Tuesday, April 15, 2008

The Lucky Ones with Good Insurance Just May Become Unlucky

The New York Times recently published the article "Co-Payments for Expensive Drugs Soar" by Gina Kolata, discussing a "new pricing system" established by health insurers.

"Now Tier 4 is also showing up in insurance that people buy on their own or acquire through employers, said Dan Mendelson of Avalere Health, a research organization in Washington. It is the fastest-growing segment in private insurance, Mr. Mendelson said. Five years ago it was virtually nonexistent in private plans, he said. Now 10 percent of them have Tier 4 drug categories."
The concept of a 4-tier pharmacy benefit plan is not new and my health insurance policy has had that structure since at least 2000. As a self-employed musician, I purchase my health insurance independently, thus having an individual (non-group) policy with a well-known Blue Cross Blue Shield licensee in the Washington, D.C. area.

However, my insurance plan exposes the individual policy holder to the horrors of "cost-sharing" much further than the examples given in the NYT article. No matter the cost of medication, and no matter on which tier of the formulary the medication has been placed, my insurance coverage simply stops when the carrier's cost has reached $1500 each year. As demonstrated in the article, $1500 of pharmacy benefit would provide 75% of ONE month of the MS medication Copaxone.

See my previous post - The Value of Money or the Value of Health which should be amended to state that 1 ounce of Copaxone now costs $1900.

Reaction to the NYT article from MS Bloggers, Health Policy Wonks, and Medical Professionals:

Mandy at MS Maze - New York Times Addresses High Priced Drugs
"Although MS bloggers have been sounding the alarm for some time, we haven’t seen much in the mainstream press which addresses our concerns. It is important that we keep this issue on the front burner, especially as election time nears."
Jeri at Fingolimod and Me - Co-Payment for MS Drugs Going Sky High
"I am terrified about what will happen when this Fingolimod trial ends and I no longer get my medication for free. I strongly believe that the medicine is the reason for this long period of remission that I am enjoying, and the health care system is putting a price on that for me. I know it will be out of my reach once it has gone to market and I am forced to pay for it."
Doug at Shoester - In the News: Big Copays for MS Drugs
"Raising copays for a few sick people means many healthier people will pay less (duh), but, as a practical matter, also means the health insurance safety net is getting smaller."
Kevin, M.D. - New Tiered Pricing for Drugs
"Patients have been shielded from costs far too long, subsequently leading to an entitlement mentality. Health care is expensive, and people are starting to realize that with the emerging co-payment structure."
Peter Zavislak at Medical Pastiche - Solving Moral Hazard: Increase Copayments
"In the long-run, this will decrease prescription-healthcare costs by decreasing the incentives of moral hazard.

Out of control pharmaceutical usage-costs are part of the reason why healthcare is so expensive in this country, and a step such as increasing coinsurance rates is a good way to start reducing overall costs, in the hopes of putting more money elsewhere. It will be interesting to see what effects these changes will have in future healthcare."
From March, PhRMA statement on Prescription Sales Growth
“Ultimately, according to CMS, medicines accounted for roughly 10 percent of total health spending in the U.S. in 2006 – the same proportion as in 1960."
Vijay Goel at Consumer-Focused Healthcare - Tier 4 Copays: A Flawed Approach to Keeping a Lid on Drug Costs

"It makes sense that payers would want to check the growth in expenditures driven by specialty medications (estimates are the sector will increase from $54B in 2006 to $99B by 2010). Many of these medicines run in the thousands of dollars per month and have no generic equivalents. [see When Will We Have the Option of Generic MS Self-Injectable Drugs?]

Instead, the Tier 4 programs look to limit overall utilization of a helpful drug while not reigning in marginal pricing-- causing significant pain to the people most in need and not changing the incentives of the pharmacos."

Richard Eskow at The Sentinel Effect - Tier 4 Drugs: An Industry Response
"When plan designs are no longer made to change behavior, but simply to transfer high-cost items back to the insured party, that’s risk transfer and not benefit design. As a result, the insurance concept is being subtly modified - and arguably undermined."
Editorial in NYT - When Drug Costs Soar Beyond Reach
"The insurers say that forcing patients to pay more for unusually high-priced drugs allows them to keep down the premiums charged to everyone else. That turns the ordinary notion of insurance on its head. Instead of spreading the risks and costs across a wide pool of people to protect a smaller number of very sick patients from financial ruin, insurers are gouging the sickest patients to keep premiums down for healthier people."
Whitecoat Rants - Insurance Companies Deny More Care
"Does anyone find it interesting that the same patients who use those medications are the ones that tend to use more medical services in general? This whole Tier 4 pricing scheme is just a way for insurers to discriminate against patients with chronic disease."
Dr. Denny at Scholars & Rogues - Seriously Ill? Need Costly Drugs? Go Broke or Die

"The drugs covered by these Tier 4 and Tier 5 categories are expensive. So if these tiers charge a percentage of the cost rather than a flat co-pay, it can become ruinously expensive.

If you’re suffering from the relapsing-remitting (RRMS) form of multiple sclerosis, you may be taking Copaxone to reduce the relapse rate. The drug may cost nearly $2,000 a month. Your co-pay might have been a flat-fee $25 a month in a three-tiered plan. Under Tier 4 or 5, the co-pay may be a percentage of the whole cost.

At 25 percent of Copaxone’s cost, your co-pay could hit $500 a month (unless capped at a specific amount). That’s a life-altering 1,900 percent increase."

Mandy at MSMaze - MS and Stress Go Hand in Hand
"I have no choice in pharmacy for these precious injectable drugs. Insurance company allows but one, and they are an unpleasant group at best. They still wanted to charge me more than my maximum monthly out-of-pocket [which is $500 per script]. Interestingly, they wanted to charge even more than the previous month."
From February, Dr. Gross at Health Central - MS and Like Diseases Get Short Shrift in "Health Care" Debate
"We must have universal affordable specialty care for all patients with MS...a big-ticket item for seriously ill people, afflicted with a disorder whose onset had nothing to do with life style."
Merrill Goozner at Gooz News - High Biotech Drug Prices = A Failed Industrial Policy
[an article so great that I felt it deserved to be included here in its entirety]

"Insurance companies are charging many patients thousands of dollars a month in co-pays for very expensive drugs, the New York Times reported this morning. A quick glance of the list of drugs that the insurance industry funneled onto this so-called "Tier 4" co-pay list are recombinant proteins, products of the nation's biotech industry.

About half of the one dozen drugs highlighted in the graphic accompanying the article are made by Amgen and Genzyme, two of the nation's leading biotech companies. But rather than re-exploring the failures of these biotech industry giants, let's look at Copaxone for multiple sclerosis, which was the drug featured in the lead anecdote in the story and is made by Teva Pharmaceuticals, an Israeli company whose original claim to fame was as a maker of low-cost generics.

From the FDA Orange Book, we learn that the Food and Drug Administration approved this drug in 1996. From the nation's public registry of clinical trials, we learn that the primary approval trial for Copaxone (copolymer 1, a combination of four recombinant proteins) involved about 250 patients with relapsing MS, half of whom were randomized to placebo.
This trial, according to the government, was conducted at the University of Maryland on a National Institutes of Health grant with information provided by the Office of Rare Diseases at the Food and Drug Administration. In other words, taxpayers like you and me paid for the seminal research that brought this drug to market.

According to this website produced by a Brit with MS, we learn that Copaxone reduced the rate of relapses among patients taking the drug by about 29 percent. Subsequent trials, funded by Teva, showed that it was slightly superior or equal to the other drugs for the condition that are on the market (Betaseron by Bayer and Avonex by Biogen, both of which are recombinant forms of interferon). Most of these trials involved just a few hundred patients, and often did not have the statistical power to prove anything in these head-to-head comparisons.
Teva continues to fund research. Again, a quick glance at Clinicaltrials.gov suggests most of these trials compare Copaxone to other drugs for the condition. There are also a few companies seeking to get approval for their own brands of interferon to fight MS, undoubtedly attracted by the high prices set on Copaxone. The government is also still involved. The National Institute of Neurological Diseases and Stroke (NINDS) has financed Dr. Fred Lublin of Mt. Sinai Medical School to test 1,000 patients randomized to either Copaxone, Avonex or placebo. Unfortunately, that trial, which began in 2005, won't be completed until 2012, just two years before Copaxone goes off patent.

Now let's follow the money. A drug company brings a new drug to market based on government-funded research. It charges a huge price for the drug, but since its the insurance companies money, it's everyone's money, which means it's no one's money. So no one complains -- for a while. What does Teva do with the huge cash flow that comes from selling this very expensive drug to a small population of MS sufferers? It funds clinical trials to show it's drug is superior to other in the field, which it shows, sort of. But the trials are never really good enough to prove superiority, just good enough to establish market dominance, which was probably the real goal of the trials. So the government has to sort things out, but it gets back into the game very late and very slowly. The insurance industry, fed up with paying extraordinarily high prices, starts putting the financial onus on patients.

The only justification for the high prices slapped on this government-funded discovery is that it would generate research into new drugs and significant therapeutic insights. Consumers, who paid the tab through their insurance premiums, got neither for their investment. And the government, which could have used that money and much less of it to get started earlier in funding definitive trials, now must come with another huge infusion of cash (a 1,000-person trial will cost at least $10 million) to sort out the mess.

In 1991, when then Secretary of Health and Human Services Louis Sullivan was hauled before Congress to explain why it was paying so much money through the Medicare program for Amgen's Epogen, which is used in dialysis patients, he testified that it was to show Wall Street that this new exciting industry -- biotechnology -- would generate generous returns if it came up with innovative products. Isn't it time to call a halt to this failed industrial policy, especially when it comes to drugs brought to market with taxpayer support? Surely the patients like those now paying 25 percent of the cost these drugs in Tier 4 co-payments deserve better."

Yes, I agree. We all deserve much better.


  1. My co-payment are already killing me, affecting my savings for assisted living home...and Medicare---where can I get $5,000?? That is 1/2 my 6 month income--which is taxed already. I have done wha many less fortunate than I--cut back on meds, my clothes, my food, to save on CDs earnin 3%---HOW do I pay for home health care/asst living when I am only 51 now?? I don't own a house, so bail outs don't mean diddly to me. And *I* am one of the lucky ones...but my savings is fast dwindling; I suppose I will die sooner than if I had money, so that is MY bail out plan, thanks, America, thanks a lot.

  2. It makes a mockery of the very concept of "insurance" which is not stated as the ability of rich individuals and corporations to get even richer.

    But that's what its come to in this land of Mammon.

    It was originally a way for a select pool ("viz" mariners and merchant who depended on marine delivery) to spread the risk (of a ship they'd built, equipped, crewed and filled with merchandise, not making it back to port.)

    ...THAT'S IT...

    The problems is that the selection of who's in the pool is not supposed to change, just because you have become in need of the services you've been paying the protection money for.

    (Literally, its like some thugs whom you've been paying protection money to, coming around and burning down your house anyway.)

    The only rational response is to have a medical plan where you are in by virtue of being human and the 85% of the people who are healthy pay for the 15% of the people who aren't.

    (Like the hiring "police" to rid yourself of "robbers")

    Otherwise, let them pay for bullets, shoot us, eat us. (Shades of "Soylent Green"!)

  3. It is absolutely ridiculous how expensive health care is! It is such sickening! I think the best we can do is to do whatever it takes to avoid getting sick. I've recently discovered a product that is doing just that for me and then some. Check it out at: http://www.iexfuze.net/juicyjuice Knowledge is power! I guarantee you'll be glad you did!