Who Pays for Specialty Medicines? - Pharmaceutical Executive

ADVERTISEMENT

Who Pays for Specialty Medicines?


Pharmaceutical Executive




Do higher patient co-pays impede access to the best that modern medicine has to offer in the specialty segment? It's more than an abstract question: big money is at stake as pharmacy benefit managers (PBMs) campaign to block efforts by specialty drug manufacturers to defray patients' out of pocket prescription costs through co-pay offset coupons and other discount programs. United Health Care's Specialty Pharmacy group has issued the latest salvo from the PBM community, barring as of January 1, 2013 the redemption by innetwork pharmacists of manufacturer-sponsored offset coupons for six key specialty medicines, including the Abbott blockbuster Humira.

In an interesting and potentially useful contribution to the larger debate on how best to manage the cost of these life-saving drugs, strategy and analytics consultant the Amundsen Group has conducted an intensive data analysis to gauge the impact of patient co-pays on access to specialty therapies.

The not so subtle conclusion? Insurers, by discouraging specialty prescribing and pushing patients into using lower cost medicines, may end up being penny wise and pound foolish. In the following summary of their findings, two Amundsen principals argue for a policy reset on benefit design for specialty medicines, taking into account the system-wide cost implications of drug therapy foregone. —William Looney, Editor-in-Chief

Although used by a small number of patients, specialty drug therapies are attracting attention because, while they represent a major advance in medical care, their high out-of-pocket costs can cause a financial burden for consumers. These costs may create a disincentive to finding the most appropriate therapy for the individual patient. Even when specialty medicines provide important new treatment options, high cost-sharing causes a substantial share of patients to abandon these medicines at the pharmacy counter.

Health insurance is intended to protect against the risk of major financial loss to specific individuals by spreading the cost of low probability, complex and treatment-intensive diseases over a large population. Numerous surveys show that spending for medicines, compared to hospital stays and other healthcare services, is frequently concentrated in a small share of the population. Analysis of a recent Express Scripts Drug Trend Report and other studies show that specialty drug therapies are used by less than 5 percent of US patients, primarily those with severe chronic or life threatening diseases, and these medicines represent a small share (13 percent or less) of total health plan costs. Similarly, a small number of hospital admissions account for a sizable share of spending. The most costly 5 percent of US hospital stays represented 32 percent of total charges and had an average charge of about $18,000 per day in 2008. In Medicare, the most costly 5 percent of beneficiaries account for about 40 percent of expenditures, the majority of which are for hospitalization.

In recent years, many health benefit plans have changed formularies to create new "specialty tiers" requiring higher cost sharing—typically coinsurance—for specialty medicines. The outcome is that health plans impose a high out-of-pocket burden on sick patients who need specialty tier medicines, rather than spreading these costs across the broader population, as insurance should. It would clearly be inappropriate to require patients needing lengthy or complex hospital stays to pay a higher share of their total costs than other patients. Yet the concentration of costs on the sickest patients is the practical effect of specialty drug tiers. Simply put, our research shows that this practice has an adverse effect on patient access.

What are specialty medicines? Many innovative therapeutics that treat serious medical conditions have earned the designation as "specialty medicines." They often address the root causes of disease, for instance by targeting a particular protein through antibodies or gene expression. They may tailor a treatment to an individual patient's physiology and risk factors. Many are biotechnology-based products that are made in living systems (e.g., cells, tissues), require special precautions or methods of administration, or treat small but severely ill populations, and thus bear higher prices than traditional medicines.

What are specialty tiers? In many health plans, medications are designated for coverage on a specialty formulary tier based on cost, rather than clinical or pharmacologic attributes. In Medicare, guidance from the Centers for Medicare & Medicaid Services (CMS) indicates that medicines may be placed on a specialty formulary tier if the negotiated price exceeds $600 per month.

Health plans commonly use prior authorization to manage the use of specialty tier therapies and ensure that treatment is appropriate. Reliance on percentage coinsurance on the specialty tier, rather than fixed dollar co-pays, is also a widespread practice. Kaiser/HRET's latest Employer Health Benefits Survey shows that in the commercial market, coinsurance on the specialty tier averaged 32% in 2011. Many commercial plans do not offer any annual limit on out-of-pocket spending for outpatient medicines, including for medicines on the specialty tier. In Medicare Part D, patients who don't qualify for low-income subsidies usually pay 25 percent or 33 percent for a specialty tier medicine in the initial coverage phase. Part D plans may deny patients the ability to seek lower cost sharing for specialty medicines (tiering exceptions), a protection available for non-specialty tier medicines. Once patients reach catastrophic coverage, however, they pay no more than 5 percent.

Why does this cause concern? Patient advocates, members of Congress, and others have expressed concern regarding the impact of specialty tiers on out-of-pocket cost and medication use. For example, research on oral oncology medicines recently published in the Journal of Oncology Practice found that Medicare patients with co-pays of $500 or more were four times more likely to abandon these therapies than patients charged $100 or less.


ADVERTISEMENT

blog comments powered by Disqus

Source: Pharmaceutical Executive,
Click here