Monday, July 14, 2008
Some plans push costs of pricey drugs on patients
Christina Rogers / The Detroit News
Pressured by employers to reduce their health care costs, some insurers are offering new drug pricing plans that stick patients with paying hundreds of dollars in out-of-pocket expenses for medications used to treat such illnesses as cancer, rheumatoid arthritis and multiple sclerosis.
Rather than charging the fixed-dollar co-payments that are standard in most plans, these programs require patients to pay anywhere from 20 percent to 30 percent of the cost of drugs that can cost from $500 to as much as $15,000 a month.
"We have patients being diagnosed with cancer and they have all these things to deal with and now we have to sit down and talk with them about a payment plan for covering these drugs," said Dr. Robert Leonard, an oncologist who works out of St. John Health. "It sounds horrible, but that's what is happening."
For years, insurers offered a three-tier system for prescription drug co-pays -- with cheaper generics in the lowest tier and having the lowest patient co-payments; brand names preferred by the insurance company in the second-tier with higher co-pays; and non-preferred brand names in the third tier with even higher co-pays. The new plans add a fourth tier for very expensive drugs and often require the percentage-based co-pays.
For cancer patients on multiple drug therapy that costs as much as $15,000 a month, that can add up to nearly $60,000 a year in co-payments.
In reality, the number of patients paying that cost is small, because most existing four-tier plans cap the co-payment on drugs.
Medco is among insurers selling the new pricing plans. Blue Cross Blue Shield of Michigan, which provides health insurance to nearly 4.7 million, also offers similar pricing arrangements for its large, self-funded employer plans.
Both companies say the number of employers covering workers with this co-pay structure remains small. Blue Cross, for instance, says only a couple hundred of its members are covered in this manner.
But many industry experts predict it will become more common as pharmaceutical companies expand their inventories of expensive drugs and health benefit providers look for ways to rein in spending.
Five years ago, the number of private insurers offering the fourth-tier plans was "negligible" -- less than 1 percent. Now, roughly 10 percent of insurers offer such a price category, said Daniel Mendelson, president of Avalere Health, a research firm in Washington, D.C.
"It's still relatively uncommon, but it's growing rapidly," he said. "I expect it to grow very rapidly over the coming years because there are a lot more drugs that are eligible for the tier."
Medicare fueled growth
Part of that growth is attributed to Medicare prescription plans picking up on the system in 2006, as a way to better distribute the cost of prescription drugs among its members. About 79 percent of Medicare plans now offer a fourth or "specialty" tier and some have even added on a fifth tier.
These are not medications with cheaper alternative or generic versions, so patients needing them are forced to pay to receive treatment, industry experts say. Medco, for example, has more than 100 medications on its list of so-called "specialty drugs" that treat a range of illnesses, including hemophilia, immune deficiency and hepatitis C.
The number of private insurers adopting four-tier systems is growing, as the number of patients on expensive, specialty drugs spirals higher. "Generally, there hasn't been a need," said William Valler, associate vice president of pharmacy at Priority Health, a Grand Rapids-based health plan company with a half-million members. About one-half percent to 1 percent of its members are on specialty medicine, Valler said, making company spending on such drugs about 7 percent to 10 percent of its total prescription expenditures.
But the company expects that spending to increase to 25 percent in the next five to six years, he said.
Insurers respond to need
Insurers say they're simply responding to employers who are seeking to keep costs down at a time when pharmaceutical companies are churning out more expensive drugs, many for illnesses that were previously only treatable in the doctor's office. While innovative and promising, insurers say, these drugs treat diseases that only afflict a few -- so it's only fair that more of the cost falls on the individual patient to keep premiums for the entire group lower.
"We're working with our clients towards improving health and building in those tools to contain costs so they can afford these more expensive drugs coming into the market," said Ann Smith, a spokeswoman for Medco. "And that's a balancing act."
She noted the way employers pay for these fourth-tier drugs varies and some elect to use fix-dollar co-pays instead of percentages.
General Motors Corp., for instance, uses a fourth-tier Medco drug plan for its retirees and active workers, but sets the fixed out-of-pocket co-pay of $75, no matter the cost of the medication, said GM spokeswoman Michelle Bunker. Ford Motor Co., which also has a Medco plan, does not use a fourth-tier system.
Patient advocates fight back
Saddling sickly patients with large co-pays limits their access to new and innovative drugs that could dramatically improve treatment for chronic and serious illnesses, patient advocates say.
"The whole purpose of insurance is to spread the risk across a large population so even the healthy people support the cost of caring for the ill," said Dr. F. Remington Sprague of the Michigan State Medical Society. "This seems to violate that principle."
The society is looking closely at the issue because "it has the potential to be a huge problem," he said.
Even more galling to some medical providers is that the term "specialty drugs" is the creation of insurance companies, not regulators such as the Federal Drug Administration, said Karen Jonas of the Michigan Pharmacists Association.
For doctors like Leonard, that has meant some business changes.
"We have had to mobilize our billing department to start meeting face to face with patients so they will know what to expect of them financially," Leonard said. "There was never really a need for that, but now it's essential."
