Composition of Formularies a Major
Point of Contention
With
state health exchanges set to open their doors on January 1, 2014, the
qualified health plans (QHPs) who will offer health insurance to individuals
and small businesses under Obamacare still don't know what standards their
pharmacy formularies will have to meet. In a reprise of some of the battles
over formularies within the Part D Medicare drug program, insurance companies,
drug manufacturers, and PBMs are now in hand to hand combat with drug
manufacturers and patient advocacy organizations over how the Department of
Health and Human Services (HHS) should define the "pharmacy" benefit,
one of 10 categories of "essential health benefits" (EHBs) each QHP
will have to offer.
The
Obama Administration is trying to broker compromises on numerous issues percolating
beneath that cost v. access divide. The proposed rule issued by the HHS last
November describes the formulary structure QHBs are expected to use, and ranges
over issues such as P&T committee oversight, use of USP classifications to
determine breath and depth of coverage (i.e. number of drugs in each class) and
use of tiers, when to add newly approved drugs to formularies, how each state
should establish a "benchmark" formulary for QHPs in their state,
where specialty pharmacy tiers can be used and the appeals process for patients
who initial prescriptions are off-formulary, which gets into questions of prior
authorization.
While the pharmaceutical access requirements clearly apply to out-patient
pharmacies, there is considerably confusion over how they apply to in-patient
hospital formularies and Part B drugs administered in physician offices. "In
the proposed rule, HHS is silent on what the EHB minimum standards are for
hospital inpatient formularies or for physician-administered drugs,"
states an industry source. "Lack of standards on coverage of these
treatments could lead to benefit designs that do not provide patients
sufficient access to medically necessary care."
Interested parties have criticized the proposed rule as much for what it
includes as for what it excludes. Aside from omissions having to do with
tiering, there is no requirement that QHPs with formularies (and most will have
formularies) have a P&T Committee, as is required under Part D. Drug manufacturers
want every health plan with a formulary to have a P&T Committee, one that
is independent. The Pharmaceutical Care Management Association (PCMA) answers,
in effect, "fine;" but let the P&T Committee make the decisions
on which drugs should be available in which classes, and on what tiers.
That is not the approach taken by the HHS in the proposed rule it
published last November. Its core requirement is that plans subject to the EHB standard
provide prescription drug coverage that is at least the greater of the following: (1) one drug in every United States
Pharmacopeia (USP) category and class; or (2) the same number of prescription
drugs in each category and class as the EHB-benchmark plan. That is an
expansion of the standard the HHS preliminarily endorsed in December 2011 in
its EHB Bulletin. That would have
required health plans to cover at least one drug in each category and class in
which the EHB-benchmark plan covered at least one drug. The Bulletin did not include a reference to
the USP Classification System. The
specific drugs on each plan's drug list could vary under this approach, as long
as a drug in each category and class was covered.
That "one drug per
class" requirement provoked considerable consternation among many
interested parties. Somewhere around 11,000 comments flooded the HHS. The
"benchmark plan" alternative was then added when the November 26
proposed rule was published. By comparison, the Medicare Part D program
requires plans to provide a minimum of two drugs per class.
Under Obamacare, each state
chooses a benchmark health plan from among four possibilities operating in that
state. These are (1) The largest plan by enrollment in any of the three largest
small group insurance products in the state's small group market; (2) any of
the largest three state employee health benefit plans by enrollment; (3) any of
the largest three national Federal Employees Health Benefits Program (FEHBP)
plan options by enrollment that are open to Federal employees; or (4) the
largest insured commercial non-Medicaid Health Maintenance Organization (HMO)
operating in the state.
The addition of the
"benchmark" formulary option did not satisfy too many people.
Opposing sides want numerous, additional modifications. For example, drug manufacturers are unhappy the HHS has said
that formularies operating in 2014 and 2015 would only have to carry drugs that
were on the formulary of the state benchmark plan when that plan was originally
selected by the state. Some states chose benchmark plans in 2011 and 2012. "That
would allow plans to exclude coverage for life-saving medical innovations and
result in coverage that lags far behind standards of care and typical coverage
in the commercial marketplace," says Richard Smith, Executive Vice
President, Policy & Research, PhRMA. He also argues that the USP
drug classification system was developed for the senior population serviced by
Part D. It should not be used to guide EHB formularies. The American Hospital
Formulary System would be a better classification yardstick. "The combined effects of multiple policy choices in the
proposed rule risks creating powerful incentives to narrow coverage of
prescription drugs and limit patients' access to innovative therapies as
compared to today's typical coverage," Smith argues.
Daniel Durham, Executive Vice President,
Policy and Regulatory Affairs, America's Health Insurance Plans (AHIP), the
insurance industry lobby, wants the HHS to ditch the USP option entirely, and
the larger option for formularies to provide one drug per class. "Instead,
HHS should require plans to cover the same categories and classes covered under the
EHB benchmark plan in a state," he states.
Greg
Low, RPh, PhD, thinks that is a bad idea. Program Director, MGPO Pharmacy
Quality & Utilization Program, Performance Analysis & Improvement,
Massachusetts General Hospital, he is largely a disinterested observer, but a
highly informed one. He serves on two P&T Committees, one that directs
ambulatory coverage for the employees of all Partners Healthcare hospitals in
Massachusetts who are covered by its self-insured insurance program, the other
that determines the inpatient drug formulary at Massachusetts General Hospital.
"The proposed approach would incent manufacturers to discount to the
benchmark plan via generous rebates, but to inflate costs for other
plans," he states. "Unless the benchmark plan captured a majority of
the population, the net effect would be an increase in overall healthcare costs
without a corresponding benefit in quality of care or outcomes."
While he can only speak for the
formularies he works on, Low explains that most drug plans cover more than one
drug per class, whether that is USP class or some other class. There can be
rare exceptions. Take weight loss drugs. PhRMA in its comments to the HHS
pointed out that some states, which chose benchmark plans prior to the HHS
publishing its proposed rule, some plans did not offer drugs for obesity. There
are very few of those drugs on the market. Two that are available, Qsymia and
Belviq, have been placed on Low's formularies,
but at Tier 3, the highest co-pay level. "That is because they have
substantial risk profiles," Low states.
That
said, Low explains that there is no reason why
in many classes insurers can't offer several drugs,
including entrants in Tier 1, the lowest co-pay category. His formularies offer
13 Tier 1 ace inhibitors, for example. Tier 2 includes Ramipril, a more
expensive generic with no clinical advantage. Tier 3 includes brand-name
Zestril. "But there is no reason a formulary couldn't offer only six drugs
in Tier 1 for ace inhibitors," he offers. "But four is as low as you
would want to go since we have two options that are combination
products, including hydrochlorothorizide (HCTZ).
However, drug companies and some patient
advocacy groups want the HHS to import into the EHB pharmaceutical standard the requirement
in the Part D program: that formularies offer "all or substantially
all" of the drugs in six "protected classes:" Antidepressants, Antipsychotics, Anticonvulsants,
Immunosuppressants, Antiretrovirals, and Antineoplastics. Drug companies, physicians and patient groups
say failure to do so particularly disadvantages cancer and psychiatric
patients. Derek L. Asay,
Senior Director, Government Strategy, Federal Accounts and Quality, Eli Lilly
and Company, says, "Incorporating the same policy within the EHB benefits
standards can help ensure that these benefits are implemented in a way that
does not discriminate against certain patient populations, as is also required
by the Affordable Care Act."
The PBMs and insurance companies say including that language will launch
premiums into the stratosphere. Kristin A. Bass, Senior Vice President, Policy and Federal
Government Affairs, argues, "The
Medicare protected classes effectively eliminate the ability of health plans
and their PBMs to negotiate rebates for drugs in those classes, thereby causing
drugs in those six classes to be considerably more expensive than they would be
if competitive forces were allowed to come into play."
Low does not support the "all or
substantially all" formulary requirement though he acknowledges the need
for health plans to offer at least a couple of choices in the lowest co-pay
tiers for atypical antipsychotics and anticonvulsants. His formularies offer
six antipsychotics on Tier 1; they are all generics and a mix of typical and
atypical antipsychotics. Tier 2 offers Abilify. That brand name is on Tier 2
because it is labeled for patients with apathy, giving it a unique clinical
profile. Tier 3 includes only brand names, some of which have generic
competitors on Tier 1.
But even in antipsychotics or
anticonvulsives, Low does not support some hard and fast requirement that
formularies cover X number of drugs. "I think P&T committees will get
there on their own," he states.
Though the HHS proposed rule does get
into the number of classes on a formulary, and the number of drugs in each
class, it does not discuss tiering, which enables P&T committees to manage
pharmaceutical costs. The Obama Administration hopes to keep premiums within the reach of
buyers. So, for example, all plans sold or renewed in 2014,
must limit the out-of-pocket exposure of consumers to approximately $6,000 for
individual and $12,000 for families. The deductible for plans in the small
group market will be limited to $2,000 for individuals and $4,000 for families
in 2014, also indexed to average premium growth in future years.
Also,
all plans must design their cost-sharing (deductibles, co-pays, coinsurance) to
fit into specific levels of coverage. The levels of coverage are defined
as follows:
- Bronze Level – The plan must cover 60% of expected costs for the average individual
- Silver Level – The plan must cover 70% of expected costs for the average individual
- Gold Level – The plan must cover 80% of expected costs for the average individual
- Platinum Level – The plan must cover 90% of expected costs for the average individual
The four levels are suppose to guarantee that any individual without
health insurance come 2014 will be able to afford it, since he or she, or their
family, will have to pay a penalty, which will be small compared to the cost of
the insurance if they do not obtain coverage. The point of this requirement,
beyond keeping people out of the emergency room and preventing "cross
subsidization," is to make sure that these newly covered have access to
equivalent policies, in terms of breadth and depth, as those offered by
employers to employees.
In
addition to requirements in each of the 10 EHB categories, there are two broad
"anti-discrimination" standards imposed by Obamacare which will also
determine access in each category, including pharmaceuticals. One standard
prohibits discrimination based
on an individual's age, expected length of life, present or predicted
disability, degree of medical dependency, quality of life, or other health
conditions. The other dictates that benefits not be "unduly
weighted." But the HHS proposed rule does not
apply either to the prescription drug category except for a glancing reference
that "We will use information on complaints and appeals and
data on drug lists to refine our prescription drug benefit review policy for
future years."
That is not good
enough for Derek Asay, Senior Director, Government Strategy, Federal Accounts
and Quality, Eli Lilly. He states, "Stronger standards are needed in the
proposed regulation‘s sections on anti-discrimination and prohibitions on
discrimination, together with more guidance for state and/or federal level
enforcement of such standards."
The anti-discrimination
standards also come into plan with regard to specialty drugs, again
traditionally associated with cancer, AIDs and psychiatric patients. They
generally require higher cost sharing, and raise, according to the PhRMA,
particular discrimination issues. Although the proposed rule does not directly
discuss specialty tiers, the actuarial value (AV) calculator that plans will
use to determine coverage limits in each of the four color-coded option appears
to allow plans to include a specialty tier. Specialty tiers are discriminatory
because they lead to benefit designs that aggressively differentiate
out-of-pocket costs based on the need for more costly services. That would violate the
EHB's anti-discrimination dictate that
benefits not be "unduly weighted." PhRMA's Smith explains, "Patients
with higher cost hospitalizations are not charged a dramatically higher
specialty tier coinsurance percentage than patients needing less expensive hospital
care."
Another hot button with regard to application
of anti-discrimination standards is utilization reviews. The PhRMA wants the
HHS to adopt the full panoply of utilization review prohibitions that are part
of the Medicare Part D plan. There Medicare checks plan formularies for tier
placement, to assure high-cost beneficiaries are not being discriminated
against, whether there is appropriate access in major treatment classes, and broad
range of drugs disproportionately used by vulnerable beneficiaries. The PhRMA's
Smith wants the HHS to explore the possibility of designing an automated
formulary review which would guarantee unbiased utilization reviews.
But the PCMA's Bass believes
there are some drug management and utilization controls that could be adversely
affected by an overly restrictive reading of a EHB anti-discrimination
requirement. For example, certain skin medications are typically subject to
age-related utilization controls to assure that their use is for medicinal
(e.g., acne treatment) rather than cosmetic purposes (e.g., wrinkle reduction
or firming up of sagging skin). Vaccines are another type of medication where
age is an important determinant for when a patient should receive an initial
dose or so-called booster doses. These age-related controls assure appropriate
clinical use of certain medications and utilization edits of this nature should
not be prohibited under the antidiscrimination ban stated in this provision of
the rule. Another category of drugs where utilization management could be
impeded, or even prohibited, is the so-called “lifestyle” drugs (e.g., drugs
for treatment of erectile dysfunction). Most health plans, both governmental
and commercial, impose limitations on access to these drugs, typically in the form
of quantity limits. To the extent that use of such drugs is higher among older
enrollees, claims of age discrimination could be made in this regard.
The question of utilization
reviews and lifestyle drugs brings up a second related issue: what flexibility
will patients have to request and get off-formulary drugs, and to appeal
negative decisions? The proposed rule added the protection that an enrollee can
request clinically appropriate drugs.
But Lilly's Asay is concerned the EHB standards do not include sufficient
safeguards to ensure that this and a number of the ACA‘s important patient
protections will be enforced. The ACA and its implementing regulations already
provide internal appeals and external review rights when a plan denies a
covered benefit, including when a plan denies a formulary exception. But Asay
thinks the HHS needs to establish more specific appeal rights for EHB pharmacy
benefits, which should include shorter timelines for appeals determinations.
Moreover, there seems to be some wiggle room between the proposed rule's
application to clinically appropriate drugs and medically necessary
drugs." Patients need a meaningful exceptions process that allows access
to medically necessary drugs that goes beyond the standard in the proposed rule
of merely assuring patients of their right to ―request a drug that is not on
the formulary," emphasizes Asay.
The differences between the
drug manufacturers and insurance companies on access v. cost bring to mind, in
terms of their seeming conflict, the difference between congressional
Republicans and the President on taxes v. spending. But in the case of
essential benefits, the Obama administration is the final arbiter, not one of
the pleaders. That is probably a relief of sorts for the administration, but
maybe not much of one. Instead of being in a foxhole exchanging political fire
with Republicans, the White House is caught in the crossfire between insurers
on one side and drug manufacturers on the other.
