Today’s Managing Health Care Costs Indicator is $1700
That’s what a patient with leukemia has to spend out of pocket each month to get a new medication for a rare kind of leukemia in an employer health plan with a “fourth tier” for specialty drugs, according to an article from Kaiser Health News in yesterday’s USA Today. In her case, the full cost of the medication is $6800 per month.
Fourth tiers in drug benefits are increasingly common – as employers struggle with the increasing cost of specialty medications, which often cost $50,000 or more per year. In a fourth tier, patients must pay a percentage of the cost of a medication (coinsurance), rather than a set dollar copayment.
These specialty drugs usually target chronic diseases like certain cancers, multiple sclerosis, or rheumatoid arthritis – so their cost recurs month after month after month. Many of these drugs represent the best advances in clinical medicine in my generation. I’ve written before about Chronic Myelocytic Leukemia, which was once a rapid death sentence. Patients now take Gleevec ($40-50,000 per year) and often have normal life expectancy.
Research suggests that 10% of oral cancer medication prescriptions are abandoned at the pharmacy - the portion of medicines with over $500 cost share not picked up by patients is over 4 times as large as those medicines with cost sharing of under $100.
There is no “perfect” answer to this problem . We want drug companies to do research for novel treatments for rare diseases, but the research is of little social value if many Americans can’t afford the resultant treatment.
- 1) Higher member cost sharing for expensive drugs. This penalizes those who have already lost the “health lottery,” and causes poor medication adherence. It does put pressure on drug companies to lower prices, since we are all more price sensitive when exposed to more of the bill.
- 2) Share cost of these medications over a large population (no higher cost share for specialty medications). There are good insurance reasons for a large population to share the cost of these medications. However, this doesn’t exert pressure to lower prices.
- 3) Special programs to fund these medicines for those who can’t afford them. Drug companies offer programs for discounted or free medicine for those in poverty, but these programs are difficult to navigate and often lead to missed doses. They are also an effective form of price discrimination that lessens pressures to make medicines more affordable.
- 4) Price regulation: This is the European approach to specialty medication cost – and the US is among few industrialized countries that have no price controls on pharmaceuticals. On the other hand, price regulation could decrease research for drugs to treat rare diseases. Furthermore, well-meaning price controls are why some inexpensive generic cancer drugs are currently in critically short supply in the US.
- 5) Allow the FDA to consider cost when it is approving new drugs. Clearly, this has helped the National Institute for Clinical Excellence (NICE) negotiate lower drug prices in the UK. On the other hand, the public outcry about drug availability has led the UK to restrict NICE’s ability to consider price when approving medications.
- 6) Perform medical management, such as prior authorization, to prevent overuse of these expensive medications. This can help prevent waste and make patients try less expensive alternatives first. However, there are rarely good alternatives for these medicines. Utilization management programs work best where the problem is overutilization, and in this instance the problem is unit cost.
- 7) Include these expensive medicines in bundled payments, to transfer the risk to providers. This would help only if providers are now overutilizing these medications, and could discourage physicians from caring for patients who have diseases responsive to these expensive drugs.
- 8) Bulk purchasing can yield higher discounts, but these expensive drugs have a single source. Required Medicaid “most favored” pricing discourages pharmaceutical companies from offering significant discounts to other payers.
Where no approach on its own seems efficacious, it’s usually wise to consider a hybrid of various approaches. With the increase in specialty pharmaceutical costs likely to continue, and few of these drugs going off patent any time soon, there will be continued pressure to lower the acquisition costs of these medications. Expect to hear more of these horror stories in the future.