The drug pricing watchdog the Institute for Clinical and Economic Review last week unveiled its third annual scorecard on how “fairly” U.S. insurers and pharmacy benefit managers cover prescription drugs. ICER found a “high degree of alignment” between insurer policies and the organization’s “fair access” criteria. But the report begs several important questions concerning the vastly expanded use of utilization restrictions, such as patient cost-sharing in the form of co-insurance, prior authorization and step therapy, and the lack of transparency in payer decision making.
For many of us, open enrollment began at the start of this month. People are trying to make informed choices about healthcare coverage options. Have you ever wondered why the prescription drug coverage your plan offers can change so much from one year to the next? From different cost-sharing requirements to new utilization restrictions to some products being excluded from formulary altogether, it’s hard to make sense of what insurers are doing and why. Many of the changes appear arbitrary. The fact that we’re not privy to the specific reasons why certain decisions are made is a problem. More transparency in insurer decision making would help consumers make better-informed choices.
The yearly report published by ICER does shed light on some aspects of what it deems to be an assessment of fair access, but it mostly leaves out the transparency of insurer decision-making and how payers can be held accountable for their decisions. Surface-level openness by insurers is one thing, but what’s often missing is an explanation of the decisions made.
ICER’s scorecard seeks to evaluate whether coverage is striking the right balance between the goals of cost containment and allowing patients and healthcare providers freedom of choice among available treatment options.
To inform the report, ICER applied criteria from its 2020 white paper. Subsequently, it examined 19 formularies, including the largest and smallest ones by number of covered lives offered by the five largest commercial payers in the U.S., the Veterans Health Administration, and the largest and smallest state health exchange plan formularies. The 19 lists of reimbursable prescription drugs represent approximately 42 million covered lives.
ICER assessed 18 branded prescription drugs on these formularies, ranging from cardiovascular medicines to cancer treatments to orphan therapeutics, against the criteria laid out in the 2020 white paper and labeled as “cornerstones of fair access.” These include ways in which insurers and pharmacy benefit managers shared information on patient cost-sharing, clinical eligibility, step therapy policies and provider qualification restrictions.
The report concluded that the majority of payer policies in the formularies evaluated are “structured in a way to support many key elements of fair access.”
While the report answers some questions it begs others.
For one thing, ICER notes that “while clinical eligibility criteria were commonly posted for each drug, this information was often only found through the provider portal, which is likely confusing to patients.” Surely, this is a major concern. Portals can be notoriously difficult to navigate for patients.
Also, ICER said that of the 18 drugs it examined, only two were priced at “reasonably cost-effective” levels. This is based on its conceptual framework for aligning price and value in which the fairness of a drug’s price corresponds to a proxy of value, the level of cost-effectiveness.
But whether insurance coverage is providing fair access to a pharmaceutical depends on how the drug is priced. If a drug isn’t fairly priced then cost-sharing which is largely price-dependent can’t be fair.
This brings us to the larger issue of patient cost-sharing itself. In 1999, when I began work in the field of patient access to pharmaceuticals, cost-sharing was almost exclusively expressed as a set of fixed co-payments. Now it’s frequently denoted in terms of co-insurance tiers, or different percentages of the list price of a drug. The list price is not what the insurer or PBM pays. Rather, it’s a benchmark off of which rebates are negotiated. In turn, the net price reflects rebates and other discounts. These are shared between PBMs, health plans and employers, yet not passed through to the patient. And so when co-insurance is calculated based on list prices how is this fair to the patient?
Additionally, cost-sharing shouldn’t be a barrier to patients being able to afford medically necessary treatment. But it can be for patients. The burden of out-of-pocket costs for patients was perhaps the impetus for the drug pricing provisions contained in the Inflation Reduction Act.
Finally, the ICER report doesn’t explain the rapid expansion of use of prior authorization and step therapy since the early 2000s. It’s now ubiquitous to see branded drugs tagged with prior authorization and step therapy. This wasn’t the case when I first examined formularies more than two decades ago. Prior authorization has gone from an occasionally employed condition of reimbursement, mainly to ensure the appropriate patient is getting access to a drug, to primarily a cost containment tool. Step therapy (or edits), which is often used in conjunction with prior authorization, requires that a patient try a less costly alternative treatment first. If this fails then the patient can step up to a more costly therapeutic. Twenty years years ago, this policy was used sporadically by payers, but is currently a frequently deployed method of cost control.
What has changed during this period? Surely not the numbers of drug-drug interactions or other clinically defensible reasons for prior authorization and step therapy.
Can we then attribute the shifts in pharmaceutical coverage policy to prescription drug prices and cost growth? Well, yes. Prices of and total expenditures on prescription drugs have certainly increased quite a bit. But the same can be said for hospital, outpatient and physician spending, each of which represents a larger share of the overall healthcare pie. We don’t observe similar increases in utilization limits for these items.
And while the prices of newly launched drugs have soared which could help to explain stricter formulary management, the net prices of existing branded drugs have been mostly stagnant. In addition, prescription drugs account for roughly the same share of the health dollar as they did in 1999.
In brief, changes in pharmaceutical management—particularly the hurdles patients and healthcare providers must overcome to access medicines—have proliferated. It would be helpful for patients to at least understand what’s going on.
To ICER’s credit, for years it has called on insurers to establish clear sets of criteria to support a more transparent discussion among all healthcare stakeholders about whether specific cost-sharing and utilization management policies are delivering fair patient access to prescription drugs. The scorecard constitutes a step in the right direction.
But an in-depth look at the decision considerations payers adopt would offer even greater insights.
Together with James Sabin, Norman Daniels developed a framework called accountability for reasonableness which describes conditions for a fair decision-making process. It’s been applied in healthcare policy and bioethics for 25 years.
All health insurers grapple with the problem of meeting population health needs under resource constraints. Decisions about what is covered and why are critical from a fairness perspective. When patients and healthcare providers are apprised of the specific reasons for (changes in) formulary placement of prescription drugs in a transparent way this can legitimize payer decisions.
Here, key elements of a fair decision-making process include transparency about the grounds for decisions; appeals to evidence-based rationales that all can accept as relevant to meeting health needs; and procedures for revising decisions in light of challenges to them.
There is nothing wrong per se with payer policies that restrict patient access. But the rationales for the limits insurers set ought to made public and not appear arbitrary. They need to be based on data that people can agree is relevant to pursuing appropriate patient care.
As we enter the season of open enrollment consumers are making choices about their health plan coverage. They deserve to be able to make genuinely informed choices. Transparency is key to a fair decision-making process by payers who determine patient access to prescription drugs.
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