from such treatments, insurers balk at paying those kinds of prices.
‘Focused on the payer perspective’
America’s Health Insurance Plans, a trade association for insurers, points to such hepatitis C drugs as “a major driver of skyrocketing prescription drug spending.”
Sovaldi was the primary target upon the launch of the Campaign for Sustainable Drug Pricing, a project of the left-wing National Coalition on Health Care, which was a big supporter of the implantation of the 2010 overhaul, widely known as Obamacare.
“Sovaldi is the canary in the coal-mine, alerting all of us that disaster is coming unless something is done to prevent it,” the coalition’s president, John Rother, said in a press release announcing the campaign. “Unfortunately, the problem is far bigger than one drug — we are talking about a tsunami of expensive medicines that could literally bankrupt the health care system.”
Steven Pearson, president and founder of ICER, said of the hepatitis C drugs, “It could be the right thing to do clinically, but at this price, can we afford it? It’s a tough ethical and financial quandary.”
ICER said a study found that the annual cost of the medications could top $18 billion in California alone if half of the state’s patients with hepatitis C received the drugs, the L.A. Times reported. The outlet noted that while treatments for cancer and other major ailments are also expensive, they aren’t prescribed as widely, leading to the intense focus on the hepatitis C medications.
In an interview with Evidence-Based Oncology managing editor Surabhi Dangi-Garimella last year, Pearson said “ICER’s framework is specifically designed for payers; to do that, it has to include perspectives of other stakeholders. But it’s [also] supposed to be a tool that’s more focused on the payer perspective — we look at the cost to payers and not the out-of-pocket cost to patients.”
Pearson started ICER in 2006, using a $430,000 grant from the Blue Shield of California Foundation. In the past decade, it has grown to an organization that receives more than $2 million in annual contributions, according to tax records.
In addition to its work with the Washington State Health Care Authority, ICER is involved with the California Technology Assessment Forum and the New England Comparative Effectiveness Public Advisory Council, Watchdog.org found in examining its IRS 990 form.
In California, the organization works with other medical professionals “to develop recommendations for how patients, clinicians, insurers and policymakers can improve the quality and value of health care” in the state. In the Northeast, ICER works to provide “guidance on the application of medical evidence to clinical practice and payer policy decisions across New England.”
‘Stifling of markets’
As a 501(c)3, ICER isn’t required to disclose its donors, but lists them (without dollar amounts) on its website. While drug companies and manufacturers of medical devices are on that list, so are about a dozen insurance companies, foundations and trade associations, leading some to question whether ICER is truly independent.
David Hogberg, formerly a senior fellow for health care policy at the National Center for Public Policy Research, noted that an $850,000 grant from the Blue Shield of California Foundation would have accounted for nearly two-thirds of ICER’s contributions received in 2013 had it been counted as regular revenue.
ICER didn’t respond to a request for comment from Watchdog.org.
In an essay on crony capitalism in the health insurance industry, Hogberg pointed to several examples of ICER suggesting that drugs are too expensive. Hogberg worries the rise of such health policy nonprofits could lead to price controls, which in turn could lead to less investment and the discovery of breakthrough drugs.
“If pharmaceutical companies cannot charge prices that enable them both to cover their research and marketing costs and generate a profit that is attractive to investors, then the production of new drugs will suffer,” he wrote. “Who knows what new cures will never materialize — perhaps one for AIDS, cancer, or multiple sclerosis — because of price controls.”
Robert Graboyes, a senior research fellow and health care scholar at the Mercatus Center, a free-market think tank, told Watchdog.org that states overall might do a better job than the federal government at managing Medicaid, although he said states have a spotty overall health care record.
Graboyes expects groups like ICER to get more attention if Medicaid block grants become a reality and states look to cut costs. His concern, as it applies to health-policy nonprofits, is that states will take reports from such groups and use them to set pharmaceutical policy for several years.
“If you have the states managing the flow of what gets bought and doesn’t get bought, you could have the stifling of markets,” he said. “You can end up with a highly mechanical method that locks studies into place for many years.”