This morning Bloomberg Law reported on a handful of recent developments in opioid settlement talks. A group of states is pushing the distributors to add $2.3B to their previous $19.2B settlement offer, which would bring the total settlement to $21.5B - the low end of the $22-$32B range previously discussed (see below). The report provides a some additional interesting details – 1) ~18 states are seeking a larger increase (similar to previous # of holdouts) , 2) local governments also want a larger increase, 3) some plaintiffs’ lawyers are telling clients $21.5B might be the best offer that doesn’t require several more years of litigation, and 4) most states are now looking for a payout over 15 years vs. 18 previously proposed.
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As demonstrated by the Track 1 opioid multidistrict litigation (MDL) case in Ohio, trial start dates are an important catalyst for settlement negotiations. This also appears to have been true for the New York trial, with the latest update (recapped below) coming immediately prior to the originally scheduled start of the trial. New York and West Virginia are the key upcoming trials in the ongoing opioid litigation, and both have been delayed by COVID-19. The New York trial now looks likely to start in September at the earliest, and the West Virginia trial is now scheduled to begin in mid-October.
After we published our weekly update last night on COVID-19 testing, XIFIN posted their weekly update on lab volume trends, including the trajectory of core testing. XIFIN is a provider of revenue cycle management solutions and laboratory information systems and has real-time visibility into claims data. Clinical lab volumes for the week ending 7/5 fell to 70% of baseline compared to 81% the prior week and 78-79% in early June. We note that the pullback in core volumes is likely driven by the holiday weekend and that comparisons are being made against a pre-COVID baseline and not a year-over-year basis. We expect next week’s update will be a more meaningful datapoint for the trajectory of core lab volumes. Interestingly, COVID-19 testing volumes generally remained strong through the holiday weekend. See Page 2 for additional details.
Today (7/6/20) DGX and LH posted updates on COVID-19 testing volumes (through 7/6/20) and capacity. DGX ran ~121k molecular tests / day this past week. DGX’s molecular testing capacity is 120k / day vs. 115k last week – this is below the previous 150k / day target for end of June (July now targeted). DGX ran ~29k serology tests / day this past week. DGX’s serology testing capacity was stable at 200k tests / day. LH ran ~111k molecular tests / day, down from ~122k / day the prior week. LH’s molecular testing capacity remained stable at 130k / day. LH ran ~13k serology tests / day, approximately half of the prior week’s rate. Testing volumes generally remained strong through the holiday weekend. DGX noted increasing average turnaround times (ex priority 1 patients) given case growth across the country, particularly in South, Southwest and West regions of the U.S.
We are updating our tracking files for the latest COVID-19 testing volumes and capacity. LH’s last testing update was provided on 6/27, with the company running ~122k molecular tests / day, double the ~61k / day the prior week. LH’s molecular testing capacity remained stable at 130k / day. LH also ran 25k serology tests / day, below ~29k / day the prior week.
We have updated our generic drug market tracking files to reflect May data. Overall, generic sales decreased 9.3% y/y in May compared to the 8.1% decrease in April and 8.5% increase in March, which included the pull-forward of prescriptions ahead of COVID-19 social distancing / lockdowns. Interestingly, price deflation intensified in May but was almost entirely driven by inhalant molecule Albuterol – excluding Albuterol, deflationary trends remained modest compared to recent months. So far in Q2 and during Q1 chain store generic acquisition costs declined faster than independent acquisition costs, which implies that distributor margins for independents are expanding. See Slides 3-13 for visuals illustrating the trends discussed below.
This morning (06/25/20) DGX posted a new entry to their COVID-19 media statement page. The company provided an update on demand / volume growth, capacity growth, turnaround times, and workforce actions. After moving away from weekly COVID-19 testing volume disclosure, we suspect today’s release was prompted primarily by expectations that molecular testing turnaround times are expected to slow in the near term.
As noted earlier by Wolfe’s Healthcare Services Analyst Justin Lake, according to guidance released by the Trump Administration yesterday insurers are not required to cover COVID-19 testing in the context of surveillance or employment / return-to-work programs. See Page 2 for the key text. We would note that 80% of covered workers at large firms are enrolled in self-funded plans (see Page 2 for the breakout), so for these firms the employer would bear the cost of COVID-19 test regardless of the guidance issued today. We expect large and thus primarily self-insured employers to drive the majority of the return-to-work testing opportunity. As discussed below, our recent meetings with DGX acknowledged this potential reimbursement dynamic, with the company remaining confident it can utilize its PCR testing capacity with entities where reimbursement will not be challenged.
In May, my wife and I were tested for COVID-19 antibodies through LH. I wrote about the experience here. My wife’s insurance is through CVS (AET) and my insurance is through UNH. Combined, CVS (AET) and UNH insure ~45M commercial members. Both of our claims have been recently processed and paid at 100% of the Medicare serology reimbursement rate of $42.13. Pages 2 and 3 have screenshots of our claims. We believe these data points are worth flagging as there has been some recent discussion of serology reimbursement challenges by lab industry billing experts.
Latest Disclosures – We are updating our tracking files for the latest COVID-19 testing volumes and capacity. LH’s last testing update was provided on 6/19, with the company running ~61k molecular tests / day, down from ~82k / day the prior week. LH’s molecular testing capacity is now 130k tests / day vs. 110k / day the prior week. LH also ran ~29k serology tests / day, above ~26k / day the prior week. We note that DGX has appeared to move away from publishing weekly updates on COVID-19 testing volumes and capacity (now second week without an update). The lack of an update leads us to believe volume trends have generally been consistent with DGX’s most recently reported weekly data on 6/8 – although as we note below DGX’s recent share ACLA testing would suggest closer to 100k molecular tests / day.
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