Insurers challenge high drug prices

July 15, 2014

Plans seek new strategies to assess drug value, ensure appropriate prescribing

The uproar over the $84,000 cost of treating hepatitis C with Gilead’s new drug Sovaldi (sofosbuvir) has prompted insurers to launch a high-profile attack on exorbitant drug prices. Sovaldi generated a record-breaking $2.3 billion in revenues for its first quarter 2013 sales because millions of patients with hepatitis C are candidates for treatment-much more than the usual patient populations for pricey specialty drugs. 

At a recent conference, Steve Miller, chief medical officer at Express Scripts, acknowledged that Sovaldi is “a much better drug” than previous hepatitis C therapies, but that the potential outlay for the drug is unprecedented. 

Similarly, Karen Ignagni, president of America’s Health Insurance Plans (AHIP), stated at a recent forum on drug cost and value that Gilead is asking for “a blank check” from insurers that would “blow up” budgets for families, state Medicaid programs, employers and even the federal debt. The National Coalition on Health Care launched a campaign to address high-priced specialty drugs, blasting pharma companies for abusing their market power.

One aim of insurers and pharmacy benefit managers is to put pressure on other drug makers to offer expected hepatitis C treatments at lower prices. Payers also fear that coverage decisions for Sovaldi will set the stage for similar pricing of important new treatments, such as new drugs for certain high cholesterol patients now moving through the drug development pipeline. New therapies for Alzheimer’s disease and diabetes are expected to follow.

Insurers also want to fend off a backlash against plans’ increasingly stiff copays for high-priced specialty drugs, which tend to be placed in the top tiers of formularies with high coinsurance rates. AIDS activists, for example, have challenged health plans marketed through Florida’s health insurance exchange for discriminating against patients by placing all HIV treatments on the highest formulary tiers, some imposing 40% coinsurance on patients. 

 

Cancer concerns

Insurers face similar issues in dealing with cancer care. The cost of branded cancer therapies has increased to $10,000 a month from $5,000 a decade ago, according to a report from the IMS Institute for Healthcare Informatics. The American Society of Clinical Oncology (ASCO) has formed a committee to rate expensive cancer therapies on their cost and value, issues that were highlighted at last month’s ASCO annual meeting. 

Plans have responded with initiatives to better manage cancer treatment. A UnitedHealth Group pilot offers a bundled payment upfront to oncology practices for coverage of cancer treatment regimes. 

A new WellPoint program pays participating physicians $350 a month per-patient to prescribe more effective-and less-costly-chemotherapies recommended in treatment “pathways” for breast, lung and colorectal cancer. Because cancer drugs are purchased by physician practices and hospitals directly from manufacturers or distributors, and payers generally reimburse providers at a set percentage above the cost of the drug, selection of lower-cost treatments normally reduces provider reimbursement. The added fee will offset losses and encourage use of less-expensive drugs, explains
Jennifer Malin, MD, PhD, WellPoint oncology medical
director. 

The program will be implemented first in six states. When fully rolled out in additional regions and cancer conditions, it could generate savings of 3% to 4% on the $5.4 billion spent by WellPoint fully insured plans on cancer care, Dr. Malin estimates. But such savings require oncologists to accept WellPoint’s treatment recommendations. 

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.