The Prescription Drug Safety Net

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Joseph Potter
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1 The Prescription Drug Safety Net Jack Hoadley, Ph.D. Research Professor Georgetown University Health Policy Institute Indispensable Meds: Closing the Gaps in the Prescription Drug Safety Net GIH Annual Meeting on Health Philanthropy February 28, 2008

2 Spending on Prescription Drugs US spending in 2005: $200 billion Small share (5%) of overall health spending Fast growing component of health spending High growth (12-13%) in the 1980s and 1990s Moderated growth rate by mid-2000s

3 Drug Expenses 63% of Americans take at least one prescription drug 59% of those under 65 take a drug 91% of those 65 or over The typical person who used one drug had costs of $371 in 2005 $255 for those under 65 $1,336 for those 65 or over Much higher costs for the top drug users

4 Who Pays for Drugs? Across all prescription drug users, Almost 40% paid out of pocket Almost 40% paid by private insurance The rest paid by public sources Rising since the introduction of the Medicare drug benefit in 2006

5 Coverage for Prescription Drugs Majority of working-age adults have coverage. Many do not: Those without insurance Those with insurance, but no drug coverage

6 Distribution of Prescription Drug Benefits Among Working-Age Adults, 2001 Uninsured, No Rx Benefits 15% Insured, No Rx Benefits 9% Insured with Rx Benefits 76% Source: Claudia L. Schur et al., Lack of Prescription Coverage Among the Under 65: A Symptom of Underinsurance, Issue Brief, Task Force on the Future of Health Insurance, The Commonwealth Fund, February 2004.

7 Medicare Beneficiaries Before Part D, nearly one-fourth had no drug coverage. After Part D, that level dropped to about 9%. Vulnerable beneficiaries those with physical or mental impairments or low incomes are more likely to lack coverage.

8 Distribution of Prescription Drug Benefits Among Seniors, 2006 VA 3% Other Coverage 8% No Coverage 9% Employer Coverage 31% Medicare Part D 50% Source: Patricia Neuman et al., Medicare Prescription Drug Benefit Progress Report: Findings from a 2006 National Survey of Seniors. Health Affairs 26(5) web exclusive, August 21, 2007, w630-w641.

9 Gaps for Those with Coverage Capped coverage Coverage gaps Medicare s doughnut hole Deductibles Cost management features Cost sharing Limited formularies Utilization management (prior authorization, step therapy)

10 Standard Medicare Prescription Drug Benefit, 2008 Enrollee Pays 5% Enrollee Pays 100% Plan Pays 15%; Medicare Pays 80% $3,216 Coverage Gap ( Doughnut Hole ) Beneficiary Out-of- Pocket Spending $5,726 in Total Drug Costs ($4,050 out of pocket) Enrollee Pays 25% Plan Pays 75% $304 Average Annual Premium $2,510 in Total Drug Costs $275 Deductible Note: Annual premium amount based on $27.93 national average monthly beneficiary premium (CMS, August 2007). Amounts are rounded to nearest dollar. Source: Kaiser Family Foundation illustration of standard Medicare drug benefit for 2008

11 Gaps Left by Cost Management Cost sharing can be substantial Formularies do not cover all drugs Utilization management can restrict coverage Prior authorization Step therapy

12 Change in Average Monthly Cost Sharing, Employer-Sponsored Plans, $80 $70 $60 $50 $40 $30 $20 $10 $0 Non-preferred brand Preferred brand Generic $29 $28 $15 $16 $32 $18 $35 $20 $38 $40 $22 $23 $43 $43 $25 $25 $8 $9 $10 $10 $11 $11 $8 $ Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,

13 Change in Average Monthly Cost Sharing, Medicare Drug Plans, $80 $72 $70 $60 Non-preferred brand $63 $50 $55 $40 $30 Preferred brand $27 $29 $30 $20 $10 Generic $6 $5 $5 $ Source: Jack Hoadley et al., Medicare Part D 2008 Data Spotlight: Benefit Design, Kaiser Family Foundation, December 2007.

14 What Happens When You Have No Coverage Pay the costs out of pocket Skip filling prescriptions Take fewer pills Get alternative medications

15 Access Problems, by Type of Drug Coverage, Working-Age Population, % 30% 25% 20% 15% Insured with Rx Benefits 16% Insured, No Rx Benefits 28% Uninsured 30% 10% 5% 0% Did not fill prescription in 2001 Source: Claudia L. Schur et al., Lack of Prescription Coverage Among the Under 65: A Symptom of Underinsurance, Issue Brief, Task Force on the Future of Health Insurance, The Commonwealth Fund, February 2004.

16 Access Problems, by Type of Drug Coverage, Seniors, % 30% 25% 20% Part D 20% No Coverage 23% 15% 10% Employer 8% 5% 0% Did not fill/delayed fill of Rx Source: Patricia Neuman et al., Medicare Prescription Drug Benefit Progress Report: Findings from a 2006 National Survey of Seniors. Health Affairs 26(5) web exclusive, August 21, 2007, w630-w641.

17 What Happens When You Have Gaps in Coverage? Capped coverage Fewer prescriptions filled Sometimes adverse health consequences Higher cost sharing Costs shift to plan enrollees Fewer prescriptions filled Sometimes more ER visits or hospital admissions Prior authorization More hassle for doctors and patients Appropriate reductions in use

18 Resources in the Prescription Drug Safety Net Insurance coverage Free samples, changes to prescribing Manufacturer-sponsored prescription assistance programs (PAPs) Federal 340B program PAPs and 340B program provide up to $10 billion worth of drugs annually (5% of national total)

19 Insurance Coverage For Medicare beneficiaries: Medicare Part D Subsidized coverage available to low-income beneficiaries For working-age adults: Employer-sponsored coverage May not be available, particularly to employees of small firms Individual market coverage Less likely to be available/helpful for those with chronic health problems, high drug costs

20 Free Samples and Changes to Prescribing Physicians can provide drug samples from manufacturers to patients who cannot afford them Physicians can prescribe generic or less expensive alternatives Problems: Physicians and patients may be reluctant to discuss costs Samples of expensive brand-name drugs raise ethical, practical issues Many samples go to patients who are not poor

21 Manufacturer-Sponsored Prescription Assistance Programs (PAPs) Offered by most major brand-name drug manufacturers Patients must generally lack drug coverage, have incomes below 200% of the Federal Poverty Level Medications usually shipped to clinic or physician s office; some offer pharmacy vouchers Problems: Administrative burden placed on physicians Limited awareness of existing programs Multiple applications and requirements for patients who need drugs from different manufacturers Mostly for brand-name drugs under current patent

22 Federal 340B Program Administered by the Health Resources and Service Administration (HRSA), DHHS. Available to health centers, public hospitals, other HRSA grantees. Safety-net providers can obtain drugs at prices 20% to 50% below those paid by private insurers. Problems: Providers do not always get appropriate discounts. 1/3 of eligible providers do not participate. Small providers may lack required infrastructure. Patients must find a safety-net provider.

23 Bottom Line Significant number of Americans lack drug coverage Many more experience gaps in coverage, which have serious consequences The drug safety net provides a vital lifeline for some But more help is needed

24 Reference Paper on prescription drug safety net The Prescription Drug Safety Net: Access to Pharmaceuticals for the Uninsured

Basic Reimbursement - Medicare Part D Specifics

Basic Reimbursement - Medicare Part D Specifics 60889-R8-V1 (c) 2012 Amgen Inc. All rights reserved 2 This information is provided for your background education and is not intended to serve as guidance