How Does This Affect You?

Rising Costs

Recent news stories have highlighted the rapid price increases of existing prescription drugs. The list price for a pack of two EpiPens – an auto-injector used to reverse the effects of severe allergic reactions – increased nearly 550%, from $94 in January 2007 to $609 in May 2016 after Mylan acquired the drug from Merck. Two insulin medications from different manufacturers increased in lockstep over a five year period. Novo Nordisk’s Levemir and Sanofi’s Lantus list price is nearly 2 ½ times its price from five years ago with Lantus holding steady at $372.37 per month since 2014 and Levemir now up to $403.50 per month (Kaiser Family Foundation).  The Wall Street Journal reported similar pharmaceutical pricing tactics for popular erectile-dysfunction products. Viagra (by Pfizer) and Cialis (by Lilly) each raised prices in 2013 by 9.4%.  Since that time, they’ve increased prices twice yearly with the Viagra highest dose tablet now priced at $48.28 and the Cialis version at $51.74.

Here are some of the drugs for UniCare plan members that the GIC spends the most money on overall.  Our other health plans also have these drugs in their top 25 list:

Drug NameDispense TypeTherapeutic ClassClass# of prescriptionsGross Cost per prescription for a 30-day supply
Humira PenspecialtyAnalgesics / anti-inflammatoryAutoimmune disease

1,747

$4,310

HarvonispecialtyantiviralsHepatitis C

172

$33,180

Advair DiskusbrandAnti-asthmaticRespiratory agent

5,238

$330

Novolog FlexpenbrandantidiabeticsDiabetes

1,691

$495

EnbrelspecialtyAnalgesics / anti-inflammatoryAutoimmune disease

485

$3,730

JanuviabrandantidiabeticsDiabetes

1,775

$345

 

The U.S. spent $424 billion on prescription drugs last year alone before discounts, according to a report by IMS Institute for Healthcare Informatics, which tracks the pharmaceutical industry.  More than two-thirds of the 20 largest pharmaceutical companies said price increases increased sales revenue for some or most of their biggest products in the first quarter of 2016 (Wall Street Journal). Major pharmaceutical firms added $25.6 billion to their bottom lines by simply raising prices on their brand-name drugs, according to the IMS.  Other countries have governing bodies that have rules or laws that restrict the price a pharmaceutical company can charge for a drug. No such central advisory committee exists in the U.S., nor is the Centers for Medicare and Medicaid allowed to negotiate prices.  

Other reasons for skyrocketing drug costs:

High Cost Specialty Drugs:  Miracle drugs that are super expensive and typically used to treat and/or manage less common but chronic diseases, such as multiple sclerosis, rheumatoid arthritis, hemophilia, and an array of cancers are driving up costs for the entire healthcare system.  Specialty drugs account for less than one percent of prescriptions in the U.S. but represent about one-third of total drug spending by consumers, employers, and the government (Congressional Research Service).  This is expected to increase to 55% by 2020, according to a 2013 National Health Expenditures/Artemetrx/CVS Health Internal Analysis report. In 2015, more than half of the new drugs approved by the Food and Drug Administration (FDA) were specialty drugs and more than 900 biologic drugs are currently under development.

Direct to Consumer Advertising:  Drug companies may spend twice as much on marketing and promoting their products as they do on research and development, according to a March 2016 analysis published in the Annals of Internal Medicine.  In October, AbbVie’s Humira (anti-inflammatory drug) continued to dominate TV pharma advertising with monthly spending of $39.1 million  –  up 85% year-over-year from last October, according to data from ad tracker iSpot.tv. Pfizer’s Lyrica pain medication drug TV ad spending came in at the number two spot at $29.6M for the month, up from $21.4M in September.  Anticoagulant, pain, erectile dysfunction, arthritis, psoriasis and diabetic treatments rounded out the top ten drug ads.

Patent Extensions:  Pharmaceutical companies have effectively reformulated old medications and used the Orphan Drug Act to extend their patent exclusivity, thereby delaying lower-cost generic competition.  When they change the formula of a drug, combine two older drugs to create a “new” pill, create an extended-release version, or change the delivery method (for example, injectable to inhalable), the federal government may grant the company a new patent  –  worth up to 20 years of protection for the drug from generic competition.  Consumer Reports uses the diabetes drug insulin to illustrate this phenomenon.  Although insulin is over 100 years old, there is still no generic version available due to formulation changes and corresponding new patents. 

The Orphan Drug Act has also been used by some companies to get an existing drug approved to treat a rare disease.  AstraZenaca recently took this approach by getting its anti-cholesterol drug Crestor approved to treat a rare disease affecting only a few hundred children that have extremely high levels of bad cholesterol.

Prescription drug costs are straining health care budgets.  This fall, the Center for Health Information Analysis (CHIA) report found that:

  • 14% of Massachusetts health care costs in 2015 were for prescription drugs
  • 36% of 2015 health care cost increases were for prescription drugs
  • Prescription drugs costs for Mass increased by 10.2% 2014 to 2015 to reach a total of $8.1 billion

Rising drug costs are not expected to abate anytime soon. The Centers for Medicare and Medicaid Office of Actuary projects prescription drug growth to average 6.7% per year between 2016 and 2025.

Some Relief from Rising Costs

  • Biosimilar Drugs:  Two biosimilar drugs are or will soon hit the market.  Biosimilar drugs have the same strength, dosage and route of administration as a reference biologic drug that is made by harvesting living cells – at lower costs.  Biosimilar drugs are expected to be 15%-30% less expensive than their biologic reference drug version, which will increase lower cost treatment options for patients.  The two approved drugs are Inflectra (a biosimilar to Remicade) used to treat Crohn’s disease, ulcerative colitis, rheumatoid arthritis and other auto immune diseases, and Zarxio (a biosimilar to Neupogen) used to treat a side effect of chemotherapy.  The biosimilar market is expected to account for up to 10 percent of the global biologics market by 2020, depending on its availability and adoption prevalence in the U.S.
  • Implementation of EGWP:  Last January Members of the GIC’s most popular Medicare plan, UniCare State Indemnity Plan/Medicare Extension (OME) switched to an Employer Group Waiver Plan (EGWP) drug program with a wrap that closed the gap between their previous drug benefits and a standard Part D plan.  Despite skyrocketing prescription drug costs, the new EGWP program is expected to save members and the Commonwealth approximately $30 million.  Lower drug costs were the largest factor leading to lower rates; the UniCare State Indemnity Plan/Medicare Extension premium went down 7.2% effective July 1, 2016.  For retired teachers in the GIC RMT (non-municipal) program, the premium went down 10.3%.  Unfortunately, the GIC’s ability to decrease the rate was a one-time benefit, and is not expected to stop the upward pressure on future rates.

What Rising Prescription Drug Costs May Mean to You

More Drug Management Programs:  If you are not already in a GIC health plan with the following programs, you may be subject to these programs effective July 1:

  • Mandatory Generics – if there’s a generic equivalent of a brand name drug, the patient is responsible for the cost difference between the brand name drug and the generic, plus the copay if they want the brand name.
  • Step Therapy – requires patients to try effective, less costly drugs before more expensive alternatives will be covered.
  • Maintenance drug pharmacy selection – patients who receive 30-day supplies of their maintenance medication at a pharmacy must call the prescription drug plan to indicate whether they wish to continue using their retail pharmacy for maintenance medications, instead of ordering the medications through less costly mail order or designated retail pharmacies.
  • Specialty Drug Pharmacies – patients who are prescribed specialty drugs must use a specialized pharmacy that provides 24-hour clinical support, education and side-effect management.  Medications are delivered to the patient’s home or doctor’s office. .
  • Stricter Formulary – under a closed formulary – the list of drugs covered under your prescription drug plan – certain prescription drugs are excluded from coverage.  The excluded products have alternatives available that are more cost effective.

Other ideas to consider:

  • Specialty drug vendor:  A different pharmacy benefit manager would be used for some or all of the GIC’s health plans for specialty drug dispensing and management.  Thirty-eight percent of large employers have adopted this approach according to the Kaiser Family Foundation (KFF).
  • Adding a fourth copay tier:  Patients have a separate copay tier for specialty drugs. Thirty-two percent of employers nationally have adopted this option (KFF).
  • Adding co-insurance: Patients pay a portion of a drug’s cost up to a maximum amount. 
  • Switching more Medicare members to an Employer Group Waiver Plan prescription drug program.

Steps Can You Take to Minimize Your Out-of-Pocket Prescription Drug Costs

  • Research your options during Annual Enrollment:  During this spring’s Annual Enrollment period, compare the prescription drug programs and formularies of your health plan options.  Check the formulary for the drugs you and your covered spouse and dependents take most often to find out whether they are on the plan’s formulary, which copay tier they are under, and which drug management programs they are subject to.  Consider changing your health plan for July 1 if another plan’s drug program works better for you and your family.
  • Bring your plan’s prescription drug formulary with you to doctor visits so you can discuss which tier your prescriptions fall under and see whether there are lower cost alternatives available.  Abbreviated drug formularies that show you alternatives to Tier 3 copay drugs and drugs subject to prior authorization or step therapy are posted on the GIC section of your plan’s website. 
  • Do not ask for a certain prescription drug just because you liked an advertisement. 
  • Use Mail Order:  If you are taking prescription drugs for a long-term condition, such as asthma, high blood pressure, allergies, or high cholesterol, switch your prescription from a retail pharmacy to mail order.  It can save you money: $5-$30 for three months of medication, depending on the tier.  Once you begin mail order, you can conveniently order refills by phone or online.  Some plans, including the CVS Caremark and SilverScript plans for UniCare State Indemnity Plan members offer mail order copays for maintenance medications at certain retail pharmacies.  Contact your plan for details.
  • Use Specialty Drug Pharmacies Required by your Plan:  If you are prescribed injected or infused specialty drugs, you may be required to use a specialty pharmacy that can provide you with 24-hour clinical support, education, and side effect management.  Medications are delivered to your home or to your doctor’s office.

This information provided by the Group Insurance Commission .