Since the Presidential election, many have commented on expected legal and regulatory changes. One of them being prescription drug pricing. It seems that Republicans and Democrats can all agree on the need for more transparency into the cost of drugs. As far as doing something to lower the cost, initially it seemed that with Republicans dominating both Congress and the White House, we might not see much action in this area. But Trump made it clear in his press conference yesterday that he plans to go after drug costs. While no specific plan has been announced, relief for rising drug costs would be welcomed by employers -- provided that pressure applied on Medicare drug costs does not mean cost shifting to private payers. We are keeping close tabs on this issue.
The Kaiser Family Foundation recently polled Americans to identify their health care priorities for the next President and Congress. At the top of the list were issues related to prescription drug costs – specifically, making sure drugs to treat chronic conditions are affordable for consumers (74%) and government action to lower drug prices (63%). From an employer’s perspective, the latter is more important, as it would manage the total cost of the drug rather than simply limiting a member's out-of-pocket expense, which just shifts cost back to the plan. While drug prices will be a hot topic for lawmakers and the regulators to address when new leaders take office in January, employers might not want to wait and hope. Over the next five years, it is expected that 40 new specialty drugs will hit the market each year. Now is the time to develop a strategy to get in front of that influx of new high-cost drugs.
As discussed in an earlier post, the EpiPen controversy has put issues surrounding drug pricing very much in the public view. But while ensuring the affordability of life-saving pharmaceutical products deserves attention, it’s a complicated issue with many stakeholders. There is little government guidance for employers and their vendors on benefit design, such as which drugs to include on high-deductible health plan preventive drug lists so that they bypass the deductible. While adding the EpiPen might seem like an obvious step, there are many drugs that fall into the gray area between prevention and treatment, and for any individual employer to try to draw that line could put them at risk. More guidance from the government would help in the short-term, but ultimately the affordability problem will only be solved by addressing underlying drug prices.
Over the past few years, there have been some short-lived alternatives to the EpiPen, but the only one currently available is an authorized generic for Adrenaclick, which may not be significantly cheaper than EpiPen and is in limited supply. While we’re already seeing activity among other drug manufacturers looking to get a competing product on the market, it will take some time. Mylan’s generic version of the EpiPen, however, will likely be available within a few weeks.
Here are some questions to discuss with your PBM or health plan now, to ensure your members have the access they need to this product and you’re controlling spending to the extent possible.
- What is the status of EpiPen and the authorized generic of Adrenaclick on the formulary? This is important because formulary status can determine drug coverage, the amount of patient contribution, and what manufacturer rebates might be obtained.
- How are any earned drug rebates being accounted? Rebates from the drug manufacturer may be one critical aspect of how to recoup some of the plan sponsor’s expenditures, so the primary payers should ensure those rebates are completely flowing back to them.
- Is EpiPen on an inflation protection program? Such protection strategies are a growing trend in managing drug expenditures and they look to ensure that the pharmaceutical manufacturer have some type of price protection or cap on how much they can increase their pricing. Unfortunately, this type of pricing protection may only be associated with increasing the rebates to keep pace with the ingredient price increases; however, it may offer some relief to plan sponsors.
- Is a generic interchange available for EpiPen? For now, the answer is mostly no, but this will be an option to consider once Mylan’s generic version is actually available.
- Will the generic price points be better for employees than the negotiated brand price? Though generics traditionally are the lowest-cost option, if the generic does not offer a significantly lower price, the plan sponsor should explore whether the branded version, net of the rebate, is actually a lower-cost option.
- Are there programs to manage the quantities being dispensed? Such strategies are often applied to ensure patients are not stockpiling large quantities of a medications.
- Are there ways to better account for the drug manufacturer couponing efforts? As the drug manufacturers have been providing more coupons to cover the cost of their products, plan sponsors continue to struggle with how to account for copays patients actually do not pay because, for example, they are applied to the deductible. Although these coupon programs traditionally only benefit the patient, plan sponsors have begun to consider how they might benefit from this type of manufacturer funding, as they still pick up most of the cost for most drug therapies.
Finally, as you monitor availability and price, you may want to review employee communications as well. You may want to consider providing educational materials that provide resources for employees that need help with the cost of EpiPen. And, if plan members can save money by asking a physician to prescribe a generic as availability grows, that’s a message worth reinforcing.
Unless you’ve spent the last few weeks vacationing on an internet-free tropical island or remote mountain-top (if so, lucky you!), you’ve read something about the controversy surrounding the EpiPen, the severe-allergy drug injector sold by the pharmaceutical company Mylan. Since 2007, when Mylan acquired the EpiPen, the list price has risen from about $100 for a two-pack to about $600. There are virtually no alternatives on the market, and the medication is potentially life-saving – in other words, not optional. A grassroots social-media campaign, driven largely by parents of children with food allergies, pushed Mylan to offer a $300 “savings card” to commercially insured patients to reduce their out-of-pocket costs and to broaden the eligibility for uninsured patients to receive free EpiPens. What they didn’t do was reduce the list price for the drug, and the barrage of negative press continued, affecting Mylan’s stock price. The company responded by announcing they would introduce their own generic version of the product in a few weeks, at half the price. It will be the exact same product as brand-name version – which the company will continue to sell for the full price. Although drug companies have introduced generic versions alongside their own brand-name drugs to compete with other generics, it doesn’t appear that another generic epinephrine auto injector will be available in the short-term.
Although this move may take heat off the company, the reason Mylan didn’t just reduce the price of the brand-name drug is because they hope and expect that sales of the brand-name version will continue – because (as this New York Times article suggests) some doctors will keep writing prescriptions for it by name, out of habit; because pharmacists will have a financial incentive to sell the more expensive, brand-name version; and because consumers with the $300 savings card might get the brand-name version for free but have a small co-payment for the generic version. On the other hand, some PBMs and carriers may have negotiated prices for the brand-name that are lower than the generic price! Employers will need to talk to their PBM or health plans to understand the current pricing structure and how, now that the target has moved and moved again, to get the best deal for their employees and their organization.
This story shines a spotlight on the urgent need for regulation to address pharmaceutical price-gouging and the extreme variation in prices paid by different purchasers for the same drug. On the defensive, Mylan’s CEO called out high-deductible plans as the real culprit; in fact, they exposed unfair price increases that might otherwise have gone unnoticed, as they do in so many cases. But the EpiPen story also highlights a problem with consumerism: you can’t be a smart shopper if there is no alternative to a product that your life, or your child’s life, may depend on.
Opioid abuse. You’ve probably read lots of stories about it recently, but have you seen the stats? They’re alarming, to say the least: There has been a fourfold increase in opioid prescriptions from 1999 to 2010 and a fourfold surge in deaths due to overdose.
Opioids are medications that relieve pain, such as hydrocodone (e.g. Vicodin), oxycodone (e.g. OxyContin, Percocet), morphine (e.g. Kadian, Avinza), and codeine, as well as non-prescription drugs such as heroin. As a group they’re the third most commonly abused drugs after alcohol and marijuana, and they’re now responsible for killing more people than automobile accidents, according to the Substance Abuse and Mental Health Services Administration.
They have also been blamed for a decrease in life expectancy among certain groups of middle-aged Americans. Among self-insured employers, some estimates claim that 32% of opioid prescriptions are misused or abused, while Mercer data shows that opioid users 18 and older cost 5.5 times as much in total allowed medical and pharmacy costs compared to non-users.
The National Council on Alcohol and Drug Dependence reports that 70% of people using illicit drugs, including non-medical use of opioids, are employed -- and then there are all the employees whose work may suffer as a result of worrying about a loved one with an addiction. Among 18-25 year olds, 12% use opioids non-medically, as do 5% of those 26 and older. The CDC also reports that there is 6% utilization among those aged 12-17. Employees across the country are struggling with this disease -- diagnosed and undiagnosed, directly and indirectly.
Something needs to be done -- and all of us, including employers, can play a role in addressing this epidemic. You can help support those with addiction by training managers and supervisors to identify problems and referring employees to sources of help such as your EAP or Behavioral Health carrier. In addition, it’s important to develop communication tools for employee awareness efforts. And if your organization has a drug-testing program, check to see if the panel of substances tested for includes opioids.
Just as important is to prevent new cases. Review your medical, dental, and pharmacy benefit design to prevent the over-prescription of opioid medications. For example, the current recommendation is to limit prescriptions after procedures to seven days, which has been shown to decrease the development of new addictions. In addition, employers can ask their carriers or PBMs whether they flag members who are deemed high-risk for addiction, and if they follow up to ensure providers are consulting state Prescription Drug Monitoring Programs (PDMPs).
It’s also important to facilitate a successful return to work, by supporting the ongoing care needs of the employee as well as the families affected by addiction. And through careful monitoring of claims data, employers can look for red flags of addiction such as:
- Members obtaining large quantities of opioids
- Members prescribed narcotics by different doctors
- Members prescribed narcotics for more than 30 days
Prescription drug abuse is a serious medical issue, and should be treated as such. By taking action now, you can do right by your employees who may be suffering from addiction, while also doing your part to address a sensitive and complex issue plaguing our society.
This interesting piece in Kaiser Health News sheds some light on a real gap in healthcare: Physicians are barely trained in medical school on how to identify and treat addiction. In fact, only a few hours in the course of four years of medical school are devoted to teaching addiction medicine. Schools have been so slow to change that medical students at Harvard University, for example, have started conducting their own training on how to buy and administer drugs that reverse the effects of an overdose. And Stanford’s medical school adjusted its curriculum so that lectures on addiction will no longer be folded into the psychiatry series as a side note, but instead will be presented as a separate unit, relevant to future doctors in any subspecialty – and that training will continue when the students leave the classrooms for clinical rotations. As the story notes, medical schools have traditionally avoided teaching about addiction, partly because so many doctors have viewed it not as a disease but as a vice resistant to treatment in a medical context. But as this outmoded view fades, pressure is being put on medical schools to expand their curriculum in this area. While this is good news for employer sponsored plans, it will obviously take time for providers to be better trained on addiction treatment.
This month, the International Federation of Health Plans (iFHP) released its 2015 Comparative Price Report, a look at medical prices per unit in private health plans in seven OEDC countries, including the US. While you can guess that most procedures, tests and scans cost more in the US, you might be surprised at the size of the discrepancies. Let’s take a look at the most common surgical procedure performed in the US – the appendectomy. According to the iFHP, the average cost of an appendectomy in the US is almost double the cost in the UK and quadruple the cost in Australia. While the report doesn’t explain the higher average US cost, it does offer a clue by showing how widely prices for this surgery vary within the US – from about $9,000 at the 25th percentile to about $33,000 at the 95th percentile. This degree of cost variation – when it doesn’t result in better outcomes – is why US employers have turned to transparency tools, reference-based pricing, and value-based care.
The report also showcases extreme pricing discrepancy for seven specialty prescription drugs, with the US typically paying much, much more. A well-researched article in the Wall Street Journal that appeared late last year does a great job of explaining how other countries manage to keep their drug spending under control. A lot of it comes down to bargaining power. Government-run health systems in countries like the UK and Norway have substantial negotiating clout with pharmaceutical companies. In the highly fragmented U.S. market, payers range from employers to insurance companies to federal and state governments – and Medicare, the largest payer for prescription drugs, is by law unable to negotiate pricing. For Medicare Part B, pharmaceutical companies report the average price at which they sell medicines to doctors’ offices or distributors; by law, Medicare adds 6% to these prices before reimbursing the doctors, and the plan member pays 20% of the cost. According to the article, “The arrangement means Medicare is essentially forfeiting its buying power, leaving bargaining to doctors’ offices that have little negotiating heft.”
Another piece of the equation is being willing to not cover a drug that doesn’t offer enough of an advantage over an existing, lower-cost drug. For example, England’s National Institute for Health and Care Excellence, or NICE, will conduct analyses and make recommendations to the public health system about whether or not to cover a drug based on its value. If a drug is rejected, its maker will sometimes offer a discount – and then hope to make up the difference in the US?? From the graphs showing cost differences in the report, it sure looks that way. And, by the way, what’s your PBM doing to maximize the value of your drug spend?
In a new poll from Modern Healthcare, more than two-thirds of the 86 responding health care CEOs said they oppose a repeal and replace strategy for the ACA. Instead, they would prefer to improve upon the ACA. Their reaction does not appear to be political; they indicate concern over the Republican's "repeal and replace" because specifics are not known and only 9.3% favor the single payor system proposed by Bernie Sanders.
The CEOs showed overwhelming interest in transforming provider reimbursement to better promote value, and in curbing rising drug costs. This should be welcome news for employers. One of the key drivers pushing up health care costs in 2015 was prescription drug benefits. Employers reported a 22% jump in cost for specialty drugs and we’re also seeing increases in the cost of generic drugs. On the care delivery front, we’re seeing more employers using accountable care organizations, centers of excellence and medical homes. Our research has found that the implementation of pharmacy management and value based care strategies will drive cost, quality and patient experience improvements
Optum and Walgreens Boots Alliance (WBA) recently announced an alliance by which Optum Rx members can fill 90-day maintenance medication prescriptions at Walgreens stores at mail-order copays. Although cheaper, mail-order pharmacy benefits are not always popular with patients so this may be a welcome development for some health plans. Optum indicates that there will be two options. In one, there are higher copays if the member does not use Optum mail-order or Walgreens after two “grace fills.” In the other, the member would pay 100% of the drug’s cost if Optum mail-order or Walgreens is not used. Initial information indicates that mail-order pricing discounts would apply to these prescriptions. However, plan sponsors interested in this new arrangement should carefully review the arrangement to ensure pricing remains at, or below, current levels for both the patient and the health plan.
If you live in New York, the days of dropping off paper prescriptions at the pharmacy are over. The New York Times reports that electronic prescriptions will now be required by a 2012 state law meant to combat the rise of prescription drug abuse (Minnesota has a similar law, but New York will be the first to back it up with penalties, including fines and imprisonment, for doctors who fail to comply). Although many doctors have already made the transition to electronic prescriptions, this will create some extra work for those who have yet to do so. That being said, advocates of the law say that it will result in reduced fraud, improved legibility, and better coordination of care. In addition to preventing intentionally fraudulent behavior, the law will also reduce the number of good-faith errors that can occur when a pharmacist misreads a doctor’s chicken-scratch handwriting.
Interestingly, one doctor notes in this article that another side-effect of the law might be the inclination of physicians to prescribe more common treatment regimens – that is, drugs that most pharmacies have in stock – than in the past, because they’d rather not go through the hassle of re-sending a prescription. And then there are patients who don’t fill their prescriptions, for one reason or another – in the old system, pharmacies wouldn’t have known the difference, but now that doctors have to send scripts ahead of their patients, we wonder how it will affect drug compliance. Will people be more inclined to follow the doctor’s orders, if the prescription has already been called in? And if not, what about the extra work this creates for pharmacists, filling prescriptions that are never claimed? Employers with New York-based employees should keep an eye on this transition and its implications for health care consumers – especially if other states start to follow suit.
Much of the pressure driving up pharmacy benefit cost comes from specialty drugs. While some new drugs represent important breakthroughs in the treatment of complex diseases, the spike in the specialty drug cost trend rightfully has employers looking for creative strategies to manage cost growth.
There are at least three areas to consider: Sourcing (getting the best price for the drug), site of care (getting the best price for administration, since many of these medications are infused), and clinical management (establishing best-practice rules for the circumstances under which a specific drug is administered).
Here are some of the simpler strategies to discuss with your carrier or PBM:
- Comprehensive site-of-care review. It may make sense to have some specialty drugs purchased through the medical plan rather than through the pharmacy plan; for example, oncology. In some cases, doctors can get these medications more cheaply than PBMs.
- Exclusive specialty. All specialty drugs are handled by one provider as a way to obtain better unit costs. However, this is not always the best option, as it limits flexibility.
- Specialty formulary. This strategy may be considered for drug classes where there is adequate competition, for example, four or more drugs with similar profiles.
- Clinical rules audit. Reviewing current clinical rules (usually from the PBM or carrier, if drug benefits are carved in) compared to best practices.
- Home health care. As part of a site-of-care review, consider the patient’s home as a venue for infused medication. This may require patient education to self-administer the medication, and is currently common in hemophilia and certain other disease states.
Larger employers may want to consider these more complex cost management approaches:
- Specialty carve-out. Investigate these new specialty-only PBMs (Acaria Health, Magellan and Diplomat Specialty Pharmacy). While they aren’t mainstream yet, specialty-only PBMs -- which address sourcing, site-of-care and clinical rules -- will get more attention in next few years as specialty drug costs continue to rise.
- Members with hemophilia may be able to access 340B pricing through Hemophilia Treatment Center. (The 340B Drug Discount Program is a federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices.)
- 340B pricing. While this is far from mainstream, a few employers have established relationships with a local hospital, ACO and/or contract pharmacy to get deeply discounted specialty drug pricing. Note that the 340B program has some complex rules regarding patient requirements to access the better pricing so this fact should be included in any review of this option.
Cost for specialty drugs will continue to rise for the foreseeable future, and none of these strategies is likely to solve the problem once and for all. But with specialty drug costs now squarely in the spotlight, we’re starting to test innovative new approaches to cost management, and learning more about the trade-offs between medical and specialty drug costs. In other words, it’s far too soon to throw in the towel.