Exchange plans increasingly use abusive drug tier design

Exchange Benefit Designs Increasingly Place All Medications for Some Conditions on Specialty Drug Tier

By Caroline F. Pearson
Avalere, February 11, 2015

New analysis from Avalere Health finds that some exchange plans place all drugs used to treat complex diseases – such as HIV, cancer, and multiple sclerosis – on the highest drug formulary cost-sharing tier.

“Plans continue to innovate on benefit design in the exchange markets,” said Dan Mendelson, CEO of Avalere.  “These designs are calibrated to optimize enrollment by delivering low and stable premiums – the primary metric that consumers use to select a plan.”

Specifically, in five of the 20 classes of drugs analyzed, plans placed all drugs in a class on the specialty tier. Specifically, in the Protease Inhibitor and Multiple Sclerosis Agents classes, 29 and 51 percent of plans respectively place all drugs, including available generics, on the highest tier.

Moreover, a subset of plans in each of 10 drug classes1 placed all single-source branded drugs in a class on a specialty tier. Specifically, in 8 of the 10 classes, 2015 exchange plans were more likely than 2014 plans to assign all single-source branded drugs to the highest cost sharing tier. A single-source branded medication is a brand name drug without a generic equivalent. The practice was most common for some cancer drugs and drugs used to treat multiple sclerosis. Roughly 30 percent of plans also place all single-source drugs for HIV/AIDS on the specialty tier.

“Enrolling in a plan that places all medications for a particular disease on the specialty tier can mean significant out-of-pocket costs for consumers, particularly if they do not qualify for cost sharing reductions,” said Caroline Pearson, Vice President at Avalere.



By Don McCanne, MD

Some plans in the insurance exchanges are placing all drugs used to treat complex diseases, such as HIV, cancer, and multiple sclerosis, on the highest drug formulary cost-sharing tier. We have covered this terribly abusive process before, but this update shows that they are “increasingly” placing all medications for expensive conditions into specialty drug tiers. In spite of the pushback, it’s getting worse, not better.

The reasons are obvious. Higher patient cost sharing reduces the insurer’s portion of the payment for the drugs. Higher cost sharing increases the probability that patients will not fill their prescriptions due to the cost, saving the insurer even more money. Most importantly, placing all drugs for an expensive chronic disorder in the highest tier greatly increases the probability that the insurer will not have to cover these high cost patients as they much more likely will obtain their insurance from a competitor.

What then will the competitor do? It’s obvious. They will also move these drugs to the highest tier. That is the nature of business competition. When we rely on private insurance plans to cover health care, we should expect that those plans will always follow an optimal business model.

This devious policy is great for insurers' businesses, but it is terrible for patients. Health care reform should have been all about the patient. We can still make it so by firing the private insurers and placing our own public insurer in charge through an improved Medicare that covers everyone.