In ‘Fail first’ fails patients in the Boston Sunday Globe, a patient with depression decries his health plan’s use of “step therapy,” which requires members to try less expensive drugs before switching to pricier products. This is a brave article –the author is going public as a transgender man and as someone who suffers with depression– and I agree that he should not have to endure what he’s been going through. In his case the drug that worked for him was put onto the list of drugs requiring prior authorization. He had to spend endless time with the insurance company and get his doctor to advocate for him to keep him on his therapy.
The author would like to see insurance companies barred from using step therapy and prior authorization, “particularly when insurance companies are still turning profits on our premiums.” That’s a simple solution that will appeal to many readers. After all, the insurance company is standing in the way of what’s best and also inconveniencing the patient and doctor along the way. Yet this solution too simplistic and ignores the broader context in which this situation is unfolding.
As a society we’ve handed health insurers much of the responsibility for controlling costs, while also imposing a series of constraints on them that limit their scope of action. ObamaCare, which I support, takes this approach even further and puts the rest of the US in a similar position to where we are in Massachusetts.
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In a more typical insurance business –like life insurance or liability insurance– the insurance company succeeds by refusing to insure customers who are likely to file claims, increasing rates after claims are filed, and writing policies in such a way as to exclude most things that are likely to happen. There is regulation, but in general you’ll struggle to get life insurance if you’re about to die or if you flunk your medical exam, and your car insurance rates will rise if you get a speeding ticket or cause a crash. In many parts of the country, health insurance has worked like this as well.
But under RomneyCare and now ObamaCare, health plans can’t charge more for people with pre-existing conditions –such as depression– and can’t refuse to accept business even from customers who will definitely be unprofitable. Not only that, but even when insurers do a good job of controlling costs, their profits are capped due to minimum medical loss ratio regulations. If they don’t spend enough on medical costs then the excess premium is returned to the customer.
Before we place yet another restriction on cost containment methods for health plans, let’s look at the broader picture.
First, rising health care costs are a huge problem for employers, individuals and taxpayers. Have your raises been low for the last several years? It’s probably because your employer is paying more for health insurance instead of giving you a salary boost. Is your town having trouble balancing its budget and struggling to find funds to build new schools or hire teachers? A big driver is the rising cost of employee and retiree health care. So it’s really important to bring healthcare costs under control. Step therapy and prior authorization are reasonable ways to do it.
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The price differences and impact on premiums are not trivial. The May 2014 issue of Consumer Reports compares prices of drugs before and after they go off patent. Two of the eight drugs on the list (Cymbalta and Abilify) are used for depression. After three years off patent, Cymbalta cost $27 per month for the generic v. $538 for the brand, and Ability was $45 v. $900. In other words, these generic drugs are 95% cheaper. As someone paying insurance premiums, I would rather have someone use a product that costs 5% if it works just as well.
Naturally, pharmaceutical companies will push newer, higher-priced products. That’s their job as profit-maximizing companies, and they have a wide array of marketing and sales tools available to them to make it happen. (Unlike health plans, pharmaceutical companies’ profits are not capped.) On the other side, the health plan needs a set of tools to deploy to keep things in balance. In today’s world of biologic drugs that cost tens or hundreds of thousands of dollars it’s prudent to expect most patients to step through a process of trying less expensive treatments first, especially when those treatments may work just as well or better and be less dangerous. If we want –as the author does– to have fully unrestricted access, then that would require some regulation of the price of drugs. Take that too far, however, and the incentive to develop new and innovative medicines will be compromised.
Step therapy and prior authorization are legitimate and even necessary tools. This doesn’t mean that these approaches shouldn’t be scrutinized. In particular, the author implies (although doesn’t come right out and say) that he went through a series of drugs before finding the one that worked for him. If that’s the case, then he shouldn’t be forced to go back and try ones that have already not worked for him. But it’s not clear that this is what’s happening.
Balancing cost, quality, access and convenience in today’s healthcare system is not easy. Making things better requires something more than legislating further restrictions on health insurers.
photo credit: torbakhopper via photopin cc
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By healthcare consultant David E. Williams of the Health Business Group
