New drugs help Americans live longer — and leave them in debt
Half a million Americans now take $50,000 in prescription drugs per year. Who ultimately pays the cost?
Kristin Agar’s symptoms came on in 2008: Her feet swelled. Her joints ached. A rash appeared on her face. And every night a fever struck that was gone by morning.
Her doctor diagnosed her with lupus, a disease in which the body’s immune system attacks healthy tissue, including skin, joints, kidneys or the brain. He prescribed Benlysta, the only treatment on the market specifically for lupus.
The 63-year-old social worker says she cannot afford the medicine. She has a good job and decent health insurance, and yet the math simply doesn’t work. Her insurance covers 80 percent — or about $2,500 per dose. That leaves Agar $450 to pay once or twice a month — on top of a $770 monthly insurance premium, plus her other medical costs.
“I make too much money to qualify for assistance,” she says, “but I don’t make enough to pay the bills.”
Across the nation, people with serious diseases like Agar’s are unable to afford the medication they need. Patients with HIV, cancer, lupus, leukemia, hepatitis C and other serious conditions are paying huge out-of-pocket sums. At a time when patients are especially vulnerable, the health-care system heaps on heavy mental and financial stress.
And costs are climbing. The combined prices for brand, generic and specialty drugs rose 10.9 percent in 2014 from 2013, according to Truveris, a research firm.
To keep up, some patients are piling on huge debt. Others, like Agar, are forgoing medications altogether — increasing the risk of more serious health complications.
The reasons for these trends are complex: Drug companies blame insurers, insurers blame drug companies, and researchers blame both, as well as government regulations. But the implications are clear. Patients who can’t get medications will grow sicker, and when they do, families, insurance companies and the government will bear the cost.
The Supreme Court ruled on June 25
the federal subsidies that help people buy Affordable Care Act health plans are legal, ensuring that patients with preexisting conditions can continue to get insurance. However, patient advocates say that much work remains to ensure that patients are not discriminated against and can afford the treatment they need.
Americans see the cost of drugs as a top concern, even more important than the political aspects of Obamacare. In a poll by the Kaiser Family Foundation this year, 76 percent said their top priority for the president and Congress was making sure that those who need high-cost drugs for chronic conditions, such as HIV, hepatitis, mental illness and cancer, can afford them.
There is no quick fix to these problems. Meanwhile, the American population is aging, and pharmaceutical companies are bringing many more expensive drugs to market.
“It’s ironic: We’ve had fairly stable health care costs for a number of years, which is a truly historic achievement. We’ve saved billions and billions of dollars,” says John Rother, the president and chief executive of the National Coalition on Health Care, which advocates for sustainable drug prices. “And now it looks like this one sector, pharma, is going to drive health-care costs much more aggressively upward in the future.”
Ever more expensive drugs
In 2014, 576,000 Americans took at least $50,000 worth of prescription drugs, up from 352,000 the year before, according to Express Scripts, which manages pharmacy benefits for government agencies, labor unions and other big employers.
Insurance companies paid the bulk of this cost — more than 97 percent. Most insurance plans cap the amount that patients pay out of pocket for drugs. On the federal exchange, that’s $6,600 for an individual — beyond that, the insurer will pay 100 percent of drug costs.
But many Americans with chronic illnesses don’t have $6,000 or more to spend on prescriptions, especially after paying a monthly insurance premium, doctor visit co-pays and other medical costs.
For many with serious illnesses, hitting that maximum annual out-of-pocket level is often inevitable. That would’ve been true for Agar, if she could’ve afforded it.
“I don’t have that money lying around to be able to do it,” she says.
“I’m not a stranger to hard work. I’ll work hard six days a week and people who know me will say that,” Agar says. “But there’s a limit to what anybody can do.”
Yet without the drug, Agar is vulnerable to a lupus flare that could damage her organs. “I feel like a sitting duck,” she says.
People living with HIV and AIDS describe similar challenges. For lower-income patients, federal funds will cover the cost of medical care and support services. Jaysen Foreman, a case manager who works with HIV-positive youths in Charlotte, N.C., says patients making up to $34,000 can receive free HIV medication and care through the federal government’s Ryan White program.
But those who make more struggle to afford their medications, too.
“That’s the portion that it’s really squeezing, individuals who are in the gap between what Ryan White will cover, and where people have the income to pay for the medication, whatever the co-pays are,” says Jonathan Hammond, a clerk at an immigration law firm in Cincinnati who is HIV positive.
Considerations about insurance and HIV-related debt have changed the course of Hammond’s life.
Hammond has taken on a heavy debt load as a result of HIV. When he discovered he was HIV positive in 2002, he was enrolled in a graduate school program that didn’t offer health insurance. Hammond dropped out of school and spent a decade as a manager at Starbucks, which provides insurance to part-time employees.
Hammond started studying law in 2013 as a way to escape from what he calls “the debt of HIV.” He has around $50,000 in medical-related debt alone, including charges from multiple visits to the emergency room more than a decade ago, when he didn’t yet realize his illness was HIV.
Despite Hammond’s efforts to reduce that debt, in most years his total debt grows. Last year, Hammond paid close to $9,000 for medical care. This year, his law firm adopted a new insurance policy with a maximum out-ofpocket payment of $6,350. Hemet that maximum March 7.
“Beyond the stress of living with HIV and having that,” he says, “[there’s] knowing that every single year that goes on, your debt is just going to get larger.”
Whois to blame?
Ninety percent of those Americans who consumed at least $50,000 in prescription drugs last year were taking “specialty medications,” which treat complex and chronic conditions such as cancer, HIV and AIDS, rheumatoid arthritis, hepatitis, multiple sclerosis, kidney failure and hypertension.
The growth is partly due to pharmaceutical innovation. Drug companies are rolling out lifechanging treatments for chronic conditions, including cancer and hepatitis C. And patients taking these drugs are living longer, meaning the number of people on high-cost drugs is increasing.
But the trend also has a lot to do with how pharmaceutical and insurance companies price their products, and how the government regulates them.
In the debate over who is responsible for high drug costs, in that surers and pharmaceutical companies are almost totally at odds. The pharmaceutical industry says insurers bear most of the responsibility for passing on too much of the cost of prescription drugs to consumers.
“What we’re seeing in the marketplace is that insurers are requiring patients to pay an evergrowing share of their medicine costs,” says Robert Zirkelbach, a senior vice president of communications at PhRMA, a trade group. “In fact, patients are being asked to pay a far greater percentage of the price of medicine than they’re required to pay for physicians or other medical services that may cost significantly more.”
Some independent researchers agree. Allison Rice, a professor at the Duke University School of Law who trains law students to work with HIV patients, cites a trend in past decades toward insurers, employers and government-programs such as Medicaid shifting more costs onto patients to encourage them to make smarter decisions about health care and reduce healthcare expenses overall. But while this approach might work with everyday health care, Rice says it doesn’t apply to chronic diseases.
“The notion is that you can reduce health-care costs by ‘putting skin in the game,’ which I always find to be kind of hilarious when you’re dealing with people with cancer, multiple sclerosis or HIV,” Rice says. “It’s not like they have a whole lot of choice in their meds.” For HIV, for example, a limited number of drugs are on the market, and each may provoke a different response in different patients.
Researchers have also found evidence that insurers offering health plans through the new federal marketplace are purposefully passing on higher costs to those with chronic illnesses.
A study published in the New England Journal of Medicine in January by two researchers at Harvard argued that some insurers discriminate against people with HIV by putting all medicines to treat the condition in the high- est cost-sharing tier.
Normally, insurers place medicines in different cost tiers to guide patients toward lower-cost versions of the drug. That might be a generic, or a drug for which the insurer has negotiated a lower price. But the Harvard study showed that some plans put all HIV medications in the highest cost tier — a practice they call “adverse tiering ” designed to discourage patients from joining certain insurance plans.
Doug Jacobs, the study’s lead author, says researchers were surprised to find the practice is widespread, used in 12 of the 48 plans they looked at across the country.
“The implications for people with HIV were tremendous,” he says. “We estimated that if someone with HIV was in an adverse tiering plan, they would be spending more than $3,000 [a year] than if they weren’t.”
Rice of Duke University says that this practice has been a barrier to people enrolling in the federal exchange plans in North Carolina. “People who realized up front that they were going to face 25 to 50 percent co-insurance for HIV drugs didn’t even bother to sign up,” she says.
A study by Avalere Health, a health-care system advisory company, showed that insurers engage in similar practices for the high-cost medicines that treat cancer, diabetes, rheumatoid arthritis, multiple sclerosis, asthma, schizophrenia and bipolar disorder.
“After the Affordable Care Act, people kind of assumed that discrimination on the basis of preexisting conditions was completely gone,” Jacobs says. “I think it has the potential to be gone in the future, but doing so would require some vigilant oversight.”
Another issue for many patients is pricing transparency. For the most expensive specialty drugs, many insurers have switched to charging patients coinsurance (a certain percentage of the drug’s total price, for example 20 percent) rather than a co-pay (a flat fee, like $20). A study by actuarial firm Milliman showed 41 percent of silver-level plans on the federal exchange charged coinsurance greater than 30 percent for specialty medications in 2015, up from 27 percent last year.
Insurance companies don’t disclose the total price of drugs to people who are shopping on Healthcare.gov. So patients may know that they have to pay 30 percent of the price of a drug, but they won’t know what that price is until they get to the pharmacy.
What’s the true cost?
Insurance companies say they are not using adverse tiering to discriminate against the sickest patients. Clare Krusing, communications director for America’s Health Insurance Plans, an advocacy group, says that insurers are doing everything they can to provide affordable coverage. The real issue is exorbitant prices of prescription drugs, which drive up insurance premiums and increase cost-sharing, Krusing says.
Insurers are on the hook for much more of the rising cost of prescription drugs than patients are, Krusing points out. For example, the report from Express Scripts shows that insured patients who used more than $100,000 worth of prescription medications in 2014 paid 1.7 percent of the total cost out of pocket, on average. Insurance companies picked up the rest, including 100 percent of the cost of drugs after patients hit their out-ofpocket maximums.
No matter how insurers try to ease the burden, some of those hefty drug costs have to be passed on, she says: “What patients are paying out of pocket is a direct reflection of that increase in cost.”
For its part, the pharmaceutical industry says these high costs are necessary to recoup investments, including in the many drugs that never make it out of the laboratory, and to fund the high cost of getting prescription drugs approved by the Food and Drug Administration. But critics say high prices are more likely a product of lengthy patents and market consolidation that gives pharmaceutical companies monopolies over certain drugs.
Introducing more competition into the pharmaceutical market, both for brand name products and generic drugs, would slow the growth in drug prices. While prices for brand-name drugs rose 14.8 percent and specialty drugs increased 9.7 percent last year, generics rose only 4.9 percent, according to Truveris.
As an example of profiteering by pharmaceutical firms, some point to the case of Sovaldi, the breakthrough drug that cures rather than treats hepatitis C. Gilead acquired the drug by buying its maker, Pharmasset, for $11 billion in 2012. Gilead then rolled out the miracle drug at $84,000 for the full 12 weeks of therapy — more than twice what Pharmasset had forecast that the treatment would cost in a 2011 Securities and Exchange Commission filing.
In charging so much, Gilead took advantage of its position as the only provider of the drug at the time, critics say — and the market and its shareholders have richly rewarded the company for doing so. Gilead recouped its cost to buy Pharmasset in just the first year of Sovaldi sales, and its stock price has doubled in two years.
Patents are necessary to encourage companies to innovate, but they also slow the arrival of cheaper generic versions of drugs, and allow drug companies without competition to charge much more in the interim. Drugmakers are also accused of “evergreening” patents, making slight tweaks to an old formula to win a new patent on a drug without substantively improving the product.
Rother and others say the public needs more transparency on drug pricing — whether they are based on clinical studies, the value of the drug or merely what drugmakers think the market can bear.
Another major issue, he says, is that private insurance companies don’t have the clout to negotiate down-drug prices, and the government has refused to play that role. The United States is the only wealthy country that does not negotiate with the pharmaceutical industry over drug prices.
Rother says Medicare is large enough to force drug makers to lower their prices, but the government did not provide for that in Obamacare — a decision Rother calls “the price of pharma’s acquiescence in the Affordable Care Act politically.”
Rother says the insurance industry is left with only very crude tools to try to counter aggressive drug pricing. One is what he calls “step therapy,” or insurers’ requirements that patients try lessexpensive drugs first. The other is high out-of-pocket costs.
“These are not happy tradeoffs,” he says. “These are not something that anyone designing an ideal system wants to see.”
In turn, the pharmaceutical industry has offered co-pay assistance. These programs help patients pay the co-insurance or copay costs on their prescriptions.
Foreman, the case manager who works with HIV patients in North Carolina, calls co-pay assistance “a saving grace.” “The pharma companies have stepped up and noticed there is a huge gap between these plans than someone can afford.”
Allie Gutshall, a 24-year-old graduate student in Houston, relies on one of these assistance programs. Gutshall has lupus and takes Benlysta, the same drug that Kristin Agar has been prescribed but can’t afford. Gutshall calls Benlysta a miracle drug, allowing her to work and live a normal life. A fewyears ago, her joints were so swollen she couldn’t even walk to the bathroom with help.
Gutshall says her family initially struggled to pay for Benlysta. After Gutshall resigned from her teaching job due to health complications, she was put on her mother’s insurance, which chose not to cover the drug. Her dad put the $2,500 charge for a single dose of the drug on his credit card. After extensive appeals to the drugmaker, she is on their assistance program.
“I’m very lucky it’s worked out this way. If my insurance company had said they would cover it, I would be paying a 20 percent co-pay of $7,500,” Gutshall says. “Even if I had got covered, it would be very difficult to come by that money every month.”
What can be done?
Even as the Supreme Court upheld subsidies for the Affordable Care Act, its regulations continue to evolve. The Department of Health and Human Services is expected to issue regulations within months on discrimination in the law. Those rules could ban adverse tiering, or potentially allow private parties to sue insurers for discrimination against those with preexisting conditions.
The bipartisan 21st Century Cures initiative in the House will seek to address the supply side, speeding up the FDA’s approval process for new drugs. The FDA also recently approved the sale of the first-ever biosimilars, “generic” versions of biological medicines that have been marketed in other countries for years. And Maine, Vermont, Delaware, Maryland, Louisiana and other states are setting limits on out-of-pocket spending.
Overall, the problem of unaffordable prescription drug costs for people with illnesses seems likely to get worse before it gets better.
As baby boomers age, America’s population of people living with chronic illnesses will grow.
Many more expensive prescription drugs are slated to hit the market in the next few years, and some are approved to treat conditions with larger patient populations, such as high blood pressure. According to Express Scripts, 27 of the 51 new medications the FDA approved in 2014 were specialty drugs.
“Ultimately there are going to be more medications that come out that are incredibly innovative,” says Krusing, the advocate for insurers. “But if people can’t afford them, what good will they do?”
As better drugs have become available for some of the most serious illnesses, costs for patients have soared.