It's de rigueur to launch new cancer drugs with six-figure annual price tags, and that fact is causing seismic repercussions for patients facing ever-increasing treatment costs. Apparently, it's also affecting insurers so significantly that they're actively shifting cancer drugs into higher tiers of their drug formularies, effectively shifting more of the cost of cancer medicine to their members.
Soaring cost of care
According to the highly regarded Memorial Sloan Kettering Cancer Center, the cost of cancer medications is skyrocketing. Of the five major new cancer drugs the FDA approved in 2014, only one of them has a monthly cost below $10,000. That's a big change from 2013, when four out of eight newly approved drugs were priced below that level.
In response to increasing prices, insurers are rapidly attempting to shift more of the cost of cancer drugs to patients.
According to the American Cancer Society's Cancer Action Network (ACSCAN), a review of 66 silver-medal health-insurance plans available through the Affordable Care Act marketplaces in six states shows that insurers frequently require patients to overcome barriers, such as obtaining pre-authorization, to receive cancer drugs, and that once approved, those drugs are frequently covered by co-insurance, rather than subject to co-pays.
Specifically, the study researched how insurance plans handle 22 cancer drugs, including molecular target inhibitors and monoclonal antibodies, used to treat a variety of cancer indications. Eighteen of those drugs are dosed orally, rather than injected, and 17 of those 18 oral drugs were covered by insurers in the highest cost-sharing drug tier more than 80% of the time.
Among the drugs that appear in the highest drug tier most often are Novartis' (NYSE:NVS) Afinitor, Pfizer's (NYSE:PFE) Inlyta and Xalkori, and Bristol-Myers Squibb's (NYSE:BMY) Sprycel. Each shows up in insurer's highest tier at least 89% of the time.
Paying for drugs that are in the highest tier, like these four, can create a substantial burden on patients because ACSCAN finds that between 73% and 100% of silver-medal plans in California, Florida, Illinois, North Carolina, Texas, and Washington rely on co-insurance for their highest drug tier. Because of that, patients are paying millions of dollars more every quarter than they would be spending if these drugs were covered more favorably with fixed co-pays.
The ACSCAN study also calls into question insurer decisions to place generic cancer drugs in their highest drug tier.
In the past, insurers have caught flak for placing generic drugs for high-cost indications in their highest tiers, because doing so could suggest insurers are purposefully limiting coverage on these drugs to reduce the number of cancer patients signing up on their healthcare plans. That process, referred to as "adverse tiering," smacks of being discriminatory.
Insurers are quick to paint drugmakers as greedy profiteers, while drugmakers are quick to point out that insurers' reduced coverage of cancer drugs leaves patients paying more for those medicines than they pay for other high-priced healthcare, such as hospital services.
There's no easy solution because the cost to create increasingly complex and targeted cancer therapies is increasing and insurers' profit margins are already small, suggesting there's little fat left to be cut in premiums.
Regardless, ACSCAN's findings do indicate that it's important that consumers do as much homework as possible when it comes to selecting their health insurance plan on the exchanges this year.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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