(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.
“We stand with patients in their efforts to access the medicines and resources they need to fight life-threatening conditions,” Sharon Castillo, a Pfizer spokeswoman, said in an e-mail. “We believe insurers should not discriminate against any patient based on disease or disability.”
The campaign to limit copayments in Illinois illustrates the close ties between drug companies and patient advocacy groups, which lobby on behalf of people with serious illnesses such as cancer, hemophilia, epilepsy and HIV or AIDS. The Illinois campaign discloses on its website that it is “supported by a grant from Pfizer.”
Since Pfizer is one of the few drug companies that voluntarily discloses its contributions to advocacy groups, it’s possible to see its connections to the organizations involved in the Illinois Cap the Copay coalition. Of 19 groups that make up the campaign, 10 received grants for various purposes from Pfizer in 2014 totaling at least $1.6 million, according to the company. The funding comes from grants the groups applied for, and the total includes money given to national organizations, not just in Illinois and not just for Cap the Copay.
See also: PPACA effectiveness center creeps ahead.
The AIDS Foundation of Chicago received two grants totaling $70,000 that its president and chief executive officer, John Peller, said were intended to finance the copay campaign. Pfizer says it has no way to enforce how a group executes advocacy work the drugmaker has funded.
While Pfizer isn’t the only drugmaker that has supported the campaign, other companies either didn’t make contributions to many of the groups involved or aren’t as transparent in their disclosures.
The patient-advocacy groups say taking money from drugmakers doesn’t influence their positions.
“We are the first to turn to pharma and say that they should revisit their pricing decisions and make the medications more affordable,” Peller, of the AIDS Foundation, said in a phone interview.
Drug companies seek to enlist patient advocacy groups in lobbying campaigns because their interests frequently coincide and because sick people are more sympathetic figures than corporate executives, Sheila Rothman, a professor of sociomedical sciences at Columbia University’s Mailman School of Public Health, said in a phone interview.
“Obviously you’re going to try to get the patients to be the front people,” Rothman said. “The patient groups really don’t see much conflict about what they’re doing. They’re trying to make things better for their members.”
Cost, cost, cost
After Julie Davis of Louisville, Ky., had to change insurers last May, her pharmacy called. Refilling her prescription of Keppra XR, a drug that controls seizures, would cost Davis $1,267 out of pocket under her new plan, which carried an $11,000 deductible for her family, she said. Davis, who has epilepsy, switched to a generic version of the drug, but then suffered seizures in July, August and December.
“I would love to be back on Keppra,” said Davis, 34. “I definitely feel a lot safer on it.”
Davis, a property insurance consultant, is a volunteer in the Cap the Copay campaign in Kentucky, and testified on the issue to the state legislature in February. She said she doesn’t believe insurers would have to raise premiums if they are required to limit co-payments.
“I hear people testify and people talk about the cost, the cost, the cost, the cost,” she said. “The whole goal of insurance is to spread the cost across a large number of people. But they’re wanting to exclude the people who are the sickest.”