Author: Kate Beebe

The U.S. Supreme Court overturned a decision by a federal appeals court for Teva Pharmaceuticals in its fight with generic drug manufacturers over patent protections for Copaxone. The 7-2 vote sent the case back to U.S. Court of Appeals for the Federal Circuit for additional review as the correct approach was not utilized in analyzing whether the patent in question was valid.  This means Teva will be able to protect Copaxone from generic competitors until September as well as have more time to shift patients to a longer-acting version of the drug that won’t face generic competition until 2030. Teva’s goal is to shift as many as 80 percent of its daily Copaxone patients because this drug along brought in more than $4 billion dollars in 2013.

After nearly three years of careful study, review and formal discussion regarding Rhode Island locally-administered pension and other post-retirement benefit obligation plans of municipal entities, the Rhode Island Pension & OPEB Study Commission Committee has released their Recommendations to the Governor and General Assembly.

The Committee has determined that the 24 communities included in the study, comprised of 34 separate pension plans, owe over $5.1 billion in pension and OPEB liabilities to existing and future municipal employees.  This unfunded liability is comprised of $2 billion in pension benefits and about $3.1 billion in OPEB (primarily health-care costs for retirees and dependents) obligations.

The committee has defined a sub category of ‘critical status’ plans, which represent plans with less than 60% of the necessary funds or assets available.  By following the state required corrective funding formulas, the more urgent ‘critical status’ plans would be back on track for proper funding by the year 2033.

An important finding in the study is that while oversight of locally administered plans is necessary in funding, a “one-size-fits-all” approach to managing plans, with a single central agency is not the answer.  The committee maintains that the numerous locally administered plans have vastly different contracts and funding complications.

The Rhode Island Pension & OPEB Study Commission Committee recommendations include:

1. Lawmakers require communities to present annual status reports to the state on their pension plans and OPEB liabilities.
2. Establish a RI state board to ensure locally administered plans follows best practices of actuaries and government financial standards.
3. The possibility of withholding non-educational state aid if a community fails to pay at least 95% of its required contribution to the fund for two consecutive years. It was suggested this withheld aid would go towards the plan’s pension and OPEB fund to reduce the unfunded liability.

A glaring omission from this report is what options or resources does the state of Rhode Island, specifically locally administered plans, have to lower the cost of the promised retiree healthcare without reducing the benefit level?  Lowering the initial cost of retiree healthcare and providing ongoing cost management are key pieces to the OPEB funding puzzle.

On January 20^th the RI Interlocal Trust voted for the creation of a multi-employer OBEB trust to offer to its 120 public sector entities.  PARS (Public Agency Retirement Services), a nation leader in OPEB trust administration, will assist the Rhode Island Interlocal with creating and managing the new program.

PARS maintains a close working relationship with KTP Advisors, a Newport, RI based advisory firm specializing in retiree health benefits, private exchange comparisons, RDS reopening and pharmacy benefits.

For the full report, click here: Recommendations to the Governor and General Assembly

 

Monday, January 5^th Gilead Sciences announced it had won exclusive access to the many hepatitis C patients whose drugs are managed by CVS Health, the nation’s second-largest pharmacy benefits manager.  This means CVS Health managed hepatitis C patients (via commercial drug list, health care exchanges, Medicare Part D and Medicaid) will only have access to Gilead’s hepatitis C drugs, Harvoni and Sovaldi.

This exclusive is especially important to the marketplace as it closely follows AbbVie, Gilead’s primary hepatitis C competition, exclusive struck last month with Express Scripts, the largest U.S. prescription drug benefit manager.

Following Express Scripts announcement last month, Gilead’s shares dropped significantly.  Since CVS’s exclusive was revealed on Monday, Gilead’s shares have risen while simultaneously AbbVie’s fell.

What does this mean to consumers, doctors and drug makers? AbbVie’s exclusive with ESI put the pressure on Gilead to make a deal with someone else.  This is good for consumers because it means serious discounts are being negotiated by the PBMs on high price specialty drugs.  This is also positive news for containing overall health care costs.  Pharmaceutical manufacturers now must consider competing on price rather than just efficacy. On the down side, this trend may lead to other drug limitations in other therapeutic classes.  Ultimately doctors will have fewer drug choices for treatments.  This is a form of health care rationing and this trend will continue in the U.S. because health care costs are unsustainable.

Effective January 2^nd, 2015, Catamaran Corporation (NASDAQ: CTRX) has completed acquisition of Salveo Specialty Pharmacy for the reported purchase price of $260 million.  Catamaran released a statement affirming the acquisition emphasizing the PBM’s ongoing commitment to expanding their specialty Rx side.  It appears specialty pharmacy will continue to be the hot topic going into 2015.

Catamaran manages more than 350 million prescriptions each year for over 32 million members.

For the full article please click here: Catamaran Completes Acquisition of Salveo Specialty Pharmacy

Back in April 2014, Express Scripts, the largest manager of U.S. prescription drug benefits, warned that the cost of Gilead’s new $1,000-a-day hepatitis C drug was “unsustainable for our country” and threatened to boycott the drug when cheaper rivals entered the market. Six months later, Express Scripts is doing just what they said they would. Express Scripts Holding Co., struck a deal with AbbVie, making Viekira Pak the exclusive option for genotype 1 hepatitis C patients covered by the Express Scripts National Preferred Formulary. Starting January 1, 2015, Express Scripts will exclude Gilead’s Sovaldi and Harvoni, and Johnson & Johnson’s (JNJ) Olysio from their Formulary.

The AbbVie Inc. drug, known as Viekira Pak, was approved by the U.S. Food and Drug Administration on December 19. After unsuccessful discount negotiations with Gilead, Express Scripts reached an agreement with AbbVie for a significant discount in exchange for exclusivity. The wholesale price for AbbVie’s Viekira Pak is $83,319, a standard 12-week course of treatment. The Viekira Pak will replace Gilead’s drugs Sovaldi and Harvoni, which cost $84,000 and $94,500 at wholesale.

Express Scripts’ independent Pharmacy & Therapeutics Committee has determined AbbVie’s Viekira Pak to be “at least clinically equivalent” to Harvoni and Sovaldi. While the Viekira Pak will be the exclusive option for patients with genotype 1 hepatitis C, regardless of symptoms or disease progression, Sovaldi, Harvoni and Olysio will continue to be available for patients who have already begun treatment regimens. Sovaldi will be available for patients with other hepatitis C genotypes who have advanced liver disease.

There are a few important things to note about this deal:

• The new therapy is the exclusive option for only genotype 1 patients with hepatitis C (predominantly what we find here in the US – representing about two-thirds of people with the viral liver disease)
• AbbVie’s regimen includes several pills a day, taken at different times, while Gilead’s Harvoni (the most direct competitor to the Viekira Pak) is one pill taken once a day.
• Some patients on AbbVie’s therapy may also require ribavirin, another drug that can carry unpleasant side effects.
• Some may question the patient follow through with the above. One pill per day is a much simpler course of treatment.
• Upon ESI’s announcement of the news, Gilead shares dropped 12% in pre-market trading while ESI shares rose 2.5% and AbbVie shares climbed 5.2%.

Historically, price drug negotiations have been between insurers/PBMs and drug manufacturers.  This news may turn that equation on its head as negotiating leverage shifts and pharmaceutical developers & manufactures are made to compete against one another on price, not just drug efficacy.  Price is trumping choice too, and more people are willing to go with narrower networks and narrower formularies in exchange for lower costs. This deal by Express Scripts may finally force pharmaceutical companies to look at pricing more closely.

On 11/3/14, Aetna Inc., the third largest U.S. health insurer, announced the acquisition of Chicago based bswift, a software and technology services company that administers public and private health insurance exchanges (PHIX) for consumers and employees. This was a strategic move that strengthens Aetna’s private exchange capabilities. The bswift technology platform will provide Aetna with the capability to deliver a new private-exchange offering for employers of all sizes. Aetna looked at the market and concluded that PHIX technology was so critical to its future growth it had to own the technology. The announcement of this transaction probably caused some heartburn among other carriers building their PHIX strategy around bswift’s platform.

There are some in the industry that believe a conflict of interest is created when a carrier or broker purchases a Private Exchange Technology Company.  Here are some questions that the market is asking:

1. Will the exchange technology company, now owned by a carrier, be a viable solution for other insurance companies who wish to place their products on the exchange?
2. Will the “owner carrier” have an unfair competitive advantage over other carriers who place products on that exchange?
3. Will competitive intelligence about other carrier products, pricing models, underwriting, and customer buying pattern data be protected from being utilized by the “owner carrier”?
4. Will the new carrier owner provide technology updates to other users of the platform on a timely basis?  At a reasonable cost?
5. Will the owner of the technology create proprietary features and product advantages that will not be offered to other users of the platform (i.e. carrier competitors)?

This acquisition of a technology company by a health insurer, is similar to that of Bloom Health in 2011.  Bloom Health, based in Minneapolis, is co-owned by a group of BlueCross BlueShield-affiliated companies: WellPoint, Health Care Service Corp. and Blue Cross Blue Shield of Michigan. In 2012 Towers Watson acquired Extend Health for $435 million and in 2013 acquired Liazon Corporation for $215 million. In 2014, Meastro Healthcare Technology announced the acquisition of Florida based Workable Solutions from Alegeus Technologies for an undisclosed sum. What does this trend of consolidation mean?

We think that with each acquisition of a pure-play PHIX technology platform, like Bloom, Liazon and bswift, the remaining independent platforms, like Quadrant 4, hCentive, ConnectedHealth, Array Health and BenfitFocus, get more valuable. The value of each of these companies is maximized by remaining independent.  Exchanges are more valuable to multiple carriers and providers of PHIXs rather than one company.  Should one or two of these companies become publicly traded entities, they will realize their maximum growth and value potential.  Of course, not all will.

The trend of carriers and brokers buying exchange technology companies will most likely continue.  The business relationships that exchanges will have with their constituents/customers in the open market (carriers, brokers, employers, associations, etc) may very well be successful for all.  However, when choosing an exchange solution, this is something employers may want to consider. Here at KTP, we have found that it is worth looking into such criteria as: how these exchanges manage their ownership structure, how they are compensated, and many other criteria before signing on. To view a map of the PHIX market players, please click here.

Under the Affordable Care Act (ACA) the Transitional Reinsurance Program exists to stabilize premium rates in the individual Marketplace, during the first three years of operation.  The Transitional Reinsurance Program (TRP) collects a fee on minimum value coverage health plans.  Examples of such plans are major medical plans, PPOs and HMOs.

For insured group plans, the carrier or HMO (insurer) is responsible for the TRP fee and the employer is not required to take action.  However, for self-funded group plans, the employer is the party which must calculate and pay the TRP fee.  It is important to note, although employers are not responsible for paying the fee for fully-insured plans, often the insurer may shift the cost to the policyholder through an increase in premium.

The TRP fee, or national contribution rate, is paid per covered life and is adjusted each year.  For 2014, the fee is $63 per covered life and for 2015, the fee will be reduced to $44 per covered life.  The 2016 contribution rate is yet to be announced.  The insurer or employer will calculate the TRP fee by multiplying the national contribution rate for that year by the number of covered lives during that year.  COBRA lives are to be included in the number of covered lives.  The fee is not required on individuals covered through Medicare unless the employer-provided group health coverage is the primary payer.  Generally, Medicare is the primary payer and the group health plan is the secondary payer, in which case the Medicare lives would not be counted in the fee calculation.

What Employers Need to Know Now –

Insurers will or have already calculated the TRP fee and paid it to the IRS.

Employers with self-funded minimum value health plans must calculate and report enrollment count by November 15^th, 2014.  Click here to access the ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form.

KTP Advisors™ has launched the first comprehensive, unbiased and completely independent Market Map and comparative data service of private healthcare insurance exchanges (PHIX) and marketplaces for employers, trade associations, and insurance brokers who don’t have the time to shop through different private exchange solutions.

The company, which has no exchange nor is it affiliated with one, has created a very robust set of criteria, along with site visits, to evaluate each exchange. In addition, KTP has created a “market map” which outlines the more than 170 distinct PHIXs currently available. The research presented on this map includes a partial list of the almost 150 comparative data points KTP has researched and gathering on these exchanges and marketplaces.  In addition to complex comparative analyses, KTP can run competitive, national Request for Proposals (RFPs) and negotiate contract terms as well for organizations seeking to partner with a private exchange.

In addition to basic operational, product and pricing factors, there are even more complex considerations that KTP assesses before employers sign onto an exchange, said Mike Martocci, KTP’s private healthcare exchange strategy leader. “The back-end technology, which powers the different exchanges, can be incredibly intricate. The software platform is a part that an employer and employees never see, yet exchange owners as well as corporate human resource departments and insurance brokers and carriers will have to deal with every day.“

Another standard that demands close scrutiny is on who owns the exchange and how the exchange is compensated. “Many large, traditional human resource consulting firms have launched their own private exchanges, which are generating significant commissions for the advisors as well as administrative fees,” explained Mark Whitcher, KTP’s president and CEO. “Evaluating private exchanges and all of the options in a brand new market is extremely difficult and it’s essential to know the right questions to ask. There are multiple hidden revenue sources in the exchange market, which make an objective appraisal of the possible solutions difficult, if not impossible, when one of those exchanges under consideration is your own.  There are legal and fiduciary concerns for employers as well.”

Deb Jacobson, a PHIX senior consultant at KTP and former Board Chair at Blue Cross Blue Shield of RI, added, “Offering independent insight into technically sophisticated health benefit issues is at the core of KTP’s expertise, and our private exchange services are no different.” We believe our PHIX performance standards and data metrics will establish the benchmark for the industry.”

For a more in-depth analysis of the exchanges including, financial information, service information, product information, consumer decision support tools, exchange strategy, sales and marketing techniques, data and security obligations, etc., please contact Nicole Allen at nallen@ktpadvisors.com.

FOR IMMEDIATE RELEASE

KTP Advisors Opens West Coast Office

Newport, RI – October 22, 2014 – KTP Advisors, a specialty advisory firm in retiree health benefits, private exchange comparisons and pharmacy benefits for active employees, has opened a West Coast office in Newport Beach, California. This new office allows the firm to more effectively provide services to its clients located in the western states.

“We look forward to expanding our presence to the West Coast. Having an office there will enable us to better serve and support our clients in the region.” said Mark Whitcher, KTP’s President & CEO.

KTP’s new office is located at:  4350 Von Karman Avenue, Suite 100, Newport Beach, CA 92660.

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Two senior consultants of KTP Advisors, Deb Jacobson and Mike Martocci, were recently interviewed by Brent Macy and Doug Field of The Institute for HealthCare Consumerism, on America’s Web Radio: HealthCare Consumerism. In this episode, Deb and Mike discuss KTP’s new private healthcare exchange advisory service.

In the interview, KTP’s consultants acknowledged that there are approximately 170 different private healthcare exchanges available in the United States today. The private healthcare exchange market is very complex and each exchange or marketplace is different. KTP Advisors is constantly performing extensive research to provide a completely unbiased and independent evaluation of the private healthcare exchanges and marketplaces that have emerged. KTP does not have their own exchange and is not affiliated with any.

Deb and Mike outline three specific take away points from their interview:

• KTP Advisors is going to evaluate exchanges in an absolutely objective and unbiased way. They take a customized approach to evaluating the exchanges, by looking at exchanges from the customer’s perspective in order to prioritize the client’s goals.
• KTP Advisors is independent and objective of any brokers, carriers, or exchange providers.
• KTP Advisors believes that private healthcare exchanges can become important levers for addressing the effectiveness and cost of health benefits for employees.

For the full interview on HealthCare Consumerism Radio, please click here.