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

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

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

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

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

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.

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.

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.

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)

Standard Medicare Prescription Drug Benefit, 2008 Beneficiary Out-ofPocket Spending

Enrollee Pays 5%

Plan Pays 15%; Medicare Pays 80%

Enrollee Pays 100%

$3,216 Coverage Gap (“Doughnut Hole”)

$5,726 in Total Drug Costs ($4,050 out of pocket)

$2,510 in Total Drug Costs Enrollee Pays 25%

Plan Pays 75% $275 Deductible

$304 Average Annual Premium 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

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

Change in Average Monthly Cost Sharing, Employer-Sponsored Plans, 2000-2007 $80 $70

Non-preferred brand

$60

Preferred brand

$50

Generic

$40 $30 $20 $10

$29

$32

$35

$38

$40

$28 $18

$20

$22

$23

$43

$43

$25

$25

$15

$16

$8

$8

$9

$9

$10

$10

$11

$11

2000

2001

2002

2003

2004

2005

2006

2007

$0

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2007

Change in Average Monthly Cost Sharing, Medicare Drug Plans, 2006-2008 $80 $70 $60

$72

Non-preferred brand

$50

$55

$40

Preferred brand

$30 $20 $10

$63

$29

$30

$6

$5

$5

2006

2007

2008

$27

Generic

$0

Source: Jack Hoadley et al., “Medicare Part D 2008 Data Spotlight: Benefit Design,” Kaiser Family Foundation, December 2007.

What Happens When You Have No Coverage • • • •

Pay the costs out of pocket Skip filling prescriptions Take fewer pills Get alternative medications

Access Problems, by Type of Drug Coverage, Working-Age Population, 2001 35% 30% 25% 20%

Insured with Rx Benefits 16%

Insured, No Rx Benefits 28%

Uninsured 30%

15% 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.

Access Problems, by Type of Drug Coverage, Seniors, 2006 35% 30% Part D 20%

25% 20% 15% 10%

No Coverage 23%

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.

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

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)

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

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

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

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.

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

Reference • Paper on prescription drug safety net The Prescription Drug Safety Net: Access to Pharmaceuticals for the Uninsured www.nhpf.org/pdfs_bp/BP_DrugSafetyNet_05-09-07.pdf