Drug Coverage, Costs Under Scrutiny - Pharmaceutical Executive


Drug Coverage, Costs Under Scrutiny

Pharmaceutical Executive

More Exclusions

In addition, plans frequently change formularies, as seen in moves by leading PBMs to expand "not covered" lists of drugs excluded from national preferred formularies. Express Scripts chief medical officer Steve Miller explained in a Nov. 26, 2013 blog that such moves are necessary to offset pharma efforts to "tilt the dynamic between drug manufacturer and healthcare payers." Manufacturers, he complains, are raising prices, expanding "me-too" branded products that cost more with no additional health benefit, and promoting copayment coupons and cards that encourage patients to choose more costly medicines.

PBMs are particularly incensed by marketers' increased use of coupons and cards to help patients cover out-of-pocket costs, a strategy seen by payers as designed to hide the real cost of new medicines from patients. Such coupons are not allowed for Medicare Part D plans, and PBMs want that policy to apply to plans sold on public exchanges, too.

In response to these tactics, Express Scripts recently revised its 2014 Preferred Formulary by cutting 48 products, which Miller describes as little-used drugs with clinically equivalent alternatives that offer greater savings. And CVS Caremark executives told financial analysts in December that it employed formulary exclusions as a "control mechanism to reduce costs and increase generic drug prescribing" – one of several formulary management strategies predicted to save clients about $1 billion in 2014.

However, patient advocates object that PBM formulary cuts deny access to important medicines for many individuals with cancer, AIDS, multiple sclerosis, rheumatoid arthritis and other diseases. AIDS activists are pressing insurers to provide coverage for newer single-tablet regimens, which promote better adherence and reduce hospitalizations, but have been left off many formularies.

These issues are playing out over coverage of new treatments for chronic hepatitis C following Gilead Sciences' announcement in December that it would charge $84,000 for a 12-week course of treatment with its newly approved Solvaldi (sofosbuvir). This breakthrough drug promises fewer side effects and better cure rates, and Gilead rationalizes its price as needed to cover high drug development costs and the prospect it will reduce hospitalizations and liver transplants for some 3 million Americans with the disease. But PBMs say they will look closely at other new hep C therapies under development by AbbVie, Bristol-Myers Squibb and Boehringer Ingelheim slated to come to market in the next year or two to see if the newcomers are more cost-effective.

Managing Benefits

Is Medicare Part D the model to beat?
A hard question for insurers and PBMs is whether these strategies for managing drug benefits more tightly aim to discourage plan enrollment by high-cost chronically ill patients. Plans insist that doctors can appeal denials and request coverage of medically necessary treatments, but that always takes time. A stronger defense for plans is that escalating outlays on more high-cost therapies will benefit only a few patients, yet will drive up the cost of drug benefits for all and thus deprive many of adequate drug coverage.

Pharma companies and patient advocates counter that relatively few patients use specialty medicines, but that these drugs can be life savers for those who stand to benefit. The debate is critical for sponsors and patients because limited reimbursement by payers could curb investment in treatments for rare and serious conditions.

Related policy decisions involve whether plans cover new specialty drugs under medical benefits, as is usual for most injectibles, or whether the development of more oral dosage forms shifts these still costly medicines to pharmacy benefits, where utilization and pricing are more transparent. PBMs also are tangling with retail pharmacies over requirements that patients purchase specialty drugs through select pharmacy networks that carefully screen use of these high-priced medicines.

Meanwhile, the latest health care spending report from CMS indicates that overall outlays for prescription drugs barely rose in 2012 and actually offset higher spending by hospitals and doctors. Steady increases in generic drug prescribing is the main factor, yet the actuaries acknowledge that the downward pricing trend was offset partly by strong growth in prices for specialty drugs. The challenge for policy makers is to sort out these and other conflicting perspectives to continue incentives for R&D and innovation, yet ensure broad patient access to affordable and effective medicines.

Jill Wechsler is Pharm Exec's Washington correspondent. She can be reached at


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