12:00 AM
Jun 24, 2013
 |  BioCentury  |  Regulation

The state of exchanges

Unanswered factors that will affect drug use in state healthcare exchanges

With the Oct. 1 deadline for opening enrollment fast approaching, uncertainty abounds around whether state healthcare exchanges will add significant numbers of new patients into the prescription drug pool and how it could affect biopharma revenues in the years to come. But an upcoming review by CMS of insurance plans that have been submitted to the exchanges could provide some clarity around what limits payers can place on drug access and affordability.

This week, CMS will review plans that have been submitted to state health exchanges to ensure that the proposals meet the requirements dictated by each state's benchmarks. The agency is expected to decide whether cost-containment practices like prior authorization or step therapy will be permitted.

But whether the programs will actually result in a net increase in patients who take prescription drugs likely won't be known until 2015 at the earliest; and how the exchanges affect biopharmaceutical revenues could take years to play out.

Forming formularies

One of the goals of the Patient Protection and Affordable Care Act (ACA) was to provide health insurance to the millions of previously uninsured or underinsured Americans through the expansion of Medicaid and the development of state healthcare exchanges.

The Pharmaceutical Research and Manufacturers of America (PhRMA) agreed to support the legislation and pay more than $80 billion in taxes, rebates and fees over 10 years in return for access to this larger audience (see BioCentury, June 22, 2009).

As the plans have started to take shape, early signs suggest the formulary could be large. Seventeen states selected benchmark plans with greater coverage than Medicaid, and most plans offer at least two drugs per class, the requirement for Medicare Part D.

Benchmark plans for the remaining states are expected to offer similar coverage, according to healthcare and benefits consultants contacted by BioCentury.

The benchmark plan sets the minimum amount of coverage a carrier must provide to sell a plan in the exchange.

In February, HHS issued a final rule that insurers must cover at least one drug per therapeutic area or the same number of drugs in each category and class as specified in the state benchmark plan, whichever is greater.

However, there are no rules limiting the size of co-pays, and at least two states have announced plans with co-pays of 50-60% for Tier 3 and Tier 4 drugs.

There also aren't any rules limiting the ability of carriers to impose cost-containment practices like prior authorization or step therapy - at least not yet. CMS has been reviewing the plans and is expected by June 28 to determine which plans must be resubmitted because they do not meet the bar set by the state benchmark programs due to the use of cost-containment practices or other factors where the agency sets standards.

While the specific details on the plans - including drugs on the formulary - aren't expected until August or September, consultants contacted by BioCentury have mixed opinions about whether the exchanges will translate into a net revenue gain for drug companies.

In some cases, exchanges may merely shift payment responsibility from the individual who was paying out of pocket to the insurance carrier or from one carrier to another. In the former case, drug revenues might actually fall because individuals cannot negotiate lower prices like payers can.

Additionally, some patients may receive coverage under the Medicaid expansion, implying minimal new revenues.

Alternatively, high premiums and co-pays or a lack of variety among the plans could keep people out of the market altogether as they opt to pay the penalty for not joining the exchange system.

A similar situation is expected to play out with the 19.9 million young and healthy adults aged 18-34, who make up about 40% of the uninsured population. The penalty to forgo insurance is $695 annually per individual, far less...

Read the full 3146 word article

User Sign in

Trial Subscription

Get a 4-week free trial subscription to BioCentury

Article Purchase

$150 USD
More Info >