Specialty Drug Costs Continue To Vex Employer-Sponsored Health Plans

 

Specialty drug costs continue to vex employer-sponsored health plans |  BenefitsPRO

Source: BenefitsPRO, by Scott Wooldridge

new report from Pharmaceutical Strategies Group finds that specialty drugs continue to be a top focus for plan sponsors, in part because they tend to be very expensive.

The drugs tend to also be highly complex and require special handling or administration, the report noted. At the same time, the drugs can have great value: extending life for some patients and keeping them productive and relatively healthy, even when conditions are not cured outright.

Related: ‘Super spenders’ accrued $2.1 billion in specialty drugs costs 

“Today, advances in drug therapy allow many patients living with conditions treated by specialty drugs to live decades longer than in the past,” the report said. “As a result, today, many specialty drugs are being used as long-term, chronic therapy for a significant portion of patients.”

Very high costs lead to an “appetite for disruption”

The report noted, as many other sources have, the financial burden that specialty drugs present, both to plans and to enrollees. “Patients who use specialty drugs often have additional health care costs such as non-specialty drugs, doctor’s office visits, outpatient hospital visits, and lab testing to monitor their condition, among others,” the study said. “The monthly total cost of care for a member who uses at least one specialty drug averages $4,846 for the plan and $574 for the member. Annualizing these costs equate to average plan costs of $58,157, and average member costs of $6,894, using the monthly average. These costs are in addition to health care premiums and deductible costs.”

To address high costs, plan sponsors are trying a variety of approaches, the report said, including the use of prior authorization, step therapy, and quantity limits as management strategies. More than 50% of employers use at least one strategy to increase the use of biosimilar drugs. And 8% of plans are currently using alternative funding models, while 31% are exploring their use.

An eye on utilization—but complexity remains a problem

Plan sponsors also are putting a premium on appropriate utilization. This is by far the top priority of plan sponsors, the report found: 37% said reducing inappropriate utilization of specialty drugs was a top goal. The next-highest goal was reducing patient out-of-pocket costs (18%), followed by improving specialty drug adherence and persistency (15%).

The report also stressed the importance of reporting on a plan’s drug spend: “Timely, accurate, and actionable reporting is key to measuring how a plan is doing in specialty drug benefit management,” the report said. “When done well, reporting can highlight areas of opportunity to improve clinical and financial outcomes.”

Among the barriers to reporting is the fact that patients with these conditions often see multiple doctors at multiple facilities. In addition, a single patient’s prescriptions often cannot be filled all at one facility, adding to the complexity.

PSG officials said there was a range of reporting for different areas of specialty drug utilization: “More than 80% of plan sponsors have access to reporting on their total health care costs,” said Tracy Spencer, senior vice president and practice leader of employer groups, labor, and health systems at PSG. “However, clinical outcomes of adherence, persistency and clinical efficacy were reported less often (71% and 31%, respectively). The impact of specialty medications on employee productivity had the lowest reporting rate at 23%.”

U.S. Hospitals Struggle to Absorb Pandemic-Era Rising Costs

Fitch: COVID-19 resurgence threatens nonprofit hospitals' margins, credit  ratings | Fierce HealthcareSource: Bloomberg, by Carey Goldberg

U.S. hospitals are struggling to absorb rising costs for labor, drugs and supplies as the pandemic drags on, the American Hospital Association said Monday in a report.

Labor costs per patient jumped by 19% in 2021 from 2019, and supplies rose by over 20% per patient during that period, according to the report. Nursing expenses shifted heavily toward travel nurses. The travelers’ share of nursing budgets rose to 39% in 2022 from 5% in 2019.

The federal government has allotted more than $170 billion to help hospitals through the pandemic, but many say they are still losing money, especially after the omicron wave earlier this year. HCA Healthcare Inc. cut its annual adjusted earnings forecast on Friday amid higher labor costs, sending shares 22% lower.

 

“The dramatic rise in costs of labor, drugs, supplies and equipment continue to put enormous pressure on our ability to provide care to our patients and communities,” AHA Chief Executive Officer Rick Pollack said in the statement. The association represents nearly 5,000 hospitals nationwide.

In Massachusetts, the state hospital association on Monday detailed its own financial woes, reporting that in January and February, as omicron hit, hospitals lost $430 million overall, despite federal relief money.

In January, 42 of 47 hospitals surveyed lost money and February was almost as bad, the Massachusetts Health and Hospital Association reported.  Governor Charlie Baker is proposing an additional injection of $250 million in federal money for distressed hospitals.

House Passes Insulin Bill Over Insurers’ Opposition

House passes insulin bill over insurers' opposition - POLITICO

Source: Politico, by Alice Miranda Ollstein and Megan Wilson

The House voted Thursday in favor of a bill to cap out-of-pocket costs on insulin at $35 a month, a policy Democrats hope will give them a concrete win to campaign on when they face voters in November as the rest of their health care agenda remains stalled.

“At the end of the day, I hope that we can still bring forward a reconciliation bill with additional reforms this year. I know we need to do Medicare drug price negotiation,” Rep. Angie Craig (D-Minn.), the lead sponsor of the insulin bill, told POLITICO. “But we can’t wait any longer to act on insulin.”

Despite concerns about the bill’s policy and strategy from both sides of the aisle, nearly all House Democrats as well as a dozen Republicans voted for it Thursday. Yet it faces slim odds in the Senate, where Democratic leaders are combining an out-of-pocket cap on insulin — led by vulnerable Sen. Raphael Warnock (D-Ga.) — with a still-in-the-works bipartisan bill from Sens. Jeanne Shaheen (D-N.H.) and Susan Collins (R-Maine) to cut the drug’s cost.

The insurance industry tried to persuade lawmakers to oppose the measure, arguing it does not lower the actual price of insulin and could lead to higher premiums.

One insurance industry source close to the negotiations told POLITICO they’ve stressed that the bill “lets pharma off the hook,” calling it a “giveaway” to the drug industry.

“The premium impact is going to be substantial, and this isn’t the way to address the high cost of insulin,” said the lobbyist, who was granted anonymity to speak candidly about the process. “But all these Democrats want this win.”

America’s Health Insurance Plans, the trade association for insurers, wants Congress to target the pharmaceutical industry’s price-setting power instead of simply shielding patients from it. While the Shaheen-Collins bill in the Senate aims to do so, its details haven’t yet been released.

“Insulin prices are too high because Big Pharma alone sets and controls the price,” AHIP spokesperson David Allen said in a statement to POLITICO. “This legislation continues to empower Big Pharma to raise insulin prices with impunity leaving patients, businesses, and hardworking taxpayers paying even more for health care.”

Brian Newell, a spokesperson for PhRMA, drugmakers’ leading lobbying group, told POLITICO that, while they aren’t officially taking a position on the bill, they see it as “one way to help patients at the pharmacy counter” but believe that a more “holistic solution” that also reforms the drug rebate system is also needed.

“No amount of spin by the insurance industry changes the fact that they determine what patients pay at the pharmacy,” he added. “It’s outrageous that insurance companies are forcing patients to pay more for medicines than what insurance companies pay.”

More than a half-dozen pharmaceutical lobbyists told POLITICO that the industry has not been lobbying on the bill, saying the insurance industry is doing more to oppose the bill than drugmakers are doing to support it.

While some Democrats don’t view the insurance industry’s complaints about the bill as credible given their financial stake in the matter, others say they understand the concerns, though they ultimately voted for the measure.

“We aren’t putting that burden on Big Pharma, and I don’t blame [the insurers] for being upset about that,” Rep. Susan Wild (D-Pa.) told POLITICO, adding that she talked “at length” with insurance companies and agreed that the bill’s “big flaw”is how it changes who pays for insulin but doesn’t lower its cost.

Still, she countered, “It’s a matter of do we help people who are literally dying or rationing their insulin? … I have a greater concern for patients and for people in that position.”

Republicans largely lined up against the insulin bill during Wednesday’s House Rules Committee hearing. Some GOP members compared the price cap to President Jimmy Carter’s cap on the price of gasoline and claimed it would trigger similar shortages and long lines for the drug. Other Republicans said the policy would encourage U.S. pharmaceutical companies to relocate to China.

Rep. Michael Burgess (R-Texas) criticized Democrats for using the repeal of the Trump administration’s drug rebate rule —which was never implemented — as a funding mechanism.

“Those are made-up dollars. Those are not real dollars,” he said, calling it a “budgetary gimmick.”

Other GOP members on the panel pointed to a Congressional Budget Office analysis released Wednesday that appeared to back up insurers’ arguments. The CBO predicts the measure would cost the federal government more than $6 billion over a decade because it would likely force insurers to raise premiums. That would increase government subsidies paid through the Affordable Care Act and decrease income tax revenue because workers would spend more of their wages on their employers’ health plans.

Eli Lilly, one of the country’s leading insulin makers, “has long advocated for solutions to limit out-of-pocket costs on insulin,” said Shawn O’Neail, the vice president of their global government affairs division. But the company notes it hasn’t endorsed the bill.

Though the legislation easily passed the House on Thursday, it will be a much heavier lift in the Senate, where it needs support from at least 10 Republicans and all 50 Democrats. Though Warnock told POLITICO on Wednesday that he’s hearing “bipartisan interest in capping the cost of insulin,” no Republicans other than Collins have signed onto the effort, and multiple lobbyists said they don’t think it will garner enough Republican support to reach the 60-vote threshold in the upper chamber.

Still, Democrats believe those who oppose it will pay a political price in November.

“If my Republican colleagues don’t support it, I hope my voters back home see right through that,” Craig said. “You can make the case for voting against a big reconciliation bill, that you opposed this or that individual provision, but when it’s a standalone bill like this, there’s nowhere to hide.”

No End in Sight for Escalating Prescription Drug Spending

Escalator

Prescription drug costs are rising more than 10% a year, which is twice the rate of medical costs increases according to an A.M. Best report. Retail prescription drug spending grew 12.2% in 2014 compared to 2.4% in 2013. Driving the rising costs are increased spending for new medications, such as specialty drugs for Hepatitis C; patents that expired, price increases for brand name drugs, and higher health plan enrollment due to the Affordable Care Act (ACA). Drug spending from private health insurance, Medicare, and Medicaid accelerated in 2014. These costs have affected insurers. Also consumers are paying more out-of-pocket costs.

The increase in drug costs has become divergent to other health care costs. In 2014, U.S. health care spending increased 5.3% to reach $9,523 per person. The cost growth was primarily due to major coverage expansion under the ACA, particularly for Medicaid and private health insurance. The share of the economy devoted to health care spending in 2014 was 18.1%, up from 17.5% in 2013.

The medical loss ratio (MLR) remained relatively flat from 2010 through 2013 in the low 80 percentages before a decline in the past two years to around 75%. But the MLR was more than 10 basis points higher in 2010 to 2015 when prescription drugs were included.

Home Care Costs Rise Again in California

The cost of long-term care from a home health aide has increased in California and nationally, according to a Genworth study. Long term care costs are up in all care settings in California from 2015. Home is where most Americans get long-term care. “Although home care costs are much less expensive than those in facility-based settings, the costs can add up to as much as $54,912 per year in California, which is why it’s imperative for consumers to begin planning now for how they will pay for that care should they need it,” said Tom McInerney, president and CEO of Genworth. He noted that at least 70% of Americans 65 and over will need some form of long-term care and support. The following are key trends in California’s major metropolitan areas:

  • The cost of care in a semi-private nursing home in Los Angeles is 8.8% less than the state average, at $6,935 per month.
  • Home health aides cost 18.52% more in the San Diego metro area than the national average, at $4,576 per month.
  • The cost of private nursing home care in San Francisco is $15,193 per month, which 97.36% more  than the national average.

Millenials Underestimate the Cost of Care

Millennials (ages 18 to 36) are more likely than are non-millennials to underestimate the cost of an injury or illness, including medical, household, and out-of-pocket costs (66% versus 45%), according to a survey by Aflac. Sixty-five percent say they could afford less than $1,000 for an unexpected out-of-pocket expense. Millenials are more inclined to try unconventional ways to pay for out-of-pocket health care expenses, such as borrowing from friends or family and crowd sourcing. The online study surveyed 1,500 benefit decision-makers and 5,000 employees at small, medium, and large companies

Prescription Drug Costs Skewed by Hidden Fees

Most independent community pharmacists consistently encounter misleading and confusing fees imposed by prescription drug middlemen. These fees distort medication costs and reimbursement rates, according to a recent survey by the National Community Pharmacists Association (NCPA). The survey documents two relatively recent trends: direct and indirect remuneration (DIR) fees imposed on community pharmacies and increased copay claw-back fees that affect pharmacy patients. NCPA CEO B. Douglas Hoey, RPh, MBA said, “Pharmacy benefit management (PBM) corporations are inserting costs into the system on virtually everyone in order to fuel their profits and reward shareholders. Government officials and health plan sponsors must insist on greater transparency and oversight of these practices to ensure that plan costs and premiums go to their intended purpose: taking care of patients. NCPA will continue to work with Medicare officials, Congress and others toward that end.”

Community pharmacies are assessed DIR fees that can turn a modest profit into a financial loss. Sometimes it takes weeks or months after medication is dispensed until the patient and pharmacy is reimbursed. The survey reveals the following:

  • 67% of pharmacists say they get no information on how much and when DIR fees will be collected or assessed.
  • 53% say DIR fees are assessed quarterly. Many complain that this lag time makes it difficult to operate a small business and impossible to determine if net reimbursement will cover their costs at the time of dispensing.
  • DIR fees started in the Medicare Part D program, but 57% of pharmacists say they now appear in some commercial plans as well.

Eighty-seven percent of pharmacists said that DIR fees significantly affect their pharmacy’s ability to provide patient care and remain in business. Many pharmacists say that DIR fees can be thousands of dollars each month. According to the survey, members report that the Aetna and CVS Caremark drug plans are the most egregious in this area. The survey also disputes claims that DIR fees are actually pay-for-performance incentives. Pharmacists said that PBM corporations were not transparent about their DIR fee criteria and they assessed DIR fees on pharmacies with the highest quality ratings.

Recently, 16 U.S. senators and 30 representatives wrote to the Centers for Medicare & Medicaid Services (CMS) urging implementation of the agency’s proposed “negotiated drug price” guidance. Proponents say that requiring  Part D plans to report these fees consistently would improve transparency, increase accuracy of the Medicare Plan Finder tool that patients use to evaluate drug plans, and give pharmacists more clarity about their true reimbursement rate.

The survey also addresses copay claw backs on patients. PBMs instruct pharmacies to collect elevated copays and recoup the excess amount – and sometimes more – from the pharmacy. “Patients purchase insurance with the presumption that they will save money using the plan’s designated health care providers. Copay claw backs turn that logic on its head. A copay becomes a full pay – and then some,” Hoey added. The survey also reveals the following:

  • 83% of pharmacists have witnessed copay claw backs at least 10 times during the past month.
  • 67% say the practice is limited to certain PBMs.
  • 59% say the practice occurs in Medicare Part D plans and commercial plans.

PBM corporations sometimes impose gag clauses that prohibit community pharmacists from volunteering that a medication may be less expensive if purchased at the cash price rather than through the insurance plan. In other words, the patient has to ask about pricing. Fifty-nine percent of pharmacists say they encountered these restrictions at least 10 times during the past month. Pharmacists sat that United Healthcare/Optum Rx and Aetna appear to employ copay claw backs most often.

Generic Drugs and Multi-Tiers Dominate Employer Plans

Forty-nine percent of employer-sponsored prescription drug plans have three tiers, and 44% have four or more tiers. That’s an increase of 34% from 2014 to 2015 and 58% since 2013, according to a report by United Benefit Advisors (UBA). “The market will continue to adapt. We’re already seeing the advent of six-tier prescription drug plans,” said Scott Deru, president of UBA Partner Firm Fringe Benefit Analysts. The Affordable Care Act will drive changes to plan design. Employers struggle with balancing cost containment and employee retention. The biggest challenges are for employers that are losing their grandmothering or grandfathering protection.

Healthcare Issues Among Millennials

Transamerica Center for Health Studies (TCHS) finds that Millennials are struggling with the cost of healthcare while facing some health issues at a young age. The survey reveals the following:

  • The most common reason that the 11% of uninsured Millennials didn’t get coverage before the ACA deadline is that they did not know how to apply for insurance.
  • 60% of the uninsured are women; and 68% of the uninsured are unemployed.
  • 21% of Millennials can’t afford their routine healthcare expenses. An additional 26% can afford it, but with difficulty.
  • 70% say that cost is very important when looking for healthcare.
  • 66% of Millennials say that a $200 a month premium is not affordable.
  • Nearly half of Millennials skip care to reduce their healthcare costs.
  • More than half of Millennials have a chronic illness or health condition. The most common conditions are depression (17%), weight issues (15% overweight and 7% obesity), and anxiety disorders (14%).
  • 64% rely on their mom/step-mom as their primary source for health advice and healthcare guidance; 36% rely on their dad/step-dad; and 26% rely on their spouse or partner.

Insurance Commissioner’s Statement on Centene’s Acquisition of Health Net

California Insurance Commissioner Dave Jones issued a statement on Centene’s acquisition of Health Net. The following is a summary of his comments:

This transaction provides an opportunity to bring new capital and resources from a major national health insurer largely outside of California (Centene) to enable a California health insurer (Health Net) to continue to compete and offer consumers additional choices in California’s individual, small group, and large group commercial health insurance market. The conditions for my approval of this merger include the following:

  • Merger costs will not be imposed on California policyholders.
  • Health Net will maintain and grow its commercial line of business. There are growth commitments and investment requirements to ensure that Centene continues to invest substantially in Health Net Life and that both companies seek to expand Health Net Life’s present competitiveness in California’s individual, small group and large group health insurance markets.
  • Health Net Life will continue to offer products through Covered California.
  • Centene and Health Net must provide sufficient networks of medical providers and timely access to medical providers and hospitals.
  • Centene and Health Net must improve the quality of care delivered through their health insurance.
  • Health insurance rates will be developed using the same methodologies used before the merger, but with an agreement that rate increases will be kept to a minimum.
  • An adequate distribution channel for Health Net health insurance must be maintained.
  • Senior management for Health Net’s California operations must remain in California and restrictions are placed on Centene’s ability to re-domesticate or move Health Net out of state.
  • Centene will invest further in California by making a $200 million infrastructure investment by establishing a California call center, bringing new jobs to California.
  • Centene and Health Net will invest an additional $30 million in California’s low and moderate income

Health Net has had declining market share and covered lives in its commercial health insurance business. The merger with Centene gives Health Net access to the capital and resources to compete in a California market that’s dominated by three much larger health insurers (Kaiser, Anthem Blue Cross of California, and Blue Shield of California) and several other national health insurers (United Health Care, Aetna, Cigna).

Last Updated 05/25/2022

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