New Rx co-pay tier hurts ill

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."

Costs Increase for Multiple Sclerosis Therapies; Tiering, Usage Expected to Rise

Reprinted from the June 2007 issue of SPECIALTY PHARMACY NEWS, a monthly newsletter designed to help health plans, PBMs, providers and employers manage costs more aggressively and deliver biotechs and injectables more effectively.

A pair of recent drug reports shows that while the usage of multiple sclerosis (MS) treatments seems fairly even from 2005 to 2006, the costs of those therapies are rising strongly. With this in mind, more payers are continuing to designate preferred therapies among the four self-injected drugs on the market. But industry experts anticipate MS treatment usage increasing further, which could push already-high costs even higher.

A chronic, autoimmune disease that affects the central nervous system, MS can occur as one of four types, each of which may be mild, moderate or severe. While MS affects approximately 400,000 people in the U.S., the National Multiple Sclerosis Society estimates that "the average annual direct and indirect cost of MS is estimated at $57,500 per person due to lost wages, increased medical care and other expenses."

Data show that the costs are rising substantially. PBM Express Scripts, Inc.'s 2006 Drug Trend Report, which includes only those specialty drugs adjudicated under the pharmacy benefit, showed that among its covered lives, the cost per prescription for the MS therapies class increased 15.1% to $1,469.93 in 2006, from $1,277.27 in 2005. In addition, the per-member, per-year cost rose 19%, from $11.43 to $13.60.

Medco Health Solutions, Inc.'s 2007 Drug Trend

Report (which also looks at only the drugs adjudicated on the pharmacy side) shows that for Medco's covered lives in 2006, MS therapy utilization has essentially remained the same (an increase of 0.6%), but both the cost for the plan and the cost per day of the therapy have climbed, 14.8% and 14.2%, respectively. The combined result made it the third largest contributor to specialty drug trend in 2006 for Medco covered lives. The primary reason that the PBM points to for this trend is "price inflation for the leading brand-name products" - the same reason that Express Scripts cited for its data.

This refers to "manufacturer-driven pricing," explains Steve Russek, vice president of clinical product development for Accredo Specialty Services, a Medco company. "There are limited products in this category."

In an April 2006 poll of 102 managed care executives on specialty pharmacy management, MS ranked sixth out of 19 categories offered for responding to the question of which condition was in greatest need of management, says Tom Baker, senior vice president at The Zitter Group. The data are in an upcoming Zitter Group specialty pharmacy trend report created in conjuction with Wyeth Healthcare Systems. And the EMD Serono Injectables Digest, which gathered data from 69 health plans across the U.S. in the first quarter of 2007, found that MS drugs, both under the pharmacy benefit and the medical benefit, are among those therapies that plans require to be obtained from a specialty pharmacy provider.

Debbie Stern, vice president of managed care consulting firm Rxperts, Inc., says that "more emphasis on 'treatment optimization' — finding the right drug and managing the side effects so the patient stays on therapy" — may also be contributing to the cost increases.

Four of the immunomodulating agents that the FDA has approved for the treatment of MS — Betaseron (interferon beta-1b), Avonex (interferon beta-1a), Rebif (interferon beta-1a) and Copaxone (glatiramer acetate) — can be given intramuscularly and/or subcutaneously, but all may be self-administered. There is a pair of infusible treatment options: Tysabri (natalizumab) is an immunomodulating agent, while Novantrone (mitoxantrone) is both an immunomodulator and an immunosuppressant.

Coverage on Medical or Pharmacy Side?

Plans will usually, but not always, cover the infusi-bles on the medical side, but the other four drugs' coverage may differ from plan to plan, falling under both the medical and the pharmacy benefits. Many plans, however, have begun offering the self-administered MS therapies under the pharmacy benefit, which may give plans more control over utilization and lessen the cost burden for patients. Russek says Medco is seeing that "a lot of companies are moving all self-injectables - not just the MS drugs — to the pharmacy side."

In fact, the EMD Serono Injectables Digest also notes that among its respondents, MS drugs are one of the therapy classes most likely to require prior authorization under both the pharmacy and the medical benefit.

Some health plans have begun selecting a preferred MS therapy among the interferons and placing the interferons on different tiers for their patient populations. Commonly done with generic drugs that offer a less expensive option to traditional retail pharmacy, this is an idea that has not been very common in the specialty pharmacy arena, but is gaining some traction, says Russek, and not just in MS but also in areas such as rheumatoid arthritis therapies and growth hormones.

These conditions have multiple branded therapies that are somewhat similar in terms of their effectiveness and safety. When the drugs are "near-perfect substitutes adjudicated as pharmacy benefits," category management is most effective, said Baker at a 2006 Pharmaceutical Care Management Assn. (PCMA) convention, referring to research from The Zitter Group's biannual Managed Care Injectables Index.

More than half of the respondents in the Wyeth survey either agreed or strongly agreed that specialty pharmacy providers were "best for managing crowded classes," such as the main MS treatments, says Baker. About one-third of respondents said that specialty pharmacy providers "have helped them with cost savings through category 'narrowing' or management."

Data from the Managed Care Injectables Index show three of the four self-injectable therapies are often covered in plans' middle tiers, with the other agent usually in the highest tier. Drug placement in lower tiers will usually translate into lower copayments — the same survey showed these copays were, on average, about $34 — which also may translate into greater patient adherence to the therapy. That survey also broke down estimated patient cost-sharing levels for various disease states at which patient compliance will fall. For MS, it was $181.36.

Plans also can negotiate better pricing for preferred therapies and can incentivize patients to use these lower-tier products as well, noted Baker in his PCMA presentation. These therapies are considered first-line treatments for MS, says Stern.

Specialty pharmacy providers may also supply these self-administered therapies through mail order, which requires less interaction on the part of the specialty pharmacy.

Still, though, the treatments are not cheap. According to 2005 data from Caremark Rx, Inc., the average annual cost of therapy for Betaseron, Avonex, Rebif and Copaxone among Caremark covered lives is in the $20,000 to $24,000 range. That category ranked second among specialty therapeutic classes by gross cost in the PBM's 2005 book of business.

The infusibles, which also have a more severe adverse-effect profile, are considered a second-line agent for patients who are not responding to treatment, says Stern. Tysabri entered the market in November 2004 to great anticipation following promising trial data.

Manufacturers Biogen Idec, Inc. and Elan Corp. withdrew the drug, though, in February 2005 in the wake of reports of patients in clinical trials acquiring progressive multifocal leukoencephalopathy (PML), a viral infection of the brain that often causes death or disability. When Tysabri returned to the market in July 2006, it was at an annual cost of almost $30,000 — without taking into account service costs for the infusions themselves. The companies said in early May that there have been no new reports of confirmed PML cases. Novantrone's annual price tag starts at around $10,000.

Adding to inflation "are studies coming out that recommend MS patients start on the drug earlier," says Russek. "We think utilization [of MS therapies] will go up with patients starting these treatments earlier."

Costs are also expected to continue to rise, as new therapies make their way onto the marketplace. According to a 2006 report by the Pharmaceutical Research and Manufacturers of America trade group, there are 27 medicines in development for MS. Datamonitor predicts that the MS market "will more than double in value across the seven major markets from 2006 to reach $10.7 billion in 2016."

Patients who either have not responded to current MS therapies or have discontinued the therapies due to their side effects will be among those waiting to try the new treatments. Those patients who dislike the injectable aspects of the current drugs will also have some options, as the first oral MS drugs are expected to begin hitting the market over the next few years. "Orals will obviously be better for compliance and for treating patients who don't want to inject," contends Stern.

Among those anticipated oral therapies are IVAX Corp. and Serono's Mylinax (cladribine), Novartis' Fingolimod (FTY720), sanofi-aventis' Teriflunomide (HMR 1726) and Pepgen Corp.'s Tauferon (interferon-tau). Some drugs that are approved for other indications, such as Genentech, Inc.'s Rituxan (rituximab), are also being explored as possible MS treatments.