DRUG PRICES: Rising as HMOs Try to Cope
Coverage of expensive new drug treatments, especially popular name-brand items, continues to pit HMOs against drugmakers -- with patients caught in the middle. Today's New York Times reports that "[s]tandard copayments are often doubling for drugs that patients have been using for years. But even bigger increases -- of 300% or more -- are appearing for some remedies that are not on insurers' lists of approved drugs." In an effort to trim costs, insurers are dropping nonessential drugs, such as baldness remedies and impotence treatments, from their formularies and refusing to approve "new versions of life-sustaining drugs when cheaper alternatives exist." Debi Reissman, president of Rxperts, a managed care consulting firm in Irvine, CA, said, "Instead of offering three to six products in every therapeutic class, for example, antidepressants or blood pressure drugs, they are moving down to two or three products." Many California HMOs have adopted closed formularies, in which the doctor must persuade the plan to cover a non-approved drug.
Us v. Them
The HMO industry says it must take such radical steps in order to curb spending on drugs, which has gone up 15-20% in the last two years as an array of effective, yet expensive, treatments have come to market. They also blame direct-to-consumer advertising for persuading patients to demand specific, more expensive drugs from their doctors. "Direct advertising by drug companies is feeding consumer demand," said David Hom, executive director of corporate benefits at Pitney Bowes. And the newer drugs "are often essentially the same as older, cheaper ones," according to Dr. Nicholas Hanchak, head of pharmacy management for Aetna U.S. Healthcare. "Newer is not necessarily better, it's just better marketed," added Patricia Wilson, a consultant on managed drug plans. But drug companies say the new drugs they have been advertising are actually better "and have fewer harmful side effects." By demanding that patients use cheaper, less effective remedies, they say, "health plans ultimately drive up costs for hospital stays, nursing homes and doctors" (Freudenheim, 1/25).