In the face
of accelerating innovations and rapidly increasing prescription drug costs,
health insurance companies are making choices that not only threaten their
financial well being, but also raise questions about cost and quality of
care for both patients and insurers, some health policy experts said.
According to
a recent study from the RAND Corp., "Pharmaceutical Technology Assessment
for Managed Care: Current Practices and Suggestions for Improvement," managed
care firms are not assessing adequately the clinical and financial impact
of new drugs. This results in increased health risks for patients and financial
risks for the health insurance companies themselves.
"There is an enormous
focus on rising prescription drug costs," said Larry Levitt, vice president
at the Kaiser Family Foundation and director of the think tank's Changing
Health Care Marketplace Project. "It is the fastest growing part of the
health care system and most managed care plan budgets."
The new classes
of drugs and pharmaceuticals that have come on to the market in large numbers
over the last decade have raised questions about exactly which prescriptions
health insurers should cover. These new drugs include those derived from
biotechnological and genetic processes, as well as lifestyle drugs like
Viagra.
"The industry
is obviously very profitable, and maybe if costs were only going up 10
or 12 percent a year, people would be willing to follow," said Levitt.
"But costs are going up 20 percent per year, which has pushed people over
the edge."
Experts say
this trend is caused by several factors, including the medical profession's
increasing dependence on new pharmaceuticals for treatment; moves by pharmaceutical
companies to replace drugs that are losing their patent protection with
new -- often more expensive -- formulas in order to protect market share;
and the aging of a large portion of the U.S. population that over time
becomes more dependent on drugs to remain in good health.
Levitt said
the most important factor is the shift by physicians from the use of older,
cheaper drugs to newer, more expensive ones for treatment.
Insurers also
play a significant role in this process. But the RAND study, prepared by
Samuel A. Bozzette and a team of RAND analysts for the French international
pharmaceutical conglomerate Sanofi-Synthelabo Inc., concluded that the
committee-based method used by most health insurance companies to analyze
whether they will cover a new drug usually focuses on a set of issues --
including safety and effectiveness -- which, while critical, is nevertheless
too limited.
The researchers
report that these committees do not generally address other important issues,
such as the effect a new drug will have on overall patient care and on
the company's financial health.
While this approach
may yield some answers to practical management questions, the report says,
it more often than not ignores larger short- and long-term clinical and
financial consequences.
Those potential
consequences -- such as high demand for a drug from patients and physicians
leading to cost increases to the insurer -- are interrelated. Other likely
potential effects of a new medicine, they say, are that it could make treatment
of a particular ailment more expensive in the short term, but less costly
over time.
The study says
that the lack of attention to such issues occurs because evaluation committees
at managed care organizations have "limitations on resources or skill mix,"
or "because the original questions are drawn in too narrow terms."
But according
to Joseph Antos, a resident scholar at the right-leaning American Enterprise
Institute and a health care policy analyst, it is an overstatement to say
that companies are failing in this arena, given the difficult challenge
that prescription drugs present to insurers.
"I am very
sympathetic to any health plan executive who says that they don't think
they are taking full advantage of the new technologies," he said. "It is
very difficult to assess properly all the circumstances that go into a
patient's taking a more expensive drug. Ultimately HMOs and health plans
do adapt to changes in technologies, but this is a wonderful world in which
new drugs come to market at a fairly rapid pace."
Antos said
it was important to note that all health plans have a process -- typically
arduous -- through which patients can gain approval for the coverage of
drugs not covered under the company's usual formula.
Levitt said
the trend among insurers is to pass prescription drug costs on to patients,
ever since the failure of their attempts in the 1990s to limit costs by
reducing the number of drugs they would cover.
"The (health)
plans are looking to trim in any way they can," said Levitt. "But there
was a backlash and the restrictive formularies and approved lists of drugs
have been revised. The (health) plans tend now to be erring on the side
of caution by allowing more drugs rather than fewer to be covered. Instead,
they are trying to control costs by shifting expenses to patients. There
are very few people left with insurance that pays near full prescription
coverage, whether you are on the low end or the high end of the (insurance)
spectrum."
Levitt said
the advent of three- and four-tiered prescription drug co-payment systems,
along with other schemes like preferred brand names, in which insurers
pay less due to deals with pharmaceutical companies, are part of an overall
attempt to discourage the use of newer, more expensive drugs.
This approach
angers people a lot less than cutting the number of drugs covered, said
Levitt. "But then it may anger people when the realize how much they have
to pay."
Nevertheless,
Antos predicted that the multi-tiered co-payment model is, at least for
the time being, here to stay, with four- and five-level plans likely to
become more commonplace.
Steve Zuckerman,
the principle research associate with the Urban Institute Health Policy
Center, told United Press International that another quality-of-care issue
is whether poorer patients or their doctors will make unwise medical choices
due to the higher costs for some drugs under these tiered systems.
For instance,
generic drugs usually are covered by insurance companies, typically at
a higher rate, because they are cost less than name-brand pharmaceuticals.
Questions arise
as to whether physicians, consciously or not, may direct their poorer patients
to the cheaper generics that may or may not be less effective than new
and innovative -- but much more expensive – name-brand drugs.
Antos agreed
that patient care could be compromised under these multi-tiered coverage
models. And both he and Levitt said that shifting costs to consumers is
only effective as a short-term response to offset other rising costs such
as hospital and doctor fees.
"It is sort
of a sad state of affairs," said Levitt. "We have really rapidly rising
health care costs, with few real ideas on the table on how to deal with
it. I happen to think that shifting the cost to consumers gives the grand
illusion of controlling costs, but it is just rearranging the deck chairs
on the Titanic."
Zuckerman,
Antos and Levitt all say there are no easy answers to the problem of increasing
pharmaceutical costs, and that finding solutions will be difficult.
"There is not
a lot of data out there," said Zuckerman.
"Pharmaceutical
companies, and I think companies in general, don't really release that
kind of information. We do not know how, in the private market, payment
policies and co-payments really affect getting many services in health
care. It would be better if this information was out in the public domain."
Despite this,
Antos predicted that over the next decade the cost increases in prescription
drugs might self-correct to a degree.
"We are going
to see some slackening in the rate of pharmaceutical costs over the next
five to ten years because the pipeline of innovation coming through the
system is drying up," he said.
Antos said
this view is common among those who follow the pharmaceutical industry
and is based upon the number of drugs currently in the Food and Drug Administration
approval process -- the standard indicator of what is farther back in the
developmental pipeline.
He said the
predicted slowdown could be attributed to the natural cycle of drug innovation.
There was a spurt of innovation around 10 to 15 years ago, and now we are
coming to the end of its effects, he said, with the introduction of new
pharmaceuticals already down over the last several years. In addition,
he said, various popular drugs like Claritin are losing their patent protection.
This has the effect of reducing their cost because they must compete with
the generic versions that will be brought to market.
--
Copyright 2002 by United
Press International.
All rights reserved.
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