One strategy that won't work is raising copays for patients taking the high-priced new drugs—the so-called “skin-in-the-game” approach. Tiered copays, a central tenet of value-based insurance design, helped drive rapid growth in the use of generics. Generics now represent 84% of all prescriptions, up from less than half a decade ago.
But tiered copays are unlikely to have a similar effect for specialty drugs. Most have many years to run before they come off patent. Moreover, generic versions of the oldest specialty drugs, whose patents are either expired or close to expiring, will be only 20% to 40% less expensive because the FDA's pathway to approving biosimilars requires complex and expensive clinical trials.
Using restrictive drug formularies, where the more expensive of two or more comparable therapies is excluded, also won't work in many cases. The latest specialty drugs—Sovaldi again is a perfect example—usually are more effective than older therapies.
Even when they're not better or provide only a marginal improvement over generic drugs—as is the case with many of the new cancer drugs—the use of price or restrictive formularies to deny hope is a recipe for a public backlash. Writing in last week's Health Affairs, Duke University researchers noted cancer treatment decisions are often “not driven by cost considerations, even though the decisions can have dire economic consequences for patients and their families.”
An effective strategy for holding down specialty drug cost growth will require many approaches, each tailored to the specific condition being treated. But most would require either congressional action or a far more aggressive stance on the part of gatekeepers—physicians, pharmacy benefit managers, insurers and care delivery sites—toward negotiating prices.
In cancer therapy, for instance, most drugs are used for multiple forms of the disease, even though their original FDA approval applies only for one or two indications.
Both the American Society of Clinical Oncology and the National Comprehensive Cancer Network are developing detailed scorecards documenting the efficacy, side effects and costs for each drug indication. The gatekeepers could pay only what the drug was worth based on an efficacy profile derived from the medical literature.
Physician practices and hospitals should take a much more rigorous approach to standardizing their practices, which would cut down on the ineffective use of specialty drugs or their substitution for less-expensive alternatives.
While this wouldn't harm their patients, it could hurt providers financially. Insurers should follow in UnitedHealthcare's footsteps and reward that behavior by developing gain-sharing reimbursement formulas.
Finally, Congress should give Medicare the right to negotiate prices, which every insurer already has.
Unfortunately, given the power of pharmaceutical interests on Capitol Hill, that will be difficult to achieve. It would be prudent for both insurers and providers to focus first on nonlegislative approaches.
Follow Merrill Goozner on Twitter: @MHgoozner