(Bloomberg) — The battle over soaring U.S. drug prices is heading for the states.
With the price of some treatments topping $100,000, patient groups are pushing for state laws to make sure insurers cover most of the costs. Their campaign is backed by an important ally: the drug industry.
Rules adopted in four states since last year cap what insurers can charge patients out-of-pocket for expensive medicines — typically, to $150 a month. Similar legislation is under consideration in at least nine other states, according to the insurance industry, driven in some cases by patient-advocacy groups supported by companies like Pfizer Inc. under a campaign called Cap the Copay.
If successful, the lobbying may short-circuit health insurers’ attempts to persuade drug companies to moderate their prices. By limiting copayments, drugmakers effectively insulate Americans with health insurance from the full cost of their products, relieving public pressure for lower prices. Without the flexibility to charge higher copayments for expensive medicines, insurers say the prices trickle down to all consumers in the form of higher monthly premiums.
“Proposals that place a cap on prescription drug coverage without addressing the price side, what’s charged for the drug, will only drive costs higher for patients, and for state governments, and for employers,” Karen Ignagni, president of America’s Health Insurance Plans (AHIP) said in a phone interview. “It’s a shell game that’s being played on consumers.”
The drug industry’s lobbying organization in Washington shares the concerns of the state-level campaigns on out-of-pocket spending for drugs but isn’t funding or endorsing the Cap the Copay effort, said Robert Zirkelbach, a spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA), who previously worked for AHIP.
“Not a lot of patients are able to write a check for $6,000 to be able to access the medicines that they need,” Zirkelbach said.
Prospects for the state bills are uncertain as insurers intensify their opposition; the industry recently chalked up wins in Virginia and Mississippi, where copay legislation died in committees of the state legislatures.
See also: On the Third Hand: Drugs.
Expensive specialty drugs made up about 32 percent of health-plan drug spending in 2014, despite representing 1 percent of U.S. prescriptions, according to Express Scripts Holding Co., the largest U.S. manager of prescription drug benefits for employers and insurers. Within two years specialty drugs — medicine for hard-to-treat diseases like advanced cancer and multiple sclerosis — will make up half of prescription spending, the company says. Higher prices and wider use of drugs for hepatitis C helped push costs higher last year.
Federal law already caps how much most consumers have to shell out for copays. The Patient Protection and Affordable Care Act of 2010 (PPACA) limits what most individuals must pay out of pocket for covered prescription drugs to $6,600 this year. The limit for a family is $13,200.
The state laws go further because many low-end health plans under the act require customers to pay their entire deductible before the insurer will cover most types of care. That means a patient with an expensive prescription may pay thousands of dollars on the first of several trips to the pharmacy counter.
Even when patients face large up-front costs, health plans pay more than 90 percent of the cost of expensive specialty drugs, according to AHIP.
Deductibles went up about 26 percent on average from 2013 to 2014, to $4,509, in seven states studied by the firm HealthPocket, which analyzes health insurance plans. The company looked at average deductibles for plans sold directly to individuals and families in 2013 and for the lowest-premium coverage sold under Obamacare in 2014.
Pfizer said it backs the effort to limit copayments to prevent insurers from discouraging sick people from enrolling in their plans by requiring large out-of-pocket spending for their medicine.