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?

The Washington Post Sunday - - BUSINESS - BY ANA SWAN­SON

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?”

AU­DREY M. VASEY

As bet­ter drugs have be­come avail­able for some of the most se­ri­ous ill­nesses, costs for pa­tients have soared.

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