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Thursday, May 10, 2018

UnitedHealth, AARP sued for diverting $400M a year to illegal rebates

The country’s largest Medigap insurer and an interest group for the elderly have been hit with a lawsuit accusing them of illegally diverting hundreds of millions of dollars a year.
class action lawsuit (PDF) was filed on Wednesday on behalf of “a nationwide class of Medicare-eligible individuals” who claim the insurer and AARP are diverting part of their Medigap payments to fund an illegal “rebating scheme.”
Led by Connecticut resident Mark Dane, who purchased AARP Medigap coverage in 2014, the suit alleged UnitedHealth allows AARP to take a 4.9% rebate from monthly beneficiary payments in exchange for AARP sponsoring UnitedHealth’s Medigap plan.
AARP then uses those rebates to pay for the monthly collective group plan premium in order to bind coverage, according to the complaint filed in a Connecticut U.S. District Court.
The suit claims an agreement between UnitedHealth and AARP violates Connecticut law by disguising the rebates as an “allowance” or “royalty” payment for AARP’s sponsorship of the plan to avoid paying taxes. The lawsuit claims the payments actually serve as inducements so AARP will continue using UnitedHealth as the carrier of Medigap Plans.

“The motive for terming the hundreds of millions of dollars a year reaped pursuant to this scheme as royalty payments is to assist AARP in avoiding taxation,” the suit alleged, adding that the scheme ultimately increases the cost of insurance for all beneficiaries.
The plaintiff is seeking an end to the alleged practices, and recoup all rebates, which is allegedly more than $400 million per year. In 2016, AARP earned nearly $600 million in royalty payments from UnitedHealth across all insurance products, up from 561.9 million in 2015, according to the complaint.

HHS plans more deregulation, with focus on financial risk, non-ACA plans

Providers, insurers and pharmacies can expect a major regulatory overhaul later this year.
The Trump administration’s spring 2018 unified agenda, released on Wednesday, offered a preview into various agencies’ regulatory and deregulatory plans for the near future. Policy changes outlined by the Department of Health and Human Services (HHS) include reduced paperwork burdens for hospitals, greater flexibility for non-ACA-compliant plans, and additional tactics to fight the opioid epidemic, all of which have been previously addressed by the Trump administration.
“Responsible regulatory reform promotes economic growth and innovation, leaving the American people with more freedom to pursue their work and exercise ingenuity,” Neomi Rao, administrator of the Office of Information and Regulatory Affairs at the OMB, said in a statement. She added that the agenda follows President Donald Trump’s executive order to eliminate two regulatory actions for each new regulation.

Hospitals and providers

Long-term care facilities, in particular, are likely to see their pile of regulatory paperwork shrink. One future proposed rule, among the nearly 150 in HHS’ regulatory list, includes the removal of “unnecessary, obsolete, or excessively burdensome” requirements that such providers need to comply with to participate in Medicare and Medicaid.

No further details will be available until the rule is officially proposed, but the agency said the rule would “increase the ability of healthcare professionals to devote resources to improving resident care” instead of paperwork. Hospitals and providers have been calling for paperwork reduction initiatives and appear to have found a friend in the Trump administration.

HHS also plans to streamline the Medicare claims appeals process by fixing cross-references, unclear terms and definitions, and other errors that could be burdensome for providers and beneficiaries.
The American Hospital Association appeared satisfied with the focus on burden reduction.
“We know that efficiencies can be found in many areas, such as streamlined quality reporting, administrative simplification, and less burdensome reporting on the use of electronic health records, among others,” Joanna Hiatt Kim, vice president of payment policy, told FierceHealthcare in an email.
Changes to accountable care organizations are also expected. Some ACOs have been asking the agency for more time in non-financial risk-based contracts, instead of the six-year limit. However, the agency appears to be moving in the opposite direction, as one proposal on the Medicare Shared Savings Program includes “facilitating the transition to performance-based risk,” signaling a greater push for risk-based arrangements.

Plans

One proposed rule would allow more flexibility in the availability of grandfathered health plans, which were in place before the Affordable Care Act (ACA) and exempt from the new requirements, in individual and small group markets. HHS is also expected to push the expansion of health savings accounts and association health plans.

Association health plans were introduced by HHS earlier this year, but experts worried that those plans wouldn’t include enough consumer protections.

Drugs

The agency is also planning additional actions to restructure requirements around prescription drugs. HHS plans to simplify retail pharmacy standards including allowing for “proper recordkeeping when less than the full amount of a prescription for controlled substances is distributed by the pharmacy.”
The agency said the enhancement is critical for pharmacies due to the ongoing opioid crisis.
The Office of Information and Regulatory Affairs plans to announce the total cost of savings from deregulatory actions this fall.

Evolent Health beats views

Shares of Evolent Health are moving higher after the company last night reported Q1 adjusted earnings per share of 2c, versus Bloomberg’s consensus estimate for a loss per share of (4c). The company’s Q1 adjusted revenue of $144.4M topped the Bloomberg consensus of $140.85M. Frank Williams, CEO of Evolent, said in the earnings release, “We are pleased with our first quarter results and our strong start to 2018. We continue to see clear interest and momentum within both the Medicare and Medicaid segments of the market as providers look to enter into and improve on their performance in value-based care arrangements.” The company now expects full year 2018 adjusted revenue to be in the range of approximately $565M-$585M. The consensus estimate is $578M, according to Bloomberg. 2018 adjusted EBITDA is expected to be in the range of approximately $18M-$23M. Bloomberg data shows the consensus EBITDA forecast to be $21.05M. Shares of Evolent Health are up $1.95, or 11.75%, to $18.55 in afternoon trading.

Solid Biosciences target hiked by Leerink

Solid Biosciences price target raised to $28 from $14 at Leerink. Leerink analyst Joseph Schwartz raised his price target on Solid Biosciences to $28 from $14 after he updated his model to reflect Q1 results and increased his probability of success estimate for SGT-001 to 30% from 20%. His probability of success estimate for SB-001 is unchanged at 20%, he noted. Schwartz keeps an Outperform rating on Solid Biosciences shares.

Aptevo target upped by Piper

Aptevo Therapeutics price target raised to $9 from $6 at Piper Jaffray. Piper Jaffray analyst Edward Tenthoff reiterated an Overweight rating on Aptevo Therapeutics and raised his price target on Aptevo shares to $9 from $6 after Q1 prophylactic Hemophilia B therapy Ixinity sales of $4.1M beat Piper’s $3M estimate. Additionally, the firm is increasing its FY18 Ixinity sales forecast to $18M.

Prestige Brands beats views

Prestige Brands Holdings (PBH +29.1%) reports revenue rose 6.4% in Q4, driven by solid consumption levels across the Company’s core brands and incremental revenue from the Fleet acquisition.
North American OTC Healthcare segment revenue grew 6.6% to $212.1M, driven by revenues from the acquisition of Fleet as well as consumption growth in the Company’s core OTC brands.
International OTC Healthcare segment revenue up 19% to $24.1M.
Household Cleaning segment revenue fell 7.4% to $19.8M.
Gross margin rate improved 110 bps to 55.2%.
Non-GAAP adjusted EBITDA margin expanded 220 bps to 33.3%.
Advertising & promotion expense rate leveraged 250 bps to 13.8%.
FY2019 Guidance: Revenues: $1.046B to 41.056B; Diluted EPS: $2.96 to $3.04; Free cash flow: $215M or more.

Depomed has Q1 earnings beat

Depomed (DEPO +21%Q1 results ($M): Revenue: 128.4 (+42.0%); Product sales: 44.4 (-50.8% due mainly to license deal with Collegium).
Net income: 33.8 (+226.6%); non-GAAP net income: 21.4 (+386.4%); non-GAAP EBITDA: 31.8 (+25.7%); EPS: 0.48 (+211.6%); non-GAAP EPS: 0.28 (+300.0%).
2018 Guidance: Neurology franchise sales: $120M – 125M; non-GAAP EBITDA: $125M – 135M; net loss: ($33M – 23M).
NUCYNTA ER supply shortages resolved.
Cosyntropin U.S. marketing application to be filed by year-end by development partner Mallinckrodt.
In-licensed new dosage form of migraine med CAMBIA (diclofenac potassium) from Applied Pharma Research S.A. U.S. marketing application expected in 2019.
Agreed to new co-promotion agreement with Allegis Pharmaceuticals for pain med Zipsor (diclofenac potassium). Allegis will add 30 sales reps focused on primary care physicians in certain regions. Revenues to be shared above a mutually agreed-to baseline.
Corporate headquarters relocated to Lake Forest, IL from Newark, CA.