Tears over drug tiers as specialty medications drive up care costs

The prices of life saving medications are playing an increasing role in driving health care costs. Specialty drugs represent about 1 percent of all U.S. prescriptions but make up nearly 32 percent of all U.S. drug spending, according to a report from the pharmacy benefits manager, Express Scripts. The trend is alarming for drugs that are used to treat serious conditions like hepatitis C, cancer, multiple sclerosis, and HIV. According to a Washington Post, one specialty drug, Sovaldi®, a hepatitis C treatment, costs $84,000 for a typical 12-week course. Although the causes are varied, some are pointing to the increased use of drug tiers among health plans as a driving component of the price hike.


The debate about who or what is really responsible for the costs is not a clear contest. Some suggest that the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) is responsible due to the increased number of insured individuals. Insurers blame the unchecked drug manufacturers and drug manufacturers point at insurer’s health plans, which have increasingly added complexity and cost to the acquisition of drugs. The Washington Post says that drug tiers sit at the center of the debate. Tiers separate drugs into distinct classifications based upon type and cost. Some plans have tiers for preferred generics and non-preferred generics as well as preferred and non-preferred brand medications. Specialty medications, like Sovaldi, typically fall into the highest tiers of a prescription drug plan. A Kaiser Family Foundation study indicates that the tier system has taken hold in Medicare and Medicare Advantage plans where, in 2014, nearly all seniors “were enrolled in plans that had a specialty tier for drugs that cost the insurers at least $600 per month.” Many of the plans with such tiers charge the highest coinsurance rates allowed by Medicare—33 percent—for drugs in those tiers.


An analysis conducted by Avalere Health revealed that the trend is affecting plans sold on the ACA’s Health Insurance Exchanges as well. Specifically, the review determined that “[E]xchanges are placing a significant out-of-pocket burden on patients with serious illnesses by requiring particularly high cost-sharing for all medicines used to treat certain conditions.” The analysis determined that plans usually have four or five tiers, with the lowest tier charging a low coinsurance amount ($15 for example) and the highest tier charging higher rates (40 percent or more of a drug’s cost). The classes of medicines used to treat serious illnesses like cancer, HIV/AIDS, autoimmune diseases such as rheumatoid arthritis and multiple sclerosis, and bipolar disorder often fell into the tier imposing the highest costs on consumers. The concern is that plans offered on the Exchanges are placing the highest cost burders on the most vulnerable patients.


The answer to the question of how to bring down costs of life saving drugs is elusive. However, California lawmakers are taking a stab at it with California Assembly Bill 339. According to Capital Public Radio, the law would prevent health plans from putting all medications used to treat a certain condition into the highest cost prescription drug tier. The theory behind the law is to prevent insurance companies from discriminating against certain patients by placing all of the drugs used to treat a particular condition, HIV for example, in the plan’s highest tier. Critics say that the bill will not do anything to lower costs and will merely shift the cost burden towards premiums and away from the drugs themselves.