Picking Winners and Losers in the Prescription Drug Wars

This article will soon be is cross-posted on the DSMA weblog. Many thanks for the opportunity!

Note: I know this post is long. Here’s the takeaway in a nutshell: In the American system, we can have lower prices or more choices but probably not both at the same time. If you don’t like that, we have to change the system to work for us. If you read the whole article, I’ll tell you why . . . and how.

During last week’s Diabetes Social Media Advocacy tweet chat one of the topics touched on something that’s been on my mind a lot since about this time last year when the healthcare reform debate started raging in the US: how to balance medication choices, treatment costs, and insurance companies. Here was the question:

Do you think insurance companies are overstepping their boundaries by dictating the cost of drugs versus the best treatment for the patient?

I ended up on the opposite side of the issue from most of my fellow patients, saying that in general I don’t have a problem with insurance companies choosing to favor some medications and therapies over others. I know it’s probably an uphill battle, but let me try to convince you why. If I can’t do that, let me at least try to convince you that the only alternative is something even more radical. (If you’re impatient, you can skip to that part.)

The UHC Decision on Novolog
First, a little backstory. The event that spawned the conversation was a recent decision by United Healthcare (UHC) — a private company that provides health insurance to American patients — to move Humalog insulin into a lower copay price tier at the same time that it moved Novolog into a more expensive tier. The claim made in the chat is that Novolog is now 250% more expensive.

I’ve always been on Humalog ever since I went on the pump, and I’ve never used Novolog. I know there are people with diabetes who swear by it, saying they’ve had better success managing their blood glucose using it. From what I’ve seen, though, their action profiles are very, very similar. The same is not identical, of course; and I have no doubt that some people really do have better outcomes using Novolog than using Humalog. But it’s important to remember that it’s a difference in degree between very similar drugs. It’s not like UHC is trying to switch patients between Novolog and regular insulin or NPH.

In a public document UHC states their reasons for making the changes to the costs of Novolog and Humalog:

Impending higher costs for the FreeStyle and Precision Test Strips as well as the Novolin and NovoLog Insulin products prompted a class review.

None of these medications are in the top 100 based on utilization. When medications are clinically similar to one another, their value is measured in terms of cost.

We were able to negotiate lower net costs for Accu-Chek products as well as the Humalog and Humulin insulin products, making them a better health care value.

Medications in the Select Designated Pharmacy Program will be up-tiered to Tier 3 to encourage Tier 1 use and increase member savings. For more details, see the section below.

And later referring to Eli Lilly’s Humalog products . . .

These medications offer sufficient health care value to be down-tiered. Some have been down-tiered since our last pharmacy benefit communications. The majority of down-tier decisions will be implemented prior to Jan. 1, 2011 so
members can take advantage of the cost savings.

While it says this about Novo Nordisk’s products. . . .

Novolin and NovoLog product rebates were reduced, lowering their overall health care value.

To be sure, these insurance decisions impact UHC’s bottom-line. They appear to have had more success negotiating lower prices with Lilly than with Novo, making Humalog less expensive for them when they pay pharmacies for it after UHC’s patients fill their prescriptions. The more of their customers/patients they can move from Novolog to Humalog the more money they will save. And they plan on doing it through both positive and negative incentives (lower costs for Humalog and higher costs for Novolog).

Who Decides?
Still with me after the backstory? Good. And to the people reading this who don’t live in the United States: Yes, it’s really this complicated and seemingly capricious.

Who makes these decisions about which tier a drug belongs in? It’s certainly not patients deciding. And since we can’t really choose between different insurance providers, we’re stuck paying what they demand. Do doctors decide? Well, yes and no. Doctors create many of the studies and reports that say how well different drugs can be used to treat the same condition. Insurance companies have staff doctors who help them make claims like two drugs being “clinically similar to one another.”

But really it’s the insurers making the decision. They see the price of Novolog going up (for them) and they need to pass that cost along to the consumer pool either by higher premiums or bigger copays. Or both. But certainly not by reducing their profit margins.

While I’m sympathetic to people with diabetes who use Novolog and are insured by UCH, I think we’re in a world of tough choices.

The Tough Choices
I suspect we’d all say that it’s foolish for an insurance company to let a patient stay on a high-priced drug when a much cheaper generic of the same drug is available, without passing on some or all of the price difference to the patient. And I think we’d also say that, when given a choice between two drugs that do the same thing, it’s wasteful of healthcare dollars to pay for the more expensive option.

It gets tricky when there’s a tiny difference between two drugs and a not-so-tiny difference in the price between them. That’s the situation UHC and Novolog users were looking at.

If you had a say in making the decisions, what would you do? Would you pass on the cost of providing the more expensive one at the same copay cost by raising everybody’s premiums? Would you raise the rates of the people who use the most healthcare dollars? Would you stop covering Novo products altogether, since you couldn’t agree on an acceptable price? Would you keep paying for the more expensive drugs and tell your shareholders to expect lower returns, knowing you’d likely lose your job?

The decision that UHC made to move people toward a lower cost drug while passing on the cost to the people who stayed starts to looks less perfidious, money-grubbing or ill-reasoned.

By the way, I was in this situation myself when Blue Cross Blue Shield of Massachusetts decided to raise the cost of Freestyle test strips — again — last year. The lingering objections I had to changing blood glucose meters kinda melted away when I realized that OneTouch meter supplies would cost me half as much out-of-pocket. Those products are almost indistinguishable in terms of quality — unlike some other options. No brainer, right? (I do hope that BCBS doesn’t give me too much run-around now, as I try to get them to reimburse me for continuous glucose monitoring supplies. Their cost is high, but the long-term cost saving should be greater.)

In my opinion, UHC made the right decision, and the only wrong decision would be to let the pharmaceutical companies set the price of therapies without getting any resistance from insurers. For better or worse, insurance companies are the intermediaries between us and the healthcare system. It’s true that this means we often don’t know the real cost of therapies; but I would much rather see someone negotiating a drug price on my behalf and the have the power to pool my interests with hundreds of other people instead of seeing all of the price and having to pay it all.

Suppose I haven’t been able to convince you yet. What are the alternatives?

If you object to letting health insurance companies pick the price tier structure for particular drugs, who would you have do it? The only realistic alternative is to have a panel of doctors pick winners and losers between similar drugs, steering people to particular therapies that work and aways from others that don’t work as well. (Or recognize that there’s no real difference between them. Or that some therapies shouldn’t be covered at all.) If cost comes into it in this situation, it might only be to say, “Between two therapies with the same outcome, always pick the less expensive one.” That might actually help drive drug prices down.

If you object to having tiers altogether, the only realistic alternative is to have higher prices overall for everybody. Maybe you’re okay with that. After all, that’s how systems like Medicare in the US work. Everybody pays taxes so that everyone gets what they need covered. But remember, to keep prices affordable, it’s often necessary to not cover some things at all.

If you object to insurance companies looking at the bottom line when making decisions, then the solution is obvious. Take the profit motivation out entirely. Make all insurance companies be not-for-profits. Convert health insurance companies that make money by denying people what they need into ones that reduce costs by trying to keep people well and looking at the long run.

If you object to the high price of prescription drugs, empower someone with real regulatory power to set the price of drugs. Allow importation of drugs from other developed countries. Demand to know why pharmaceutical companies get away with charging so much more in the United States than elsewhere.

If the status quo doesn’t work for you — and there’s a lot of evidence that it’s not working for most people or for the long-term stability of the country — then change the status quo. The insurance companies are working in the system as it is. We need to change the system so that it works for us and so that it benefits us more than it does them.

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