For many American patients, the arrival of another year comes with an unwelcome surprise: a sudden and steep rise in out-of-pocket expenses for medicines.
The crux of this recurring beginning-of-the-year challenge? Insurance plans without adequate cost-sharing protection, high initial deductibles, limited protections for out-of-pocket expenses, and copayments based on the medicine’s list price versus the net price upon which manufacturers have sold the product to plan intermediaries. The result? Patients are required to fork over significant sums in the early months of the year until high deductibles and cost-sharing thresholds are met. A recent Kaiser Family Foundation poll highlighted the greater affordability challenge across all types of health insurance plans, showing that nearly half of American adults report that they have difficulty affording their out-of-pocket costs, and one in four say they find it difficult to afford their annual deductible.
The challenges patients face concerning affordability in the early months of each year remind us of the questions policymakers, payers, patient advocates, other health care stakeholders, and we in the biopharmaceutical industry should be asking ourselves:
- How can we improve the current state of health insurance so it prioritizes positive patient outcomes?
- How can we ensure that the personalized needs of patients are at the forefront?
- Where are the current savings going and why are copayments and patient costs not based on the actual price at which the product is sold?
- And what solutions exist to keep insurance premiums stable, ensure adequate medical and prescription drug coverage, and maintain predictable and affordable out-of-pocket costs across deductibles, copays and coinsurance?
Prioritizing Those with Chronic Conditions, Preventive Care
The discussion about insurance benefit design should go beyond the near-term focus on costs to payers and the overall health care system. In the United States, 75% of our health care spending goes to treat chronic conditions, illustrating why prioritizing the needs of those patients, and helping them get timely treatment before their disease becomes a chronic condition, is so critical.
Case in point: Many insurance plans are designed to help insurers manage costs in the short term, creating tension between the needs of patients and their health plans, their sponsors, and health systems to control costs. In the case of prescription medicines, tools that limit access – high deductibles, unpredictable coinsurance and utilization management protocols such as step therapy – can interfere with getting the right patient the right treatment at the right time. While these tools may temporarily control plan costs, they can also lead some patients to forego and delay necessary care from the onset.
In fact, for employers, NPC research has shown tools like these can actually increase costs in the long-term, because delaying care leads to worse health and reduced productivity. Research also shows that when patients wait to get needed care, long-term spending goes up as patients end up seeking care when they experience acute, and therefore costlier-to-treat, conditions. This research builds on a growing body of evidence demonstrating the negative impact of ill cost-sharing policies on health outcomes and higher long-term cost due to forgone healthcare.
To their credit, many large employers are expanding pre-deductible coverage for medications and health services used to prevent common chronic conditions and would like to broaden this coverage, according to Employee Benefits Institute research sponsored by NPC. This is a positive step in the right direction. Getting ahead of disease can help patients better manage their health, avoid chronic conditions, and promote the long-term financial viability of insurance plan costs and our health system overall.
The Flaw of “Average” Design
One challenge for the health care system in general, especially in relation to insurance coverage, is that big picture decisions are often made at the broad population level instead of at the individual patient level.
The mechanisms used to control costs or encourage careful use of health care services are designed with the general population in mind. But this runs counter to the progress of medical innovation, where recognizing and acting on unique patient differences has become an expected cornerstone of care and an emerging trend in new, innovative medicines.
With traditional insurance, patients get hit with cost-sharing requirements for medicines through a framework of tiered formularies. These protocols place medicines at different levels of cost-sharing. They are different depending on the plan and can vary year over year, adding to unpredictability in cost-sharing. When the cost sharing is calculated based on a medicine’s placement on a tier rather than whether it is an optimal medicine for the patient, patients with the same condition using different insurance can face highly variable out-of-pocket expenses. This is especially detrimental to patients who could benefit from medications that are in higher cost-sharing tiers.
Slowly but surely, though, an increasing number of stakeholders are calling for more patient-friendly benefit design for medicines:
- Equity is becoming a larger focus, including for federal health regulators who have proposed new rules to require that benefit design is based on clinical evidence and does not have a disparate negative impact on vulnerable populations. The Centers for Medicare & Medicaid Services has also proposed that insurers offer plans that provide pre-deductible coverage for some services and use fixed dollar copayments in place of coinsurance, which could lead to more predictable costs for patients and better treatment adherence. These are important steps in making health equity and better access to medicines across socioeconomic and other racial-ethnic disadvantaged populations a reality.
- NPC’s newly updated Myth of Average white paper recommends that health insurance benefits should align patient cost-sharing with clinically appropriate care and include pre-deductible coverage for high-value medicines. Modern medicine is meeting patient needs on a personalized level, and insurance benefit design should follow suit.
- In the case of patients who need higher value and more expensive treatments, a multi-stakeholder roundtable of patient, payer, and employer experts assembled by NPC concluded that financial barriers should be lower for patients who need these treatments based on their biology or genetics, and also in instances where there is high confidence that the health benefits of a treatment would be significant. The roundtable conclusion is an important illustration of the broader shift in thinking around redesigning insurance benefits and prescription drug coverage with patients and outcomes in mind.
The Tough Question: Where Are the Current Savings to Plans, Employers and Governments Going?
The conversation about health benefits should not shy away from a tough question: where are the savings from these current cost-control measures going?
A large part of the public discussion about medicines focuses on drug manufacturers and list prices, yet as a recent Berkeley Research Group report showed, brand name manufacturers are now retaining less than half of all drug expenditures. Most expenses went to other stakeholders, including pharmacy benefit managers, health insurance plans, pharmacies, hospitals, and the government. What’s more, many studies have shown overall spending on prescription medicines, as a total percentage of overall national healthcare expenditures, remain in the teens, well below other services delivered by hospitals, physicians and clinics. Yet, studies also show that patients pay more out of pocket for medicines than those other services.
This highlights an unfortunate theme that has emerged: patients are paying more for insurance that is giving them less when it comes to medicines. They are being forced to pay more out of pocket for prescription drug deductibles and individual treatments at a time when the overall net prices of brand-name medicines are dropping. Shifting the financial burden from insurance onto families and individuals runs counter to what should be the goal of our health insurance system: the health and financial well-being of patients.
There is widespread acceptance throughout the health care system that we need to do more to make it easier on patients to afford quality insurance and the medicines they need to get and stay healthy. Putting maximum limits on out-of-pocket costs, smoothing cost sharing out over the calendar year, allowing manufacturers’ patient support programs to count towards a deductible, and passing rebate savings on to patients are all common-sense reforms. Patients will benefit most when these affordability solutions are coupled with measures that protect and further enhance access and incentives for innovation.
Our work this year should help lay the groundwork for a start to 2023 where patients can have predictable and affordable out-of-pocket costs for medicines, free from the sudden sticker shock patients face now.
Michael L. Ryan is Senior Vice President, Worldwide Value, Access, Pricing & Health Economics and Outcomes Research at Bristol Myers Squibb. He serves on NPC’s Executive Committee served as NPC's Chair of the Board of Directors for 2021.
Sharon Phares, PhD, MPH, is Chief Scientific Officer of the National Pharmaceutical Council.