Socialism or CVS? The health giant's plot to take over US healthcare
Plus, what if doctors were contractually bound to cure you, or your money back?
|Whitney Fishburn||Jun 7, 2019|
Docu-mental vol. 1 issue 9
June 7, 2019
It’s been a busy week for antitrust watchers, which includes yours truly. Not only is Congress getting hip to the dangers of the morally challenged leadership at Facebook or the ubiquitous amazon having free reign with our data, several reports indicate that our nation’s two antitrust enforcement agencies, the Federal Trade Comission (FTC) and the Department of Justice (DOJ) are “quietly divvying up” the terrain in their coming assault on Big Data.
Meanwhile, a judge has thrown shade on the 70 billion dollar merger of Aetna by CVS. The deal is done, but is lagging thanks to Richard E. Leon, a D.C. federal circuit court judge who is skeptical that the settlement between the DOJ and CVS required enough concessions by the healthcare behemoth to truly offer “consumers” (aka, patients and retail pharmacy customers) a better deal than might have existed if the merger had been blocked.
The merger was consummated in November of last year, but the deal’s details are getting another look in court. Normally the routine review would be over and done by now, but Judge Leon noted that both parties seemed to be in a greased pig hurry to get the deal done.
At issue is whether CVS’s promise to the DOJ that it would sell Aetna’s Medicare Part D drug business to WellCare Health Plans Inc. is enough to prevent diminished competition among companies selling Medicare drug plans to seniors in 22 states.
What I hope (against hope?) Congressional leaders and other policy wonks are considering, especially if we come anywhere near to a “Medicare-for-All” solution to our current healthcare system woes, is that the deal seems perfectly crafted to place CVS-Aetna in the crow’s seat of any healthcare reform debate. C’mon, I know it’s Friday, but I trust that many readers already can tell me why: because the insurer/pharmacy company is a major third party administrator of Medicare Advantage plans.
Even without the merger, CVS already has enormous power over US healthcare choices. Here is why:
To greenlight the deal, the government accepted CVS’s claims that the merger will result in what are called efficiencies – basically, less waste because part of their supply chain would not be in-house and so can trim any mark-ups they once paid. If CVS end up spending less to offer us their services, then they should charge us less for offering them, is how the theory goes.
Plenty of economists slice and dice statistics to prove or disprove that this actually happens in these kinds of mergers, but consider that over the past 20 years or so CVS has been sucking up much of its retail competition, while also gobbling up much of the market for third party prescription drug plan management, and opening minute clinics. This has impacted the market by making it more difficult for me – and presumably you, too – to find an independent pharmacist if that’s what’s called for (and in many cases, such as with compounded medications, it is), because CVS has either purchased them or run them out of business.
Without getting into the weeds, it’s also important to note that through a consortium Red Oak Sourcing, CVS controls more than a third of the generic drug supply chain, more than any other wholesale buyer of generic drugs, which make up more than 80% of all drugs prescribed in this country.
FTC claims of price fixing now has generic drug manufacturers under review. If they are found guilty, much could change, including more oversight, but what I have been expecting for at least two years now is that the constant bickering between wholesale buyers like Red Oak who say generics are too expensive and the manufacturers who say their margins are too low means that, especially after federal enforcement gets through with their review, some generic makers will sell themselves off. And who would I expect to step up as the prime bidder? Yup. CVS.
Either way, already CVS has the market power per the machinations already noted above to name its own prices. In turn, that means CVS has greater say in the cost of all prescription drugs I might need. And, while the minute clinics are cheaper alternatives to my regular doctor, they do not coordinate the care with my doctor’s office, which in the last decade has become a priority for lawmakers who see care that is delivered in one so-called medical home as care that is more efficient and less expensive.
CVS executives know this, and see it as an opportunity they just haven’t yet sewn up: they already are marketing themselves as a one-stop health care facility (think “medical home”, to use the legislative terminology).
But wait, there’s more.
And just to throw a little salt in the mix: think of all the struggling hospitals that wouldn’t mind a little cash infusion from a powerful health company like the one CVS is rapidly morphing into being. It’s not hard for me to follow the money to there being a facility where CVS could direct patients who can’t be treated in the retail clinics. There has already been talk from CVS CEO Larry Merlo of adding urgent care centers to the mix.
And even more…
As the demand for the ultra-epensive biologics and their less expensive relatives, the biosimilars has grown, pharmaceutical benefit managers who create formularies for clients have struggled to keep costs down. Who is among the largest third party pharmaceutical managers in the US? Right! CVS Health. How are they keeping their costs down? Setting up their own infusion centers — no need to go to a specialty clinic.
These supply chain and competition mergers signal to me that CVS seeks as much control as possible over both the marketplace and the supply chain. Why wouldn’t this include physicians?
Owning an insurance agency is pretty much the same as owning a physician group, since that gives the pharmacy-health giant the power to dictate what prescriptions physicians covered by Aetna plans can write for their patients.
Here’s another prediction: fewer physicians will even want to take Medicare or any other insurance, and will start to exit the system entirely. This will initially devastate rural or “under-served” communities where physician shortages already exist; however, perhaps there would be a silver lining, in that it would actually return market power to patients/consumers.
That’s if there is a market place left. Did you also know that CVS is developing its own dialysis equipment and has entered the home dialysis market?
If you are a physician who drops out of the insurance marketplace but wants to purchase supplies from a supplier…your only avenue might be CVS, the very same CVS who wants to own your prescription pad. How would you feel as a tiny fish in a big pond having to buy your lunch from the shark?
Are there savings to be gained by all this consolidation and streamlining? Of course there is. I am not so cynical as to think that the DOJ isn’t honestly reviewing the deal. But they aren’t operating in a vacuum, and politics do seem to find their way into everything in this town (docu-mental is published in DC, remember). Yet, even if there is not an element of pressure to get this deal done behind the scenes, there is something else very important:
Put simply, while it’s plausible that healthcare costs will go down in the short term if CVS indeed shares the savings of any gained efficiencies, it most certainly dimishes the competitive marketplace and dilutes our freedom to choose our own healthcare providers, whether it be pharmacy, physician, or dialysis machine.
It’s no different than socialized medicine, only instead of the government making the decision, CVS is. We can hold elected officials accountable, but unless we are shareholders of CVS, we have no power over CVS, and even then, it’s limited.
If this appeals to you and to lawmakers as a solution for better, more efficient healthcare delivery, especially since that 80% of generic medications roughly correlates with 80% of US healthcare dollars being spent to treat chronic rather than acute conditions – something CVS keeps marketing as a problem for which they have the coordinated solution, then perhaps this is good news.
But if so, then let’s call it that: a takeover of our healthcare system. This would help us hold CVS accountable for the power it has assumed.
If we don’t have the guts to call them out on this, then it’s a CVS coup right before our eyes
You don’t have to believe me, believe CVS’s own CEO, as quoted in the Wall Street Journal:
“The breadth and depth of consumer data we have access to is unmatched,” CVS Chief Executive Larry Merlo said on Tuesday, kicking off a meeting with investors and financial analysts to review the company’s forecasts and strategy. “We are going to be the driving force for change in our health-care system.”
What if physicians billed you only if you actually got better?
Photo: From medievalists.net
A few months ago I was diagnosed with an autoimmune disorder. I readily accepted the diagnosis and began treatment, happy finally to have what I thought would be a containment of symptoms and a path to healing. Instead, things have gotten worse and I am in a pique about the ridiculousness of a system that can cost so much for what is often a maze more of trouble than its worth.
Case in point: I did a wash out of the medications and actually feel better than I did before. I attribute this more to the fact that I just got angry and said to hell with it, I will just live with it, than I do to any marvel of science. Of course, I am still looking for solutions, but what I have started to think about is, if we’re going to continue to spend a fifth of our GDP on healthcare and view physicians as suppliers, why not revisit Roman and medieval medicine’s insistence on a contract between a healer and a patient?
Instead of paying physicians to give us their “best guess” – even with what should be conclusive data derived from studies and blood labs – what if all examinations were free so that, just like any other supplier, they could determine whether they really know what’s going on, and give us an estimate of the work that needs to be done and whether they are up for the job.
Yes, I know that is the point of running lab tests. But if a physician knows what tests to order, then they clearly are thinking in what are called “differentials”, meaning they have narrowed down the possibilities and are just trying to find the right one. That should also mean they are already thinking of possible treatments and their role in them.
Talk about precision medicine. Think of the humility that would require, but also the money and time it would save.
Just thinking out loud on a Friday afternoon…
Meanwhile, if you valued docu-mentaling with me the potential for CVS to take over healthcare, you will definitely enjoy the EXCELLENT podcast with former assistant attorney general for antitrust, Donald Baker. It is completed but under editorial review (as in, I am checking to make sure it is does not have any wacky sound burps) so I will send it out next week. Why hasn’t it already been reviewed? Because I spent a day and a half talking and visiting with doctors this week, and since I am both host and producer of the podcast, I am now behind schedule in getting it out the door. I am keeping the newsletter to its Tue-Fri schedule, even if I sometimes have to be flexible with resource allocation.
If you’re not already a member of docu-mental, here’s a taste of what you missed earlier this week: A discussion of why Medicare-for-All might not be such a great idea, and a look at why individualism is under attack and why we should care, and perhaps get a little tougher about preserving it.
Why I love Kelly Ripa.
Happy Friday everyone!