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PwC’s Health Research Institute projects 2015 medical inflation of 6.8%

BY Michael Johnsen

NEW YORK — After a five-year contraction in employer healthcare spending growth, medical inflation in the United States is projected to rise to 6.8% in 2015, according to PricewaterhouseCoopers’ Health Research Institute. In its annual report, "Medical Cost Trend: Behind the Numbers," HRI on Tuesday projected that the stronger economy is now reaching the health sector, releasing a pent-up demand for care and services. 

Despite some higher utilization and the cost of expensive new cures, the higher expected growth rate in 2015 is modest compared to the double-digit annual increases seen throughout the late 1990s and early 2000s. However, the fact that health spending continues to outpace GDP underscores the need for a renewed focus on productivity, efficiency and ultimately delivering better value for healthcare customers.

Confident consumers are spending more freely on healthcare due to the improved economy as well as increasing numbers of newly insured, and HRI expects that trend to continue through next year. In addition, the high costs of specialty drugs will increase the healthcare spending growth rate, according to HRI. As exemplified by new Hepatitis C therapies, which are estimated to have a big cost impact next year — responsible for a 0.2% increase in spending growth — drug development continues to play an inflationary role in the short run. However, over the long-term, these new therapies may improve quality of life and reduce other medical costs. Other inflationary factors identified by HRI are shifts to higher payments for physician practices acquired by hospitals and health systems, and IT integration investments for large-scale health system mergers and acquisitions. 

"Due to a demand for value and increased efficiency in the healthcare industry, medical inflation will be modest this year," stated Kelly Barnes, PwC’s U.S. health industries leader. "It is still too early to tell whether the drive for transparency and better value for each healthcare dollar – the cornerstone of the new health economy – will be able to temper spending growth once millions of newly insured access the healthcare system."

The report notes that additional factors are helping to moderate the growth rate. Three factors holding down spending growth include:

  • Healthcare providers gaining efficiencies through ‘systemness’ – streamlining administrative activities and standardizing clinical programs to eliminate redundancies and lower operating costs;
  • Cost-conscious consumer shopping brought about by employees shouldering more of the financial responsibility for their healthcare; and
  • Risk-based contracts in which healthcare providers are held accountable for patient outcomes.

After accounting for likely changes in benefit design, such as higher deductibles and narrow networks, HRI projects a net growth rate of 4.8% in 2015. Benefit design changes typically hold down spending growth by shifting financial responsibility to consumers, who often choose less expensive options. 

In Behind the Numbers, HRI examines the factors that serve to inflate or deflate the spending growth rate. The ninth annual report also includes findings from PwC’s 2014 Health and Well-being Touchstone Survey of 1,200 large employers and interviews with health plan actuaries whose companies cover a total of 93 million members. Some key findings from the Touchstone Survey include:

  • Employers are continuing to shift financial responsibility for health plan costs to employees through plan design and increased contributions. High deductible health plans are growing in popularity, with 18% of employers surveyed now offering a high-deductible plan as the only insurance option for employees;
  • Wellness continues to be a major investment for employers, with 71% offering programs, up from 68% in 2013; and
  • Other than traditional cost savings efforts geared towards cost shifting, employers are considering private exchanges more often than other new and emerging strategies.

“Major purchasers such as the federal government and large employers are helping to contain spending growth, in part by demanding greater value and by shifting more financial responsibility to consumers,” said Michael Thompson, principal, PwC’s human resource services practice.  “Indeed 85% of the employers we surveyed have implemented or are considering an increase in employee cost sharing, with high deductible health plans the highest enrolled plan for 26%. When you consider that the in-network deductible is $1,000 or more for 40% of employers — up from 16% in 2010 — it’s no wonder that employers are exploring other cost saving efforts such as private exchanges and wellness initiatives.”  

 

 

 

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Distributor of misbranded supplements fined $60,000

BY Michael Johnsen

SILVER SPRING, Md. — Nikki Haskell, the owner and CEO of Balanced Health Products, has been sentenced by a U.S. magistrate judge in a Manhattan federal court to a $60,000 fine for distributing dietary supplements that contained a prescription drug, the Food and Drug Administration reported Monday.

From at least November 2006 through December 2008, BHP’s primary business was the distribution across the United States of “Nikki Haskell’s StarCaps." BHP advertised StarCaps as weight-loss pills containing only all-natural ingredients including, for example, papaya extract. The company failed to list on the product’s label that the pills also contained bumetanide, a powerful diuretic used clinically to treat heart failure, kidney failure, high blood pressure and swelling (edema). Bumetanide is available in the United States only by prescription from a licensed physician.

In March 2014, Haskell was convicted upon a guilty plea to distributing the misbranded StarCaps from BHP’s New York City-based location. Per Haskell, the company is now defunct and has filed for bankruptcy.

Agents from the FDA’s Office of Criminal Investigations, New York Field Office spearheaded this investigation, which led to the permanent removal of this tainted dietary supplement from the market.

“There is a strict regulatory process in the United States for the distribution and dispensing of prescription drugs, and dietary supplements cannot legally contain such drugs,” stated Philip Walsky, acting director of the FDA’s Office of Criminal Investigations. “Consumers rely on the labels of dietary supplements to inform them about any potential health risks. The FDA will continue its vigilance over the dietary supplement market.”

Use of bumetanide is banned by certain professional sports organizations, including the National Football League, in part because bumetanide can mask the presence in the human body of steroids and other banned doping agents.

 

 

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Walgreens to open Wrigley Building flagship

BY Michael Johnsen

CHICAGO — Walgreens will open its latest flagship store in the Wrigley Building on North Michigan Avenue this Wednesday, according to a report in the Chicago Tribune published Tuesday. 

Walgreens helps celebrate the storied history of the Wrigley Building with a mural of the famous Wrigley Building Clock on the floor and stretching onto the wall, according to the report. 

“I think of flagships as being the amplification of a brand and what it stands for and its role in people’s lives,” Joe Jackman, CEO of Jackman Reinvention who has contributed to the design of 14 flagship stores, told the Chicago daily. “The first one we did in Chicago was State and Randolph. It was very, very exciting to see not only the customer community, but the internal community get excited. It’s tangible, I can see it. Flagships can be amazing laboratories for exploring where a brand might go.”

 

 

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