Drug Industry Criticizes Health Plan Formularies

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

By Sara Hansard

Sept. 18 — A pharmaceutical industry lobbyist Sept. 18 criticized health insurers for classifying expensive drugs in Affordable Care Act exchange plans so that patients have to pay a higher share of the costs.

For conditions such as HIV/AIDS, rheumatoid arthritis and multiple sclerosis, “we've seen patterns of plans putting every single medicine” on the highest-tier formulary for which plan enrollees must pay the highest share of costs, said Lori Reilly, executive vice president for policy and research at the Pharmaceutical Research and Manufacturers of America (PhRMA). She spoke at a Capitol Hill briefing on prescription drug costs sponsored by the Alliance for Health Reform.

At the briefing, George Mason University health policy professor Len Nichols responded that the “trade-off” to capping out-of-pocket costs for drugs in ACA exchange plans is that “you're going to push it into the premium.” That could spread the expense of high-cost specialty drugs over a larger population in the individual market, he said, but there needs to be “buy-in for that from the rest of the population.” Nichols is director of the George Mason University Center for Health Policy Research and Ethics.

According to a recent Congressional Research Service report, although there is no commonly accepted definition of specialty drugs, “insurers and other health care payers generally characterize them as expensive prescription products requiring extra handling or administration (such as injection or infusion) that are used to treat complex diseases including multiple sclerosis, cancer, and hepatitis C.”

Plan Practices `Discriminatory.'

Reilly said that “what we're seeing in some of these plans is discriminatory” against people with expensive medical conditions, which is barred by the ACA. “States need greater tools to be able to look at a formulary and assess whether or not it is potentially discriminatory.”

Reilly said PhRMA doesn't favor caps on copayments that health plan enrollees must pay because “payers need to have some mechanism to control costs, but we do need to look at affordability issues for patients and it isn't just the price of medicine. It is the price that patients are charged in terms of copays and we want them to be reasonable for patients.”

Richard Evans, who leads the health-care practice at investment research firm Sector & Sovereign Research LLC (SSR), said that free-market “price caps do not exist in health care” because patients “want the best available technology.”

No Price Limits 

People with medical conditions generally can't pay more out-of-pocket for drugs than the maximum required, Evans said. Drug manufacturers that come out with products that offer significant therapy advances for diseases such as cancer can charge whatever they choose, he said.

Even prices for generic drugs are rising quickly, Evans said. Wholesalers have gained control of about 75 percent of generic purchasing in the U.S. in the past several years, and “they benefit when generic prices go up. They make a big margin on these products,” he said.

Michael Gray, vice president and chief strategy officer of The Resource Group LLC, which provides logistical support for Catholic health system Ascension, said that Ascension has experienced “hyperinflation” for generic drugs over the past year.

Prices for “age-old” generic drugs used by Ascension's system have shot up as much as 1,700 percent between 2014 and 2015, raising the 131-hospital group's costs by $84.5 million for the year ending in July, and the costs could increase fiscal 2016 spending by $100.3 million if left unchecked, Gray said.

Ascension is determining “evidence-based, safe, cost-effective alternatives,” and it is developing a national formulary “to reduce the unnecessary variation across the organization,” Gray said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com