Cost Sharing Keeps Cancer Patients From Getting Medications

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. 

Possible approaches:

1. 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. 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. 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. 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. 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. 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. 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. 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.

Related Post 

Prescription Abandonment on the Rise

Today’s Managing Health Care Costs Indicator is 86%

That’s how much the rate of prescription abandonment rose over the last four years, as reporting on public radio's Marketplace this afternoon. 

More and more Americans are in health plans with higher member cost share, and people are going into the pharmacy expecting to pay $20 for a prescription, and discovering it’s $40 or more.  For many Americans, this is just too much to pay.

One of the interviewees noted that he also saw his patients deciding to skip physical therapy because of high copayments.

This is one of the bitter ironies of the increased coverage of health care reform.  More Americans will be insured (mostly starting in 2014), but even those with “full” coverage often find that their insurance doesn’t cover them as it once did.

This is bad news for health.  The pharmaceuticals introduced over the last decades represent quantum leaps in the treatment of HIV, depression, ulcer disease, asthma, diabetes, cholesterol and many cancers.  However, these innovations are no good if people can’t afford them.

The answer for consumers is often generic medications –which can be purchased at a fraction of the cost of brand name medicines.  Generic prescribing rates are currently around 70% in states with ‘mandatory substitution,’ where a physician must explicitly demand the brand or else the pharmacist must use a generic.  However, closed health care systems can achieve an 80% generic rate, which dramatically lowers overall costs.

The public policy answer to high pharmaceutical costs is less clear.  Possible answers include

1. Price Controls: Most industrialized countries have some form of price control.  As a result, drug costs are dramatically higher in the US, which helps attract additional capital into the pharmaceutical industry. Price controls are politically difficult in the US – and unlikely to be implemented. 
2. Antitrust enforcement:  Consolidation in the industry leads to less price competition. (Pfizer just shelled out $2.6 billion for a generic drug maker, King Pharmaceuticals).  Even more important in terms of promoting sane prescribing would be prohibiting cross-promotion of medications.  This is when a company allows discounts on a popular medicine only if the pharmacy benefit manager (or health plan or employer) agrees to put other company products on a preferred list.  This process helps keep actual prices opaque, and leads to higher costs.
3. Patent Vigilance: Patent protection is why brand name medicines are so expensive.  Congress has periodically offered further patent protection to the industry, and limiting patent protection would make the industry less profitable and less attractive to new investors while it would lower costs.

The rising abandonment rate is further indication we need to lower the costs of prescription medications.  It won’t be easy to do so, but there are a lot of people wheezing away who can’t afford their asthma inhalers.  We don’t want them to be hospitalized, and an inhaler is a good deal compared to an emergency department visit