Bill Addressing Expensive Specialty Drugs on Governor’s Desk

As the issue bubbles up in national and state headlines, as well as the 2016 presidential race, the California Legislature approved one proposal for dealing with high-cost drugs and sent it to the governor.

AB 339, by Assembly member Rich Gordon (D-Menlo Park), would cap out-of-pocket costs for a 30-day supply of prescription drugs at $250. The bill also contains provisions that ensure health plans do not place most or all drugs used to treat a certain condition on the highest cost tier in their drug formularies.

The bill passed the state Senate and Assembly last month. Brown has until Oct. 11 to sign or veto it.

Gordon said his bill would help patients who are “forced to choose between paying for their life-saving drugs and paying for housing, child care or food.”

The bill builds on consumer protections adopted by Covered California, the state’s health insurance exchange, which requires insurers selling policies on the exchange to limit out-of-pocket consumer drug costs to $250 for a 30-day supply, starting in 2016. Bronze-level plans — health plans that typically have the lowest monthly premiums — must cap out of pocket costs at $500 for a 30-day drug supply.

“The benefit of the Gordon bill is that it extends the protections adopted by Covered California to the rest of the market, including large employers,” said Anthony Wright, executive director of Health Access California, a supporter of AB 339. “This will make drug costs more manageable for families.”

Patients with serious chronic conditions such as HIV/AIDS, multiple sclerosis, hepatitis and epilepsy can end up paying thousands of dollars for prescription drugs over the course of a year. The Affordable Care Act caps patient annual out-of-pocket costs on prescription drugs at $6,600. Under the federal law, once patients reach that spending level, insurers must pay for the whole cost of the drugs.

The Gordon bill and the policies adopted by Covered California can help eliminate high monthly bills before the annual $6,600 cap kicks in, Wright said. “A lot of patients will still potentially reach the annual cap but they will have their costs spread out throughout the year,” he said.

Patients Suffer Sticker Shock

Consumers are paying more than ever for prescription drugs, according to Caroline Pearson, senior vice president at Avalere Health, a research and consulting firm.

“Across the board, in the exchanges and in the commercial market, we are seeing big increases in cost-sharing for prescription drugs,” Pearson said.

Some health plans offered through the exchanges place all drugs used to treat complex diseases such as HIV/AIDS, cancer and multiple sclerosis on the highest formulary cost-sharing tier, according to an analysis by Avalere Health released in February.

Typically, health plan drug formularies have between one and four tiers, with the first tier including generic and low-cost drugs and the fourth tier having the highest-cost and specialty medications. In five of the 20 classes of drugs analyzed by Avalere Health, plans placed all the drugs, including generics, in a class on the highest tier.

Additionally, about 30% of plans put all single-source drugs used to treat HIV/AIDS in the specialty tier, according to the analysis.

Putting specialty drugs on the highest-cost tier does a number of things, Pearson said. First, it helps health plans competing for business on the exchanges to keep monthly premium costs down to attract customers. Second, it raises consumer awareness of the high cost of some prescription drugs.

Third, cost-sharing of prescription drugs can have the effect of discouraging plan enrollment by people with complex medical needs, she said. “The concern is that is an indirect source of discrimination,” Pearson said.

A request for comment from the California Association of Health Plans was not returned.

Under rules adopted by Covered California for 2016, if at least three drugs are available in a specified class of pharmaceuticals, health plans must include in their formularies at least one drug in tiers one, two or three if all drugs in the class would otherwise be included in the fourth and highest tier.

National Spending Relief Plans

Several other states have enacted consumer protections on prescription drug costs. Delaware, Maryland and Louisiana, for instance, cap cost-sharing for a 30-day drug supply at $150. Maine limits annual consumer out of pocket spending on drugs to $3,500.

Leading Democratic presidential candidates have offered proposals similar to the Gordon bill to protect consumers from runaway spending on specialty prescription drugs.

Former Secretary of State and Democratic presidential candidate Hillary Clinton unveiled her consumer drug spending relief plan at a speech in Iowa last month. Like Gordon’s bill, Clinton’s plan would cap patient monthly out-of-pocket spending at $250. She said up to one million people would benefit from this spending cap. Her plan also would allow Medicare to negotiate with drug companies for lower prices and Americans to import prescription drugs from overseas.

“We need to protect hard-working Americans here at home from excessive costs,” Clinton said at a campaign stop in Des Moines. “Too often these drugs cost a fortune.”

Sen. Bernie Sanders (D-Vt.), also a Democratic presidential candidate, introduced legislation in Congress last month that would allow Medicare to negotiate prices with drug companies, permit drug imports from Canada and require drug companies to report information on how they determine prices.

Pearson said she is not hugely optimistic that these proposals will lower drug costs. “I see it as an initial step to tackle the problem but not a strong solution,” she said.

A drug company’s 5,000% price increase last month for a decades-old drug also focused attention on the issue. Biotech startup Turing Pharmaceuticals raised the price of 62-year-old drug Daraprim, which treats an infection of a common parasite, from $13.50 per pill to $750 per pill. The company said it would lower the price after intense criticism, but a new price has not been announced.

Clinton urged drug officials to “do the right thing” and restore the original price.

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