Q: I keep hearing stories of patients who have insurance, yet their medicines cost them thousands of dollars. How can this be?
A: Let's consider the example of one leukemia drug, Ariad's Iclusig, which carries a list price of about $200,000 a year. We've heard of insured patients who are quoted a price of $40,000. Sounds outrageous, but it's plausible.
First, some basics. Most insurance plans provided through employers or on the individual market cover medications prescribed by physicians or dentists — but the coverage can vary dramatically, especially if the annual deductible hasn't yet been met.
Usually, plans with lower monthly premiums have the highest deductible amounts. A typical plan might have an annual deductible of $2,500, meaning you have to spend that much out of pocket each calendar year before insurance benefits enter the picture.
So, to get back to the example of Iclusig, a pharmacy might quote a price of $40,000 because the deductible hasn't been reached. Or it could be due to the fact that $40,000 is 20 percent of the wholesale price of the drug — and if your insurance requires you to make a 20 percent copay, that would explain it.
Thanks to the Affordable Care Act (for however long it remains in effect), many policies do have annual out-of-pocket spending maximums, which this year are $7,150 for an individual plan and $14,300 for a family plan.
In some cases, patients can control drug costs by opting for generics.
Let us assume that you have reached the deductible threshold of $2,500, and your insurance benefits are in full force. Now, you walk into the pharmacy with a new prescription and you are told that you can receive the brand-name product for $18 or the equivalent generic one for $6 as your co-payment. Most health insurers negotiate with drug manufacturers to obtain large discounts for medicines (though Medicare is expressly forbidden by Congress from doing so), and the net price that they pay determines what co-pay tier your medicine is in.
For example, consider statins, drugs commonly used to reduce cholesterol levels. The patents have expired on most of the brand-name products and now generic versions are available for most of these following the 20 year period of patent exclusivity. Pfizer's Lipitor is still available as a branded product, but your health insurer wants you to use the less costly generic, so the co-pay tier is used to provide you an incentive for cooperating. The generic equivalent of Lipitor is called atorvastatin and is far cheaper than Lipitor, so, it would be found in tier one, at about $6 for a month's supply (30 tablets). If you still demanded Lipitor, you might be required to pay a tier two co-payment of about $20. If your physician wrote a prescription for another statin for which the insurer negotiated a discount, but it is still more expensive than Lipitor, it would likely be in tier three, at perhaps $35. And if your physician prescribed one of the newer or less common statins that had no discount agreement, the plan expects that you will share in that greater expense to them and your co-pay could be $50 or more.
When there is no generic version, and all of the drugs in a therapeutic category are only available as brand names, the insurer will negotiate with one or perhaps two suppliers to obtain a discount and the lower priced ones will be in co-pay tiers one and two. For example, there are several drugs now on the market for Hepatitis C, and some insurers have agreements for one or two of these products, at the exclusion of the others. As a reward for delivering a high market share, the manufacturer gives a discount (called a rebate) to the insurer. This lowers the price to the insurer and to the patient.
In the Medicaid prescription program, most drugs are available for no co-payment or for a very small standard co-pay. In the more complex Medicare Part D program, it's important to check every year during open enrollment whether the plan you're considering covers the drugs you use, and under which tier. Plans do change their coverages, so you never want to assume that just because you're covered this year, the situation won't change next year.