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| Posted on: Tuesday, November 7, 2006 |
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It is clear that rapidly advancing Rx technology produces cures and therapies that benefit many, if not all patients. However, it has also resulted in double digit pharmacy trend rates for the past five years that have outpaced those for virtually all other types of medical care.
“Conundrum – noun: A paradoxical, insoluble, or difficult problem”
If Rx technology cost increases were linear, that is, increased at the same rate each year, cost increases for improved medications would continue to be handled as they have been in the past. That is, a small share would be paid by employees via higher copays, deductibles and pay deductions with the majority paid by employers who would pass these costs to their customers via higher prices for products and services.
However, high-tech injectible drugs, therapies custom engineered to patients’ body chemistry as well as medications the FDA defines as Orphan Drugs are examples of extremely expensive emerging technologies that will drive Rx costs up exponentially. With a price tag for many of these therapies at $2,000 to $15,000 per month and with treatment plans calling for many years of use, the consequences for Plan Sponsors, patients, and society as a whole are fundamentally changed.
For Plan Sponsors one of the challenges is predicting when their Plan will be impacted. Considering the number of high-tech medications becoming available in the market, it is inevitable and can potentially result in bankrupting a Medical Plan, leading to 50%+ renewal increases, or making insurance unavailable at any cost.
What are insurance companies and self-funded Medical Plans doing currently or considering doing to manage this emerging challenge?
1. Excluding these high-tech medications from coverage entirely,
2. Reducing coverage of high-tech medications to 50% (or other
percentage), and excluding them from out-of-pocket maximum provisions,
3. Covering these high-tech drugs but capping all Rx payments per calendar
year for each member to $25,000 (or other dollar amount), with the
remainder borne by patients at 100%,
4. Ensuring that high-tech drugs and therapies are reimbursable under
reinsurance contracts and large claim pooling provisions.
These options represent difficult decisions for Plan Sponsors because each limits benefits and shifts costs to those patients in need of such high-tech drugs. One consequence of limiting coverage is that patients may become eligible for Rx manufacturer or government subsidies. While no formal government programs exist to reimburse patients for high-tech medications or therapies, in the past coverage was extended for kidney dialysis for end stage renal patients under Medicare.
If coverage and cost issues surround these emerging high-tech drugs are not realistically addressed, the cost of providing medical benefits for all employees, the vast majority of whom do not need these drugs, will increase substantially or, in a worst case scenario, not be available at all. “Conundrum – noun: A paradoxical…”
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team. |
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